CBSE COMMERCE NET-11

QUESTION SET-11

76.     BOLT system in the Indian securities market is related to :

A. National Stock Exchange

B. Bombay Stock Exchange

C. Over the counter Exchange of India

D. Multi commodity Stock Exchange

ANSWER:-B

EXPLANATION:- The economic and capital market in India cannot exist without a stock exchange; there are two main stock exchanges where transactions take place; the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). While all the major transactions take place here, there are over 20 different stock exchanges located across the country.
Online trading in India has changed the meaning of trading in the country. With no requirement for a broker, trading has become easier, faster and far more convenient than earlier days. Some of the major financial products and services offered through online trading are mutual funds, equities, general insurance, life insurance, share trading, portfolio management, commodities trading and financial planning. In online trading, the investor has to pay less brokerage as compare to offline trading. There is no need for any paperwork through online investing and the need for a middle man is eliminated. All the stock accounts are stored in a Demat account where they can be viewed.

77. The presence of fixed costs in the total cost structure of  a firm results into;

A. Financial leverage

B. Operating leverage

C. Super leverage

D. None of the above

ANSWER:-B

EXPLANATION:-Operating leverage is the ratio of a company's fixed cost to its variable costs. Operating leverage is a measure of the combination of fixed costs and variable costs in a company's cost structure. A company with high operating leverage depends more on sales volume for profitability. The company must generate high sales volume to cover the high fixed costs.
Operating  leverage is a measure of the combination of fixed costs and  variable costs in a company’s cost structure. A company with high fixed costs and low variable costs has high operating leverage; whereas a company with low fixed costs and high variable costs has low operating leverage.
A company with high operating leverage depends more on sales volume for profitability. The company must generate high sales volume to cover the high fixed costs. In other words, as sales increase, the company becomes more profitable. In a company with a cost structure that has low operating leverage, increasing sales volume will not dramatically improve profitability since variable costs increase proportionately with sales volume.

78.Which one of the following is not a money market instrument?

A. commercial paper

B. participatory paper

C. Warrants

D.Treasury bills

ANSWER:-C

EXPLANATION:-Share warrants are a common source of funding used by companies, both public and private. As is clear from the nomenclature, warrants are issued with an option to convert into shares of the company. Share warrant is an option issued by the company that gives the warrant holder a right to subscribe equity shares at a pre determined price on or after a pre determined time period.

79. Which one is not related to micro financing?

A. SHGs

B. Anganwadi workers

C. Women empowerment

D.none of the above

ANSWER:-A

EXPLANATION:-Microfinance has evolved over the past quarter century across India into various operating forms and to a varying degree of success. One such form of microfinance has been the development of the self-help movement. Based on the concept of “self-help,” small groups of women have formed into groups of ten to twenty and operate a savings-first business model whereby the member’s savings are used to fund loans. The results from these self-help groups (SHGs) are promising and have become a focus of intense examination as it is proving to be an effective method of poverty reduction. 

80. "Cost of capital declines when the degree of financial leverage increases"  who advocated it?

A. Net operating income approach

B. Net income approach

C.Modigliani -Miller approach

D. Traditional approach

ANSWER:-B

EXPLANATION:-David Durand’ suggested the two famous capital structure theories, viz, Net Income.According to NI approach a firm may increase the total value of the firm by lowering its cost of capital. When cost of capital is lowest and the value of the firm is greatest, we call it the optimum capital structure for the firms and at this point, the market price per share is maximised.
The same is possible continuously by lowering its cost of capital by the use of debt capital. In other words, using more debt capital with a corresponding reduction in cost of capital, the value of the firm will increase.
Assumptions of NET INCOME APPROACH are:-
1.There are no taxes
2.The cost of debt is less than the cost of equity.
3.The use of debt does not change the risk perception of the investors.

81.Interest paid by a  firm to its partners, under the Income Tax Act, 1961, is allowed 
A. 6%
B.12%
C. 15%
D.18%

ANSWER:-B

EXPLANATION:As per Section 40(b) of income tax act any interest, salary, bonus, commission or remuneration paid to partners by the partnership firm are allowed to be deducted as an expenses subject to such conditions mentioned in the income tax act. Remuneration means any payment made towards services rendered.
Conditions for payment of remuneration to partners:-

1. Remuneration shall be allowed as deduction only if it is paid to working Partner 

2. Remuneration must be written/authorized and should be quantified in partnership deed 

3. Remuneration must be related to the period after the partnership deed 

4. Interest paid to partner should not exceed 12% 

5. It should not exceed limits specified in section 40(b)

82. The area under normal distribution covered within U+3S.D. limits is
A. 0.6827
B.0.9545
C.0.9973
D.1.0000

ANSWER:-C


EXPLANATION:-The ‘Normal Probability Curve’ is  the also known as "bell shaped curve" . Thus the “graph of the probability density function of the normal distribution is a continuous bell shaped curve, symmetrical about the mean” is called normal probability curve.

The characteristic of normal distribution curve are:-

1. The curve is asymptotic:

2. The Mean, Median and Mode.
3. The Points of inflection occur at ± 1 Standard deviation unit:
4. The curve is bilaterally symmetrical.