Commerce 2016 July Paper 2 Solved

COMMERCE 
Paper – II 
Note : This paper contains fifty (50) objective type questions of 
two (2) marks each. Allquestions are compulsory.

1. For the following statements of Assertion (A) and
Reasoning (R) indicate the correct code
from the alternatives given :
Assertion (A) : Liberalization means corporatisation of
departmental undertakings and public undertakings.
Reasoning (R) : Freedom to public sector undertakings
to access capital market.
Codes :
(1) Both (A) and (R) are true and (R) is correct explanation of (A).
(2) Both (A) and (R) are true but (R) is not a correct explanation of (A).
(3) (A) is true but (R) is false.
(4) (A) is false but (R) is true.
Answer:(1)

2. Match the items of List – I with List – II
and indicate the correct code :
 List – I List – II
a. Fiscal Policy i. Mitigation of National hazards
b. Technology Policy ii. Balance of Payment
c. Macro-Economic Policy iii. Fiscal Federalism
d. Monetary Policy iv. Inflation
Codes :
 a b c d
 (1) i ii iii iv
 (2) iii i ii iv
 (3) iv iii i ii
 (4) ii i iv iii
Answer:(2)

3. Which of the following factor is not directly responsible
for slowing down the growth of
infrastructure ?
 (1) High level of perceived political risk.
 (2) High level of sunk cost.
 (3) High probability of time and cost over-run.
 (4) Introduction of competition in all sectors.
Answer:(4)

4. Out of the following which is not a major component of
Gross Domestic Product (GDP) ?
 (1) Personal Consumption Expenditure
 (2) Gross Private Domestic Investment
 (3) Net Personal Income
 (4) Net Exports
Answer:(3)

5. Which of the following is not a forum of Consumer
Dispute Redressal System ?
(1) Local forum
(2) District forum
(3) State Forum (State Commission)
(4) National Commission
Answer:(1)

6. X Ltd. purchased 70 percent of the shares of Y Ltd.
at a price of INR 1,00,000. Share capital
of Y Ltd. was of INR 70,000 and its accumulated profits
amounted to ` 90,000. What would be the amount of Minority
Interest in the consolidated Balance Sheet ?
(1) INR 25,000
(2) INR 70,000
(3) INR 1,00,000
(4) INR 40,000
Answer:(X)

7. Match the items in Column – I with the items in Column
– II and indicate the correct code :
Column – I Column – II
a. Debt-Equity Ratio i. Net Profit before interest and tax
/Interest on long term loans

b. Proprietary Ratio ii. Equity share capital + Reserves
/Preference share capital + Interest bearing finance

c. Interest coverage ratio iii. Long term debts/Shareholder's Funds

d. Capital gearing ratio iv. Shareholder's Funds/Total Assets

Codes :
 a b c d
 (1) i ii iii iv
 (2) iii iv i ii
 (3) iii iv ii i
 (4) ii iii iv i
Answer:(2)

8. Ram and Shyam are partners in a firm with capital of INR
4,80,000 and INR 3,10,000, respectively. They admitted Ganesh
as a partner with 1/4th share of profit. Ganesh brings
INR 3,00,000 as his capital. Ganesh’s share of goodwill will be
(1) INR 1,10,000 (2) INR 27,500
(3) INR 17,500 (4) INR 70,000
Answer:(2)

9. Which of the following is a deferred revenue expenditure ?
(1) Legal expenses incurred on the purchase of land.
(2) Expenses on a mega advertisement campaign while
launching a new product.
(3) Expenses incurred on installation of a new machine.
(4) Wages paid for construction of an additional room in the building.
Answer:(2)

10. The amount of depreciation charged to Profit and Loss
Account varies every year under :
(1) Fixed instalment method
(2) Annuity method
(3) Diminishing balance method
(4) Insurance policy method
Answer:(3)

11. Ordinal utility analysis of the consumer’s behaviour
is considered superior to the cardinal utility analysis mainly due to
(1) assumption of the rationality of the consumer’s behaviour.
(2) possibility of the derivation of the consumer’s demand.
(3) bifurcation of price effects into income and substitution effects.
(4) consideration of the available limited resources for satisfying
consumer’s demand.
Answer:(3)


12. For the following statements of Assertion (A) and
Reasoning (R) indicate the correct code :
Assertion (A) : Price reduction normally leads to an increase
in the demand for a commodity.
Reason (R) : Price reduction leads to the entry of new buyers
of the commodity in the market.
 Codes :
(1) (A) is correct but (R) is not correct.
(2) (A) is not correct but (R) is correct.
(3) Both (A) and (R) are correct and (R) offers full
explanation of (A).
(4) Both (A) and (R) are correct but (R) does not offer full
explanation of (A).
Answer:(4)

13. The minimum Long Run Average Cost (LAC) can
be determined on a
 I. LAC curve for a normal production function
 II. LAC curve for a linear production function
 III. Planning curve
 IV. Envelope curve
Codes :
 (1) I II III
 (2) II III IV
 (3) I III IV
 (4) I II IV
Answer:(3)

14. Monopoly is not considered desirable from the point
of view of the society mainly because the monopolist endeavours to
(1) earn net revenue on sale of all goods including those
involving no cost of production.
(2) earn net revenue on sale of goods in short run as well as long run.
(3) charge different prices for the same product from the different
categories of buyers.
(4) produce below economic capacity level when he exhibits
satisfaction with normal profit only.
Answer:(4)

15. Product-line pricing strategy includes which combination
of the following ?
 I. Public utility pricing
 II. Complementary goods pricing
 III. Spare parts pricing
 IV. Load factor pricing
Codes :
 (1) I II III
 (2) II III IV
 (3) I II IV
 (4) I III IV
Answer:(2)

16. When the data are classified only on the basis of descriptive
characteristics which cannot
be quantified is known as
(1) Geographical classification
(2) Chronological classification
(3) Qualitative classification
(4) Quantitative classification
Answer:(3)


17. Which one of the following is a false description ?
(1) In a moderately asymmetrical distribution, the empirical
 relationship between Mean, Mode and Median suggested by
Karl Pearson is
 Mean – Mode = 3 (Mean – Median)
(2) Coefficient of variation is an absolute measure of
dispersion.
(3) Measure of skewness indicates the direction and extent
of skewness in the distribution of numerical values in the data set.
(4) Kurtosis refers to the degree of flatness or peakedness in the
region around the mode of a frequency curve.
Answer:(2)

Answer:(X)


19. Statement – I : When the null hypothesis is true but as
per the hypothesis-testing, it is rejected, it is known as beta type
error in hypothesis testing.
Statement – II : Chi-square test is exclusively a non
-parametric test.
 Codes :
 (1) Both the statements are true.
 (2) Both the statements are false.
 (3) Statement – I is true while Statement – II is false.
 (4) Statement – I is false while Statement – II is true.
Answer:(2)

20. Computers that recognize data as discrete signals
are called ?
(1) Analog computers
(2) Digital computers
(3) Hybrid computers
(4) Super computers
Answer:(2)

21. Herbert Simon’s concept of administrative man
assumes that
(a) He has satisfying approach in decision making rather
than the maximising approach.
(b) He can make decisions without determining all
possible alternatives.
(c) He is completely rational in decision making.
 (1) (a) only (2) (b) only
 (3) Both (a) and (b) (4) (a), (b) and (c)
Answer:(3)

22. Which of the following statement(s) is/are correct
about scalar chain principle as given by Fayol ?
(a) Each communication, going up or down, must flow through
each position in the line authority.
(b) Chain of communication cannot be broken under
any circumstances.
(1) Only (a) is correct. (2) Only (b) is correct.
(3) Neither (a) nor (b) is correct.
(4) Both (a) and (b) are correct.
Answer:(1)

23. A mission statement should be
 (a) Self-explanatory
 (b) Elaborate
 (c) Distinctive
 (d) Feasible
Codes :
 (1) (a) only (2) (a) and (b)
 (3) (a), (b) and (c) (4) (a), (c) and (d)
Answer:(4)

24. Match List – I and List – II and indicate the correct code :
List – I List – II
a. Equity theory i. Motivation depends on ratios of inputs
and outcomes of self and others.

b. Vroom’s theory ii. People are motivated to achieve a goal
to the extent that they expect that
certain action will help them to reach
the goal.

c. Porter and Lawler model iii. There exists a complex relationship
among motivation, performance and
satisfaction.

d. Herzberg’s theory iv. A challenging job that has
opportunities for achievement,
recognition, responsibility and growth
will motivate employees.
Codes :
 a b c d
 (1) i ii iii iv
 (2) ii i iii iv
 (3) iii ii i iv
 (4) i iii ii iv
Answer:(1)

25. Assertion (A) : ‘Grapevine’ tends to be more active
during periods of change, excitement, anxiety and sagging
economic conditions.
Reason (R) : Employees use this communication to fill
in important information gaps and clarify management decisions.
 Codes :
 (1) (A) is right and (R) is wrong.
 (2) (A) is wrong and (R) is right.
 (3) Both (A) and (R) are right and (R) explains (A).
 (4) Both (A) and (R) are right but (R) does not explain (A).
Answer:(3)

26. Which type of differentiation is used to gain competitive
advantage through the way a firm designs its distribution coverage,
expertise and performance ?
(1) Channel differentiation
(2) Services differentiation
(3) People differentiation
(4) Product differentiation
Answer:(1)

27. Which one of the following is the most likely result
of a marketing strategy that attempts
to serve all potential customers ?
 (1) All customers will be delighted.
 (2) Customer-perceived value will be increased.
 (3) The company will need to follow up with a demarketing campaign.
 (4) Not all customers will be satisfied.
Answer:(4)

28. Which of the following is not a primary activity in
Michael Porter’s value chain ?
 (1) Inbound logistics (2) Operations
 (3) Outbound logistics (4) Procurement
Answer:(4)

29. Which of the following represents
consistency of results when the test
instrument is used repeatedly ?
 (1) Validity (2) Reliability
 (3) Relativity (4) Sensitivity
Answer:(2)

30. Assertion (A) : Too many stimuli make a person
accommodated to those sensations. Sensory adaptation
is a problem that concerns many advertisers,
which is why they try to change their advertising campaigns
regularly.
Reason (R) : To cut through advertising clutter and to
ensure that consumers perceive advertisement, marketers
try to increase sensory input.
 Codes :
 (1) (A) is right and (R) is wrong.
 (2) (A) is wrong and (R) is right.
 (3) Both (A) and (R) are right but (R) does not explain (A).
 (4) Both (A) and (R) are right and (R) explains (A).
Answer:(4)

31. Which of the following is not a feature of payback period method ?
 (1) It is simply a method of cost recovery and not of profitability.
 (2) It does not consider the time value of money.
 (3) It does not consider the risk associated with the projects.
 (4) It is very difficult to calculate.
Answer:(4)

32. Which of the following is not a source of credit information
of prospective customers ?
 (1) Letter of credit (2) Bank Reference
 (3) Trade Enquiry (4) Credit Bureau
Answer:(1)

33. The portion of earnings which is distributed among shareholders
in the form of dividend is called
 (1) Proprietary Ratio (2) Earnings-yield Ratio
 (3) Payout Ratio (4) Retention Ratio
Answer:(3)

34. Select the correct code regarding motives for holding
inventories by firms :
 (a) Transaction motive
 (b) Environmental motive
 (c) Precautionary motive
 (d) Speculative motive
 (e) Competitive motive
Codes :
 (1) (a), (b), (c), (d)
 (2) (a), (b), (d), (e)
 (3) (a), (d), (e)
 (4) (a), (c), (d)
Answer:(4)

35. Which of the following formulae is related to
operating leverage ?
(1) Contribution/Operating Profit
(2) Sales – Variable Cost
/Earnings before Interest and tax
(3) Percentage change in EBIT/Percentage
change in sales
(4) All of the above
Answer:(4)

36. Which of the following is not true in case of HRM ?
(1) Employees are seen as an investment to be nurtured as
well as a cost to be controlled.
(2) Conflicts are dealt with by team members within their teams.
(3) Preference is for collective bargaining of pay and working conditions.
(4) Emphasis is on competitive pay and conditions to stay
ahead of competitors.
Answer:(3)

37. Which one of the following is an advantage of
Magazines as a source of recruitment ?
 (1) Less expensive
 (2) Long lead time for advertisement placement
 (3) Reach a diverse audience
 (4) Many unmotivated applicants
Answer:(3)

38. Examine the following statements and choose the correct code :
Assertion (A) : Human Resource planning must always be
seen within the strategy making context.
Reason (R) : Human Resource planning process removed
from the realities of the
business will be a waste of time.
 Codes :
 (1) Both (A) and (R) are correct.
 (2) Both (A) and (R) are wrong.
 (3) (A) is correct, but (R) is wrong.
 (4) (A) is not correct, but (R) is correct.
Answer:(1)

39. Match the items of List – I with the items of List – II
and select the correct code :
List – I List – II
a. Golden parachutes i. The right to purchase a stated
number of shares of a company
stock at today’s price at some time
in the future.

b. Gain sharing ii. An incentive plan that engages
employees in a common effort to
achieve productivity objectives and
share the gains.

c. Stock-option iii. Payments companies make in
connection with a change in
ownership or control of a company

d. Annual bonus iv. Plans designed to motivate short
term performance of managers and
are tried to company profitability.
Codes :
 a b c d
 (1) iii i ii iv
 (2) i ii iii iv
 (3) ii iii i iv
 (4) iii ii i iv
Answer:(4)

40. Which one of the following is not a
function of plant council ?
(1) Recommend and improve safety, health and
welfare measures.
(2) Determination of productivity schemes taking into
consideration the local conditions.
(3) Planning, implementation and review of monthly
targets and schedules.
(4) Review of working of shop level bodies.
Answer:(1)

41. Assertion (A) : “Banks globally are facing more
challenges now, and Macro sustainability is a necessity
but not sufficient for sustainable economic growth.”
Reason (R) : “Putting regulations in place is only one part and
their implementation is equally important for achieving growth
and sustainability.”
Codes :
(1) (A) and (R) both are true and (R) is correct explanation of (A).
(2) (A) and (R) both are true but (R) is not the correct explanation of (A).
(3) (A) is true and (R) is false.
(4) (A) is false and (R) is true.
Answer:(1)

42. Banking on telephone service includes :
 (i) Automatic balance voice out
 (ii) Inquiry all term deposit account
 (iii) Direct cash withdrawl
 (iv) Utility bill payment
 (v) Voice out last five transactions
Codes :
 (1) (i), (ii), (iii) and (v)
 (2) (i), (ii), (iv) and (v)
 (3) (ii), (iii), (iv) and (v)
 (4) All (i), (ii), (iii), (iv) and (v)
Answer:(2)

43. Which one of the following banks currently ranks number
one in India in terms of market capitalization ?
 (1) State Bank of India
 (2) I.C.I.C.I. Bank
 (3) U.T.I. Bank
 (4) I.D.B.I. Bank
Answer:(1)

44. Match the items of Column – I with the items in
Column – II and suggest the correct code :
Column – I Column – II
a. Interbank call market i. Money market
b. Commercial Bills ii. Promissory note
c. Commercial paper market iii. Short-term maturity
d. Treasury bills iv. Government papers
Codes :
 a b c d
 (1) i ii iv iii
 (2) iii i ii iv
 (3) i iii iv ii
 (4) iv iii ii i
Answer:(2)

45. Match the items of List – I with List – II with regard
to the BASEL III norms and select the
correct code :
 List – I List – II
a. Pillar 1 i. Supervisory review process
b. Pillar 2 ii. Market discipline
c. Pillar 3 iii. Minimum regulatory capital
requirements based on Risk
Weighted Assets (RWAs)
Codes :
 a b c
 (1) i ii iii
 (2) i iii ii
 (3) iii ii i
 (4) iii i ii
Answer:(4)

46. Assertion (A) : Comparative cost theory is static
in character.
Reason (R) : Comparative cost theory is based on fixed
supplies of factors of production.
 Codes :
(1) (A) is correct, but (R) is incorrect.
(2) (R) is correct, but (A) is incorrect.
(3) (A) and (R) both are correct, but (R) is not the
correct explanation of (A).
(4) (A) and (R) both are correct and (R) is the correct
explanation of (A)
Answer:(4)

47. Match the items of List – I with List – II with regard to
Balance of Payments equilibrium :
List – I List – II
a. Exchange control i. Exporters surrender foreign exchange to the central
bank.

b. Trade Policy ii. Bank rate raised by the central bank
Measure

c. Expenditure iii. Reduction in foreign exchange rate
reducing policy


d. Expenditure iv. Enhancing exports by granting subsidies
switching policy

Codes :
 a b c d
 (1) i iv ii iii
 (2) i ii iii iv
 (3) iii ii iv i
 (4) iv iii ii i
Answer:(1)

48. Which among the following is closely associated with
intellectual property rights ?
 (1) GATS (2) TRIMS
 (3) TRIPS (4) MFN
Answer:(3)

49. What is not correct about International
Development Association (IDA) ?
(a) Following earthquake in 2015, IDA has helped
Nepal rebuild and recover.
(b) IDA ranks as the highest performing multilateral
development bank in 2016.
(c) IDA is a subsidiary bank of IBRD.
(d) India has procured highest amount of international
loan from IDA.
Codes :
 (1) (a) and (b) (2) (c)
 (3) (d) (4) (a) and (c)
Answer:(3)

50. As per the Foreign Trade Policy 2015-2020, a three
star export house should have :
(1) Export performance (FOB/FOR) of US $ 100 million
during current and previous two years.
(2) Export performance (FOB/FOR) of US $ 500 million
during current and previous two years.
(3) Export performance (FOB/FOR) of US $ 1000 million
during current and previous two years.
(4) Export performance (FOB/FOR) of US $ 2000 million
during current and previous two years.
Answer:(1)