PREVIOUS YEAR SOLVED PAPERS - December 2018
1. Which one of the following statements is correct?
- A
The purpose of issuing different types of rules and regulations by SEBI is to bring monetary gains to investors.
- B
SEBI has been constituted under the Securities (Contract and Regulation) Act, 1956.
- C
One of the objectives of setting up SEBI is to protect the interests of investors.
- D
SEBI is constituted from amongst the directors of various stock exchanges.
- Option : C
- Explanation : Government of India set up the Securities and Exchange Board of India (SEBI) on April 12, 1988 on the basis of the recommendations of the high powered Committee on Stock Exchange Reforms headed by G.S. Patel. SEBI was given a legal status by the Securities and Exchange Board of India Ordinance, 1992. The members of the Board of Management of the SEBI comprised those drawn from professional brokers, financial consultants, merchant bankers, investors, stock exchange authorities, finance ministry, etc.
FEATURES OF THE SEBI BILL
The SEBI has been entrusted with a wide range of responsibilities in regulating the activities of almost all the players in the capital market. After the abolition of the controller of capital issues, the issuer of capital, which is the promoter, has come under SEBI’s jurisdiction. The SEBI laid down certain guidelines for the issuers to ensure investor protection. The SEBI was expected to regulate mutual funds, merchant bankers, registrars to issue, share transfer agents, portfolio managers, underwriters, investment advisors, brokers and sub-brokers. SEBI has also been given certain powers to regulate the functioning of stock exchanges in India.
OBJECTIVES
SEBI was set up with the following objectives of assisting and facilitating the mobilization of adequate resources through the securities market and its efficient allocation, keeping in mind the interests of issuers, investors and the intermediaries:
1. Conducive environment: SEBI aims at creating a proper and conducive environment required for raising money from the capital market through the rules, regulations, trade practices, customs and relations among institutions, brokers, investors and companies. It also aims at endeavouring to restore and safeguard the trust of investors, especially the interest of the small investors. This is to be achieved by meeting the needs of the players connected with the securities market such as the investors, the corporate sector and the intermediaries. SEBI works for creating proper investment climate to enable corporate sector to float industrial securities easily, efficiently and at affordable minimum cost.
2. Investor education: SEBI aims at educating investors so as to make them aware of their rights in clear and specific terms by providing them with information. This way, SEBI aims at maintaining liquidity, them with information. This way, SEBI aims at maintaining liquidity, safety and profitability of the securities in the market that are crucial for any investment. A high degree of protection of investor rights and interests is made possible by providing adequate, accurate and authentic information on a continuous basis. This way, the market efficiency is also ensured.
3. Infrastructure: SEBI aims at developing a proper infrastructure for facilitating automatic expansion and growth of business of middlemen like brokers, jobbers, commercial banks, merchant bankers, mutual funds, etc. This is aimed at providing efficient service to their constituents, viz. investors and corporate sector at competitive prices.
4. Others: In addition to the above mentioned objectives, SEBI would also make efforts to bring about necessary enactments for regulating business of intermediaries such as mutual funds, NBFCs and chit funds, etc. SEBI would also work towards creating a framework for more open, orderly and unprejudiced conduct in relation to takeover and mergers in the corporate sector so as to ensure fair and equal treatment to all the security holders.
| LIST-I | LIST-II |
| (a) Rival Firms | (i) External Environments |
| (b) Technology | (ii) Social and Cultural Environment |
| (c) Improving Quality | (iii) Internal Environment |
| (d) Ethics in Business | (iv) Global Environment |
CODES
| (a) | (b) | (c) | (d) | |
| 1 | (ii) | (iii) | (iv) | (i) |
| 2 | (iv) | (i) | (ii) | (iii) |
| 3 | (i) | (ii) | (iii) | (iv) |
| 4 | (iii) | (i) | (iv) | (ii) |
3. Combined leverage can be used to measure the relationship between:
- Option : A
- Explanation : COMBINED LEVERAGE
Meaning of Combined Leverage
Combined Leverage is a measure of Total Risk. The percentage change in EPS occurring due to a given percentage change in Sales is known as the degree of combined leverage. It is the product of degree of operating leverage and degree of financial leverage.
Decision with which Combined Leverage is Associated
It is associated with Capital Budgeting Decision (or Assets Mix Decision) and Capital Structure Decision (or Capital Mix Decision). Its degree differs with the use of different forms of financing.
When Does Combined Leverage Exist?
Combined Leverage exists if there are either fixed costs or funds bearing fixed financial payments or both.
How to Calculate Combined Leverage?
Combined Leverage can be calculated with the help of following formulae:
4. Which among the following is not an internal factor of pricing decision?
- Option : C
- Explanation : FACTORS INFLUENCING THE PRICING DECISIONS OF SERVICES
Internal and External Factors
The factors that influence price determination can be classified as internal and external factors (Adrein Palmer).
1. Internal Factors
The internal factors are controllable in nature, which are discussed below:
(a) Organisational Policies: As price decision is an outcome of production and marketing, the pricing (takes at the top level and the lower level of an organisation.)
(b) Service Differentiation: In order to differentiate own services from that of the competitor, the service provider has to price the services differently.
(c) Service Cost: It is necessary to assure that the price charged for a service covers the fixed, variable and semi-variable costs incurred in providing that service.
(d) Marketing Mix: The price of a product or service varies depending upon whether the product or service idea is new or an established one, whether the service provider is an agent or a sub-agent, or the main provider (distribution channels) and also the various pricing objectives.
2. External Factors
On the other hand external factors are uncontrollable in nature, such as:
(a) Demand: Markets have to be segmented effectively according to:
Different Groups of Users: In order to obtain maximum value from each segment of users, different prices can be charged for offering the same service. Depending on the user’s demand for the product or service like heavy user, medium user, on low user the pricing variations are made.
Different Points of Consumption: On the basis of the point of production and consumption, service organisations charge different prices at different service locations. Depending on the place where the consumption takes place, the prices are to be varied. For example, Taj group of hotels will not charge the same price for its deluxe rooms in Delhi, Mumbai, Chennai and Bangalore.
Different Time of Production: Owing to the perishability characteristic of the services, they are priced discriminatorily, depending upon the time at which they are offered. For example, hotels in Goa follow a different price package during the monsoon season as compared to the peak season of the year i.e., October-May.
(b) Competition: Competition plays a significant role in pricing, due to similarity in the services offered and the satisfaction enjoyed by a customer. Unless the products and services provided by the hotelier are unique in nature, the marketer cannot price the products and services higher than the competitor.
(c) Governmental Control: Government policy regulations affect the pricing decisions of various services. For example, changes in the luxury tax, sales tax, etc. imposed by the government, from time to time, affect the pricing decisions of a hotel or restaurant business.
| LIST-I | LIST-II |
| (a) Compensation received by an employee from his employer on termination of job | (i) Exemption up to specified limit |
| (b) Pension received by the widow of an employee | (ii) Profits in lieu of salary |
| (c) Foreign allowance for rendering services abroad | (iii) Income from other sources |
| (d) Children hostel allowance | (iv) Fully exempt from tax |
CODES
| (a) | (b) | (c) | (d) | |
| 1 | (ii) | (iv) | (iii) | (i) |
| 2 | (ii) | (iii) | (iv) | (i) |
| 3 | (iv) | (iii) | (i) | (ii) |
| 4 | (iii) | (iv) | (ii) | (i) |
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