UGC NTA NET/JRF Exam, Management, December-2021/June-2022

Total Questions: 100

11. Which one of the following is not an intramural function of trade unions?

Correct Answer: (b) Extension of medical facilities during sickness and casualties
Solution:

The functions of trade unions can be broadly classified into three type i.e. • Militant functions (protective)
• Fraternal functions (positive)
• Intramural functions-
It refers to welfare schemes & activities within the framework of factory premises (safety, secure working environment, minimum wages, minimum working hours and leave with wages).
• Extramural functions -
It refers to the welfare schemes outside the factory premises (medical assistance, health care education). Hence, extension of medical facilities during sickness and casualties is not intramural functions of trade unions actually, it is an extramural function.

12. Which one of the following is a disadvantage of MBO as a performance appraisal tool?

Correct Answer: (b) Time consuming
Solution:

MBO procedure is expensive and time consuming setting goals together in MBO takes a lot of time and money. Senior executives lack the patience and time to complete the extensive analysis required by MBO.

13. Marston Company sells a single product at a price of Rs. 50 per unit, its fixed costs total Rs. 15,000 and variable costs amount to Rs.20 per unit. If management reduces the sales price of this product by Rs. 5 per unit, the sales volume, needed for the company to break even will.

Correct Answer: (c) Increase by Rs.2000
Solution:

14. Nobel Laureate (2013) Robert Shiller advocates price earning ratio based on:

Correct Answer: (d) Cyclically adjusted 10 years' earnings
Solution:

Noble laureate (2013) Robert Shiller advocates price earnings ratio based on cyclically adjusted 10 years' earnings.
• The Shiller P/E ratio is a valuation measure that uses real earning per share over 10 year period to smooth out fluctuations in corporate projects.
• This ratio helps investors to understand whether stocks are overvalued or undervalued while also correcting for short term volatility.
The formula for the Shiller P/E ratio is current price divided by average inflation adjusted 10-year EPS.

15. The traditional accounting practice of resolving uncertainty by choosing the solution that leads to the lower amount of income being recognized in the current accounting period is based on which of the following accounting principles?

Correct Answer: (c) Conservatism
Solution:

The traditional accounting practice of resolving uncertainty by choosing the solution that leads to the lower amount of income being recognized in the current accounting period is based on Conservatism' accounting principle.
• The concept of conservatism (also called prudence) provides guidance for recording transactions in the book of accounts and is based on the policy of playing safe.
• It requires that profits should not to be recorded until realised but all losses, even those which may have a remote possibility are to be provided for in the books of account.

16. If a company's current ratio declined in a year during which its quick ratio improved, which of the following is the most likely explanation?

Correct Answer: (b) Inventory is declining
Solution:

If a company's current ratio declined in a year during which its quick ratio improved so here 'Inventory is declining' is the most likely explanation. Because current ratio includes all the current assets such as cash, prepaid expenses and inventory etc. it means decline in inventory results in decline in current ratio. Whereas quick ratio only includes most liquid current asset i.e. cash and cash equivalents it does not includes inventory. So. there is no effect of declining in inventory on quick ratio.

17. Earnings per share of company is Rs. 5 and the rate of return required by its shareholders is 16 percent. Assuming Gordon valuation model, what rate of return should be earned on investment to ensure that the market price of its share is Rs. 50 and the dividend payout is 40 percent?

Correct Answer: (a) 20% percent
Solution:

18. In which of the following methods of capital budgeting cash flows are reinvested at the cost of capital?

Correct Answer: (b) Net Present Value (NPV)
Solution:

Net Present Value (NPV) is a method of capital budgeting in which, cash flows are reinvested at the cost of capital.
• It is a classic method of evaluating the investment proposals which recognizes the importance of time value of money.
• It correctly postulates that cash flows arising at time periods differ in value and are comparable only with their equivalents i.e. present values.

19. Which of the following is a pre-offer takeover defence employed by target companies in hostile takeovers?

Correct Answer: (c) Poison pills
Solution:

Poison pills is a pre-offer takeover defence employed by target companies in hostile takeovers.
• The terms 'Poison pill' was coined by investment banker Martin Siegel.
• This tactic is used by prospective targets to make the potential acquirer seem less appealing to them.
• In this, target company issues low-priced preferences shares to its shareholders. This increases the total issued share capital of the target company and consequently makes it more costly for the acquirer to acquire the target company.

20. In the absence of transactions cost if a stock plots above the security line (SML), it is:

Correct Answer: (b) Underpriced
Solution:

A security market line is a tool of evaluation used by investors or money managers that are scrutinizing stock to add into their portfolio based on their degree of favorability.
• It depicts the relationship between the expected returns of a particular investment and the risk involved.
• When stock is plotted above the SML it is underpriced because the level of returns are higher than the risk and when potted below the SML it is overpriced because the level of returns doesn't justify the risk.