SEBI Grade A Mock Test PDF

SEBI GRADE A
EXAM
Paper 2 Mock Test PDF
Questions with Solutions
SEBI Grade A Free Mock Test PDF Free SEBI e-book
SEBI Grade A Free Mock Test PDF – Paper 2

Questions with Solutions
Q.1) RBI is least likely to go for __________ if there are inflation concerns building up.
a) Repo rate hike
b) Increase in CRR requirements
c) Increase in SLR requirements
d) Reverse repo rate hike
e) Repo rate cut
Answer: Option e (Repo rate cut)
Explanation:
● Repo rate is the rate at which the central bank of a country (Reserve Bank of India in
case of India) lends money to commercial banks in the event of any shortfall of funds.
● When it is decreased, banks will borrow more money from RBI and in turn lend more,
leading to more money in the market leading to inflation.
● Hence, RBI will not go for Repo Rate cut usually in an inflation concern scenario.
Q.2) As per the Companies act, dividend can be declared only after providing for
a) Depreciation
b) Carry over losses
c) Both a & b
d) Notional loss
e) All a b & d
Answer: c
Reason:
As per Sec 123 (1) of the Companies Act 2013, Set off of previous year losses and
depreciation: -
A company shall not declare dividend unless carried over previous losses and depreciation
not provided in previous year or years, are set off against profit of the company for the
current year.
Q.3) While preparing cash flow statement, conversion of debenture to preference share
capital ___________
a) Should be shown as a financing activity
b) Should be shown as an investing activity
c) Should not be shown as it is a non-cash transaction
d) Should be shown as an operating activity
e) None of the above
Answer: c
Reason:
Since mere conversion transaction does not have any cash inflow or outflow it will not
impact cash balances as such. Hence the same will not been shown in the statement.
Q.4) Which among the following is not a financial derivative?

a) Futures
b) Forward
c) Stocks
d) Options
e) Swaps
Answer: Option c Stocks
Explanation:
● Derivative means forward, futures, options or any other hybrid contract of
predetermined fixed duration, linked for the purpose of contract fulfilment to the
value of a specified real or financial asset or to an index of securities.
Q.5) Which of the following is not an objective of Management Accounting?

a) Policy & planning formulation
b) Interpretation of financial documents
c) Assistance in Reporting & decision making
d) Managerial control & co-ordination
e) Preparation of balance sheet
Answer: e) Preparation of balance sheet

Solution:
● Management Accounting links all those aspects which facilitates management in any
form
● Management accounting is a decision-making system
● Management accounting provides accounting information in such a way as to assist
management in the creation of policy and in the day-to-day operations.
● Provides data which is helpful to management in decision making.
● It communicates a variety of facts in a systematic and meaningful manner.
Management accounting does not set particular formats for information but provides
necessary information to the management in the form which may be more useful to the
management in taking various decisions on different aspects of the business.
Q.6) Which of the following will not help in reducing fiscal deficit?
a) Reducing government debt

b) Reducing government spending
c) Increasing government income
d) Borrowings from RBI
e) All of the above
Answer: Option D) Borrowings from RBI
Explanation:
● Borrowings from RBI actually increases government liabilities and therefore the cost
of debt which government has to pay leading to increase in deficit.
Q.7) The segregation of ownership, management and trading rights in stock exchange is
referred as
a) Demutualisation
b) Decentralisation
c) Mutualisation
d) Dematerialisation
e) None
Answer: a
Solution:
Demutualisation refers to the legal structure of an exchange whereby the ownership, the
management and the trading rights at the exchange are segregated from one another. In a
mutual exchange, the three functions of ownership, management and trading are
concentrated into a single Group.
Q.8) The FRBM review committee recommended escape clause to meet unforeseen
expenses. The quantum of slippage allowed under escape clause is.
a) 50 basis points above FD
b) 100 basis point above FD
c) 75 basis point above FD
d) 25 basis point above FD
Answer: a
Solution:
● The NK Singh Committee points out that there are disadvantages with set fiscal deficit
target if some economic instabilities like an external crisis affects the Indian economy.
● For example, the government has to spend more during the time of a recession and
hence it need not restrict its borrowing to keep the fiscal deficit target.
● The committee recommends fiscal flexibilities to go above or below the fiscal deficit
targets in the form of escape clauses.
● The Committee set 0.5% as escape clause for fiscal deficit target.
Q.9) According to Fiedler’s contingency model, the leadership model depends on the
situational factors. What are the situational factors identified by Fiedler?
a) Leader member relations
b) Position power
c) Task structure
d) Only a and b
e) All of the above
Answer: e
Solution:
● Fiedler’s Contingency model gave emphasis to situational factors for determining
leadership style, rather than traits or behaviour alone.
● Fred E. Fiedler’s contingency theory of leadership effectiveness was based on studies of a
wide range of group effectiveness and concentrated on the relationship between
leadership and organizational performance.
● This model is based on the idea that rather than having a single leadership style for all
circumstances, the best approach is to be able to vary the leadership that is provided
based on the group and task at hand.
● For a single person, the leadership style is fixed, so for different situation we will require
different leaders.
● This theory looks at leadership from 2 factors:
What is the Leadership style?

Whether, it is Task oriented or Relationship oriented.
● In order to assess this, Fiedler developed the ‘least preferred co-worker’ (LPC) scale in
which the leaders are asked about the person with whom they least like to work.
● Fiedler states that leaders with high LPC scores are relationship-oriented and the ones
with low scores are task-oriented.
The other thing that is seen is ‘What is the situation’?
● To assess this, 3 variables are considered: Leader’s Position Power, Task Structure,
Leader-member relation.
● Depending on the above two factors, Fiedler describes a matrix which lays down which
style is more useful in a particular situation.
Q.10) If current assets are lesser than current liabilities then which of the following is true?
a) Working capital is positive
b) Working capital is negative
c) No impact on working capital
d) Negative capital
Answer: b
Reason:
The capital of a business which is used in its day-to-day trading operations, calculated as the
current assets minus the current liabilities. If CA are lesser than CL, then it results in Negative
Working capital.
Q.11) AS 2 is applicable to companies of?

a) Level I
b) Level II
c) Level III
d) All of the above
Answer: d
Reason:
● This accounting standard is applicable to all companies irrespective of their level (Level
I, II and III).
● This standard prescribes the accounting treatment for inventories and sets the guidelines
to determine the value at which the inventories are carried in the financial statements.
Q.12) Which of the following is right w.r.t. Keynesian consumption model?

a) With rise in income, consumption will also rise by same margin
b) With rise in income, consumption will decrease by same margin
c) With rise in income, consumption will remain the same
d) With rise in income, consumption will rise by lesser margin
e) All are false
Answer: d
Solution:
● Aggregate demand consists of two parts—consumption demand and investment
demand.
● As the demand for a good depends upon its price, similarly consumption of a community
depends upon the level of income.
● In other words, consumption is a function of income.
● The con-sumption function relates the amount of consumption to the level of income.
● When the income of a community rises, consumption also rises.
● Keynesian theory proposed that with a given consumption function, amount of
consumption is different at different levels of income.
● It also says that, when income rises, consumption also rises but not as much as the
income.
● This fact about consumption function was emphasised by Keynes, who first of all evolved
the concept of consumption function.
● The reason why consumption rises less than income is that a part of the increment in
income is saved.
Q.13) Hawthorne studies led to the evolution of

a) Scientific management
b) Bureaucratic management
c) Administrative management
d) Human relation school of management
Answer: d
Solution:
● Hawthorne studies led to the introduction of human relations school in management.
● Hawthorne studies were conducted on workers at Hawthorne plant of western electric
company in 1920 by Elton Mayo and Roethlisberger.
● The Hawthorne studies were part of a refocus on managerial strategy incorporating the
socio-psychological aspects of human behaviour in organizations.
● Bank wiring experiment and Zimbardo prison experiments also comes under Hawthorne
experiments.
● The changes in behaviour pattern during observation is termed as Hawthorne effect. So,
Hawthorne effect is when subjects of an experimental study attempt to change or
improve their behaviour simply because it is being evaluated or studied.
What was found in these experiments?

● The studies originally looked into whether workers were more responsive and worked
more efficiently under certain environmental conditions, such as improved lighting.
● The results were surprising: Mayo and Roethlisberger found that workers were more
responsive to social factors—such as the people they worked with on a team and the
amount of interest their manager had in their work—than the factors (lighting, etc.) the
researchers had gone in to inspect.
● The Hawthorne studies discovered that workers were highly responsive to additional
attention from their managers and the feeling that their managers actually cared about,
and were interested in, their work.
● The studies also found that although financial motives are important, social issues are
equally important factors in worker productivity.
● Thus, this led to the introduction of human relations school of management.
● Human relations movement deals with finding ways which will encourage better
performance of workers. Improving working conditions in ways other than monetary
factors like lowering working hours, introducing rest periods or enhancing social
interaction at work lead to improved productivity.
● Elton Mayo and Mary Parker Follett are the main contributors of human relations
approach.
Q.14) The process used to collect information about the duties, responsibilities, necessary
skills, outcomes, and work environment of a particular job is
a) Job analysis
b) Job evaluation
c) Job design
d) Job description
Answer key: a
Solution:
● Job analysis is a systematic process of collecting complete information pertaining to a
job.
● It is a procedure through which you determine the duties and responsibilities, nature of
the jobs and finally to decide qualifications, skills and knowledge to be required for an
employee to perform particular job.
● It helps to understand what tasks are important and how they are carried on.
● Job analysis forms basis for later HR activities such as developing effective training
program, selection of employees, setting up of performance standards and assessment of
employees (performance appraisal) and employee remuneration system or compensation
plan.
● The outcome of job analysis is job description and job specification.
● One very important point to understand is job analysis is related to analysis of a job and
not of the person.
Q.15) The call option buyer will make profit only when,
a) Strike price plus option premium equals spot price
b) Strike price plus premium is lesser than spot price
c) Strike price plus premium is greater than spot price
d) Both a and b
Answer key: b
Solution:
● Call option holder will buy the asset at strike price (exercise price) when spot price is
greater than strike price plus option premium.
● Strike price is the one determined at the time of contract.
● For example, in a Call option, strike price is 100.
● On expiration, the spot price was 120 and option premium paid was 10.
● So, sum of strike price plus option premium (110) is lesser than spot price (120). Thus, the
buyer can buy at 110 rupees for an asset trading at 120 rupees in market.
● Thus, he can gain from trade.
● When strike price plus premium equals spot price, he will not make any profit or loss.
● When strike price plus premium is greater than spot price, the option will lose its worth.
Q.16) Practice, where only significant deviations from plan/process are brought to
management is known as?
a) Management by objectives
b) Management by exception
c) Cybernetic management
d) Pragmatic management
Answer: b
Solution:
● Management by Exception (MBE) is the practice where only significant deviations from
plan are brought to management.
● We can call it as a method of control. Managers intervene in the work of the employees
only when they work outside the prescribed scope or when they can't meet the
standard.
● Now, here before we proceed, we need to understand the concept of Transactional
Leadership.
Transactional Leadership:
● In this type of leadership, the main goal of the follower is to obey the instructions of the
leader. The style can also be mentioned as a ‘telling style’.
● The exchange between leader and the follower takes place to achieve routine
performance goals.
These exchanges involve 4 dimensions:
Since the question is about MBE, we will restrict our discussion to it.
We can see that MBE can be either Active MBE or Passive MBE.
Active Management by Exception: Transactional leaders actively monitor the work of their
subordinates, watch for deviations from rules and standards and taking corrective action to
prevent mistakes.
Passive Management by Exception: Transactional leaders intervene only when standards

are not met or when the performance is not as per the expectations. They may even use
punishment as a response to unacceptable performance.
Q.17) In the annual budget documents of the Government of India, ‘Primary Deficit’ refers
to
a) Difference between revenue deficit of the current year and grants for capital creation
b) Difference between revenue deficit of the present financial year and grants to states
and local bodies
c) Difference between budgetary deficit and capital deficit of the present financial year
d) Difference between fiscal deficit of the current year and interest payments on the
previous borrowings
Answer: d
Solution:
● The borrowing requirement of the government includes interest obligations on
accumulated debt.
● To obtain an estimate of borrowing on account of current expenditures exceeding
revenues, we need to calculate what has been called the primary deficit.
● It is simply the fiscal deficit minus the interest payments
● Gross primary deficit = Gross fiscal deficit – net interest liabilities.
Q.18) Higher the Interest coverage ratio then

a) Higher would be the ability to pay
b) Lower would be the ability to pay
c) EBIT > Interest expense
d) A&C
e) B&C
Answer: d
Reason:
● The interest coverage ratio measures the ability of a company to pay the interest on its
outstanding debt.
● This measurement is used by creditors, lenders, and investors to determine the risk of
lending funds to a company.
● A high ratio indicates that a company can pay for its interest expense several times over,
while a low ratio is a strong indicator that a company may default on its loan payments.
The formula for the same is: “Earnings before interest and taxes/ Interest expense”
Q.19) Which one among the following ratio is an indicator of operational efficiency of a
business?
a) Debt-equity ratio
b) Operating profit ratio
c) Gross profit ratio
d) Solvency ratio
Answer: b
Solution:
Operating profit ratio: It is an indicator of operational efficiencies. It reveals only overall
efficiency of the business. It establishes relationship between operating profit and net sales.
Debt Equity ratio: It is also known as external to internal equity ratio. It is calculated to know
the relative claims of outsiders and the owners against the firm’s assets.
Gross Profit ratio: It expresses the relationship of gross profit to net sales. It is expressed in
percentage.
Solvency ratio: It refers to the ability of a business to meet its long-term obligations.
The long-term liability of a business towards debts such as debenture holders, financial
institutions providing medium- and long-term loans etc.
Q.20) Cost of the asset is Rs. 100000. Depreciable value is Rs. 85,000 then what would be
the percentage of Residual value?
a) 85%
b) 20%
c) 15%
d) 10%
e) 12%
Answer: c
Reason:
Q.21) What will happen to the balance sheet if the business purchases the inventory of ₹.
500 on credit?
a) The inventory balance will increase to ₹. 650 and cash balance will be reduced
to ₹. 800.
b) Both the asset side and liability side of balance sheet will increase by ₹. 500
c) The inventory balance will increase by ₹. 500 and liability side of balance sheet
will be reduced by ₹. 500
d) The inventory balance remains the same and cash balance will increase to ₹.
1800.
Answer: b
Solution:
● The inventory is purchased on credit so, both the asset side and liability side of balance
sheet will increase by ₹. 500
● In the asset side, the inventory balance will increase to ₹. 650 (150 + 500) and in liability
side, another new balance Creditors will have balance of ₹. 500.
Balance sheet after the new transaction:
Capital & Liabilities (₹) Assets (₹)
Capital 2450 Cash 1300
Bank Loan 500 Inventory 650
Profits 300 Plant and Equipment 1800
Creditor 500
Total 3750 Total 3750
Q.22) Issue of share at a price less than market price to existing shareholders is known as
(a) Bonus shares
(b) Right shares
(c) Initial offer
(d) Shares at discount
(e) Shares at premium
Answer: b
Reason:
● A rights issue is an invitation to existing shareholders to purchase additional new shares
in the company.
● This type of issue gives existing shareholders securities called rights.

● With the rights, the shareholder can purchase new shares at a discount to the market
price on a stated future date.
● The company is giving shareholders a chance to increase their exposure to the stock at a
discount price.
Q.23) The compensation for revenue for state governments under GST will be provided till
which of the following year?
a) 2024
b) 2022
c) 2025
d) 2021
e) 2023
Answer: b
Solution:
● As many indirect taxes are subsumed by GST, the possible loss for state governments will
be compensated by central government for first 5 years.
● That is until 2022.
● GST cess is introduced for meeting the compensation expenditure.
● The revenue neutral rate for state governments is fixed at 14%.
Q.24) If machinery is shown in the books at its purchase price then the assets are measured
under
a) Historical cost
b) Replacement cost
c) Revaluation cost
d) Present value
e) Current cost
Answer: a
Reason:
● Historical cost means acquisition price.
● For example, Mr. X paid Rs. 6,00,000 to purchase the machine, its acquisition price
including installation charges is Rs. 7,00,000.
● The historical cost of machine would be Rs. 7,00,000.
Q.25) Journal is also known as

a) Book of Original Record
b) Snapshot of financial position
c) Business Analytics ratio
d) Book of secondary entry
Answer: a
Solution:
● Journal is a book of accounts in which all day to day business transactions are recorded
in a chronological order i.e. in the order of their occurrence.
● Journal is also known as ‘Book of Original Record’ or ‘Book of Primary Entry’.
Q.26) Selection committee of NCLT consist of

(a) Chief Justice of India
(b) Secretary of MCA
(c) Secretary of Law and Justice
(d) Chief Justice of High court
(e) All of the above
Answer: e
Reason:
As per Sec 412 of the Companies Act 2013:
● The President of the Tribunal and the chairperson and Judicial Members of the Appellate
Tribunal shall be appointed after consultation with the Chief Justice of India.
● The Members of the Tribunal and the Technical Members of the Appellate Tribunal shall
be appointed on the recommendation of a Selection Committee consisting of (a) Chief
Justice of India or his nominee—Chairperson; (b) a senior Judge of the Supreme Court or
Chief Justice of High Court— Member; (c) Secretary in the Ministry of Corporate Affairs—
Member; and (d) Secretary in the Ministry of Law and Justice—Member.
● Where in a meeting of the Selection Committee, there is equality of votes on any matter,
the Chairperson shall have a casting vote.
● The Secretary, Ministry of Corporate Affairs shall be the Convener of the Selection
Committee.
● The Selection Committee shall determine its procedure for recommending persons
under sub-section (2).
● No appointment of the Members of the Tribunal or the Appellate Tribunal shall be invalid
merely by reason of any vacancy or any defect in the constitution of the Selection
Committee.
Q.27) What is/are the differences between WPI and CPI?

a) WPI does not includes services sector, CPI includes services sector
b) Food basket dominates CPI, while manufacturing dominates WPI
c) Both CPI index and WPI index are released by CSO
d) Both CPI and WPI are used by RBI for inflation targeting
e) Both a and b
Answer: e
Solution:
● Consumer Price Index is released by CSO and WPI is released by the Economic Advisor in
the Commerce Ministry.
● WPI does not include services sector.
● As CPI index measures retail inflation, food basket dominates the index.
● RBI uses CPI for inflation targeting from 2014.
Q.28) Which leadership model involves contingent reward and punishment?

a) Transformational leadership
b) Charismatic leadership
c) Contingent leadership
d) Transactional leadership
Answer key: d
Solution:
● The Transactional style of leadership was first described by Max Weber in 1947 and then
by Bernard Bass in 1981.
● The leader believes in motivating through a system of rewards and punishment.
● If a subordinate does what is desired, a reward will follow, and if he does not go as per
the wishes of the leader, a punishment will follow.
● Management by Exception and contingent rewards are the major themes of Transactional
management.
● The power of transactional leaders comes from their formal authority and responsibility
in the organization.
● The main goal of the follower is to obey the instructions of the leader. The style can also
be mentioned as a ‘telling style’.
● This model is followed in Bureaucratic management.
Q.29) The communication barrier due to misunderstanding between the sender and receiver
arising due to the different meanings refers to
a) Technological barrier
b) Physiological barrier
c) Filtering
d) Semantic barriers
Answer: d
Solution:
● The Semantic Barriers refers to the misunderstanding between the sender and receiver
arising due to the different meanings of words, and other symbols used in the
communication.
● The semantic barriers usually arise when the information is not in the simple language
and contains those words or symbols that have multiple meanings.
Q.30) Which of the following is/are the objective/s of Unit costing?

a) To ascertain the total cost of the output
b) To ascertain the cost per unit of output
c) To ascertain the profit or loss on production
d) All the above
Answer: d) All the above

Solution:
● Unit costing is a method applied in industries where single or few grades of similar articles
are manufactured.
● This is the easiest and simplest costing method adopted in industries like paper, bricks,
cement, coal etc.
● The objectives of adapting this method of costing are:
i. To ascertain the total cost of the output
ii. To ascertain the cost per unit of output
iii. To ascertain the profit or loss on production
iv. To analyse the expenditure by nature, classify them into element of cost
and know the extent to which each element of cost contributes to the total
cost.
v. To facilitate comparison of the cost of one period with the cost of another
period to know the efficiency or otherwise of the production.
vi. To facilitate the preparation of tender or quotation.

vii. To control the cost of the product through comparative study
viii. The comparison of the actual costs with the pre-determined standard cost.
Q.31) Which of the following is/are feature/s of marginal costing?

a) Total costs are divided into fixed and variable
b) The cost drivers dictate the cost behaviour pattern
c) Only the variable costs are considered
d) None of the above
e) All of the above
Answer: c) Only the variable costs are considered

Solution:
Features of marginal costing are as under:
● Costs are separated into the fixed and variable elements and semi-variable costs are also
differentiated like wise
● Only the variable costs are considered for computing the value of stocks of work-in-
progress and finished products.
● Fixed costs are charged off to revenue wholly during the period in which they are
incurred and are not considered for valuing product cost/inventories
● Prices may be based on marginal costs and contribution but in normal circumstances
prices would cover costs in total
● It combines the techniques of cost recording and cost reporting
● Profitability of departments or products is determined in terms of marginal contribution
● The unit cost of a product means the average variable cost of manufacturing the product
Q.32) Planned Maintenance System is regarded as one of the Pillars of:

a) Budgeting
b) Costing
c) Total Productive Management
d) 5S
e) Value analysis
Answer: c) Total Productive Management
Solution:
● TPM is a systematic approach to eliminate waste associated with production equipment
and machinery.
● TPM focuses on involving machine operator in the routine checks and cleaning of the
machine to detect problems earlier.
● Other areas of emphasis include minimizing machine "downtime" resulting from
unexpected breakdowns, fully utilizing a machine's capabilities, and tracking life cycle
cost
● Avoids the manufacturing equipment losses of breakdowns, set-ups, adjustments,
reduced speed, scrap and rework
● Measure impact of defects, sub-optimal performance, and downtime using OEE (Overall
Equipment Effectiveness)
● the implementation of TPM can lead to significant manufacturing cost reductions,
improvement in production efficiency & improved competitiveness
● Total productivity management (TP management) provides a system for coordinating all
the various improvement activities occurring in a company so that they contribute to top
management’s goals for the entire company.
Q.33) Which of the following is not a function of RBI?

a) Setting interest rate for banks
b) Raising money for the government
c) Conducting annual inspection of banks
d) Regulating foreign exchange management
e) Currency printing and issuing
Answer: a
Solution:
The primary functions of RBI include:
✔ Monetary policy formulation.

✔ Printing and issuing currency.
✔ Regulation and supervision of bank and nonbanking institutions.
✔ Managing foreign exchange.
✔ Banker to Central and State governments.
✔ Regulation of payment and settlement system.
✔ Financial supervisor and lender of last resort functions and financial inclusion policies.
● RBI has deregulated interest rate management of banks in 90 s as part of LPG reforms.
● Since then, banks themselves sets interest rate for their deposits and advances. The coins
are minted by union government and distributed by RBI.
● However, currency is printed as well as distributed by RBI.
● Bhartiya Reserve Bank Note Mudran Private Ltd is an entity under RBI which prints
currency at MYSORE in Karnataka and SALBONI in West Bengal.
Q.34) What is the economic condition that can be inferred from an inverted yield curve?
a) Economic expansion
b) Stagflation
c) Economic recession
d) Hyper inflation
Answer: c
Solution:
● An inverted yield curve suggests possible recession in imminent future for an economy.
● A yield curve is a graphical representation of interest rate against maturity time period.
● A normal yield curve is upward oriented, by which yield (interest rate) of long-term
securities is more that of short-term securities.
● In inverted yield curve, this will reverse, and yield of long-term securities will be lesser
than that of short-term securities.
● That means longer term securities are offering less interest rate than short term
securities.
● People are losing confidence in long term securities. That is possibility of economic
recession.
Q.35) Which among the following is the method of accounting for by-products?
a) Activity based cost method
b) Absorption cost method
c) Opportunity cost method
d) Joint cost method
e) Bifurcation cost method
Answer: c) Opportunity cost method
Solution:
● Opportunity cost method is also called as replacement cost method.
● This method is adopted where by-products are utilised by the factory itself as input
material for some other process
● The opportunity cost or replacement cost which otherwise would have been incurred if
the by-products were to be purchased from outside suppliers is taken as the basis for
costing by-products.
● The process account is credited with the value of by-products so ascertained.
● The other two methods of accounting for by-products under ‘Cost methods’ are:
a) Standard cost method: A standard cost is set on the basis of technical assessment for
each by-product and credit is given to the process account on this basis. Because of
the stability of this method, effective control would be exercised on the cost of the
main product
b) Apportionment on suitable basis: Where by-products are of major significance, cost
should be apportioned on the most suitable basis, i.e. physical measurement, market
value etc.
Q.36) Identify the stages of business cycles

a) Boom, Depression, Recession, Expansion
b) Recession, Depression, Boom, Prosperity
c) Expansion, Boom, Contraction, Depression
d) Boom, Depression, Prosperity, Contraction
e) All of the above
Answer: c) Expansion, Boom, Contraction, Depression

Solution:
● Business cycle is also referred to as ‘Trade Cycles’.
● A trade cycle is composed of periods of good trade characterised by rising prices and low
unemployment percentage, altering with periods of bad trade characterised by falling
prices and high unemployment percentages.
● They are recurrent and occur periodically
● They are not always at regular intervals, nor are they of the same length.
Q.37) Standard Deviation in Six Sigma applications is referred to as the difference from the:
a) Target
b) Specification limits
c) Nearest fit value
d) Mean
e) Mode
Answer: d) Mean
Solution:
● Sigma in Six Sigma refers to the capability of the process to produce defect free work.
Higher the capability, lower the defects.
● Mean is the arithmetic average of a process data set; Central tendency is the tendency of
data to be around this mean; Standard Deviation (also known as Sigma or σ) determines
the spread around this mean/central tendency.
● The greater number of standard deviations between process average and acceptable
process limits fits, the less likely that the process performs beyond the acceptable process
limits, and it causes a defect. This is the reason why a 6σ (Six Sigma) process performs
better than 1σ, 2σ, 3σ, 4σ, 5σ processes.
● 7 or more σ processes are even better than a 6σ (Six Sigma) process, and yet throughout
the evaluation and history of Six Sigma process, the practitioners gained the belief that a
6σ process is good enough to be reliable in almost all major situations except some
systems whose defects can cause unrepairable consequences.
● LSL and USL stand for “Lower Specification Limit” and “Upper Specification Limit”
respectively. Specification Limits are derived from the customer requirements, and they
specify the minimum and maximum acceptable limits of a process.
Q.38) Which of the following does not come under financial inclusion measures?
a) PMJDY scheme
b) Pradhan Mantri Mudra Yojana
c) Easing of KYC norms
d) NABARD- SHG linkage programme
e) All are financial inclusion measures
Answer: e
Solution:
● All the above-mentioned schemes and measures will help improve financial inclusion.
● PMJDY helped in opening millions of new bank accounts especially for the
marginalised sections.
● PMMY helped in affordable credit availability for MSME sector.
● Easing of KYC norms can help in more account opening.
● SHG NABARD microfinance linkage provides credit supply to the poor ones.
Q.39) Which of the following is/are the difference(s) between futures and forwards?
a) Futures are standardised instruments, while forwards are customised
b) Futures involves margin payments while no margin payment in forwards
c) Futures are traded on the exchange and forwards are traded off the exchange
d) All of the above
Answer key: d
Solution:
● Futures and forwards are derivative instruments in which two parties are entered in to
contract for trade at a future date on a pre agreed price.
● But there are some differences between futures and forwards.
● Forwards are non-standardised, over the counter traded instruments with no margin
money involved.
● Forwards can be settled in cash or physical mode.
● However, futures are standardised, exchange traded and cash settlement payment mode
instrument.
● As a standardised instrument, forward involves margin money to avoid counter party
default risk.
Q.40) The law of demand states that

a) The demand for a product is inversely proportional to the price of the product with the
other things being equal
b) The demand for a product is directly proportional to the price of the product with the
other things being equal
c) The demand as well as supply of a product is inversely proportional to the price of the
product.
d) The demand for a product is independent of price of the product
Answer: a
Solution:
● Law of demand states that other things being equal, the demand for a product is
inversely proportional to the price of the product.
● In other words, the demand is higher at lower prices and lower at higher prices under the
assumption of ceteris paribus (i.e. other things being equal).
Q.41) Which of the following assumption is not correct wrt Classical Theory of output and
employment?
a) There is the existence of full employment without inflation
b) There is perfect competition in labour and product markets
c) The quantity of money is given, and money is the only medium of exchange
d) It is an open economy with foreign trade
e) Savings are automatically invested and equality between the two is brought about by
the rate of interest
Answer: d
Solution:
The Classical Theory of Employment:
● The classical economists believed in the existence of full employment in the economy.
● To them, full employment was a normal situation and any deviation from this regarded
as something abnormal.
● According to Pigou, the tendency of the economic system is to automatically provide full
employment in the labour market when the demand and supply of labour are equal.
● Unemployment results from the rigidity in the wage structure and interference in the
working of free market system in the form of trade union legislation, minimum wage
legislation etc.
● Full employment exists “when everybody who at the running rate of wages wishes to be
employed.”
The classical theory of output and employment is based on the following assumptions:
1. There is the existence of full employment without inflation.
2. There is a laissez-faire capitalist economy without government interference.
3. It is a closed economy without foreign trade.
4. There is perfect competition in labour and product markets.
5. Labour is homogeneous
6. Total output of the economy is divided between consumption and investment expenditures
7. The quantity of money is given, and money is only the medium of exchange.
8. Wages and prices are perfectly flexible
9. There is perfect information on the part of all market participants
10. Money wages and real wages are directly related and proportional
11. Savings are automatically invested and equality between the two is brought about by the
rate of interest
12. Capital stock and technical knowledge are given
13. The law of diminishing returns operates in production
Q.42) Which among the following is the difference between primary market and secondary
market?
a) Primary market is where securities are traded, and secondary market is where
securities are issued
b) Primary market is for short term securities and secondary market for long term
securities
c) Primary market is the New issue market and secondary market is the trading market
of issued securities
d) Primary market is part of money market and secondary market is part of capital
market
Answer key: c
Solution:
● Both primary market and secondary market are part of capital market, where long term
securities (maturity more than 1 year) are issued as well as traded.
● The security is initially issued in primary market. thus, primary market is also known as
NEW ISSUE market.
● The issued securities in primary market are traded further by investors in the secondary
market.
Q.43) The ICDR regulations were issued by SEBI in which of the following year?
a) 2018
b) 2019
c) 2008
d) 2009
e) 2012
Answer: d
Solution:
The Securities and Exchange Board of India (SEBI) replaced the Disclosure and Investor
Protection Guidelines 2000 with the Issue of Capital and Disclosure Requirements Regulations
(ICDR) 2009.
Q.44) Poka Yoke is a lean manufacturing concept that is used for what purpose?
a) Process levelling
b) Mistake proofing
c) Process visualization
d) Quick set up
e) Process redesign
Answer: b) Mistake proofing

Solution:
● Poka-Yoke is a Japanese word which means mistake proofing. This method is used in six
sigma for eliminating errors.
● A poka-yoke is any mechanism in any process that helps an equipment operator avoid
(yokeru) mistakes (poka).
● Example of Poka-Yoke device – many elevators are equipped with an electric eye to
prevent doors from shutting on people. They are also equipped with sensors and alarms
to prevent operation when overloaded.
● One more simple poka-yoke example is demonstrated when a driver of the car equipped
with a manual gearbox must press on the clutch pedal (a process step, therefore a poka-
yoke) prior to starting an automobile. The interlock serves to prevent unintended
movement of the car.
● Poka-yoke can be implemented at any step of a manufacturing process where something
can go wrong, or an error can be made.
Q.55) Job Card is also termed as

a) Job number
b) Job Ticket
c) Job licence
d) Job permit
e) Job pass
Answer: b) Job Ticket

Solution:
● A job card or job ticket is used to record the time spent on each job, having a specified
work order or job order number.
● Job cards may be of two types, one, which is a job cost card, and contains information
regarding material consumption as well as time spent by operators. The other one is, in
effect, a job ticket, which is issued to an operator by the supervisor and contains only
the operation details.
● When the operator starts the work, he records the time either manually or through time
recording clock on the card. The finishing time is recorded when the operation is
completed. If there is any break in between, then time ‘out’ and time ‘in’ are also recorded
indicating hours not used on job and shall be considered indirect labour hours.
● When the job is completed, the operator deposits the card with the supervisor, and
collects the next job ticket.
● At the end of each day, the timekeeper collects all these cards and records the time for
each job or process or operation.
Followings are the feature of job ticket/job cost card:
a) It reduces normal idle time.
b) It gives clear, logical and suitable information to the costing department.
c) It provides a very useful link between the production control and costing.
d) Job card gives information about number and particulars of job accurately.
e) The entries are made by costing officer in card at the time of commencement and
completion of the job.
Q.46) The market capitalisation of entity after bonus issue will,

a) Increase
b) Decrease
c) Remain constant
d) Either a or b
e) None
Answer key: c
Solution:
● After the bonus issue, the market capital will remain the same.
● It will not change.
● The number of shares increased will be proportionately adjusted by the reduction of
share price and thus market cap remains same.
● For ex, consider share price of an entity is at 200 rupees.
● After bonus issue of 1:1, the share price will be halved, that is 100, as the number of share
subscription is doubled.
● Thus, market cap remains same.
Q.47) Expansion in the level of output of an economy by fiscal or monetary measures is

known as?
a) Skewflation
b) Reflation
c) Stagflation
d) Disinflation
Answer: b
Solution:
● Reflation is a fiscal or monetary policy designed to expand output, stimulate spending,
and curb the effects of deflation, which usually occurs after a period of economic
uncertainty or a recession.
● Reflation aims to stop deflation—the general decline in prices for goods and services that
occurs when inflation falls below 0%.
● Skewflation is the rise in price of specific commodities or a group of commodities, while
general price level remains constant.
Q.48) ‘Output of one process becomes raw material of another process’. This statement is
true in which of the following cases below:
a) Regular Costing
b) Absorption costing
c) Nominal Costing
d) Process costing
e) Standard Costing
Answer: d) Process Costing
Solution:
● Process costing is a form of operations costing which is used where standardized
homogeneous goods are produced
● This costing method is used in industries like chemicals, textiles, steel, rubber, sugar,
shoes, petrol etc.
● Process costing is a method of costing under which all costs are accumulated for each
stage of production or process, and the cost per unit of product is ascertained at each
stage of production by dividing the cost of each process by the normal output of that
process
● Production records of each process are so designed as would show the quantum of
production for each period
● The cost of any normal spoilage or wastage is included in the cost of the total units
produced. Thereby the average cost per unit is increased
● The output of the last process is transferred to finished stock
● Costs are collected process-wise
Q.49) Consumer Surplus is also called as

a) Economic surplus
b) Marshallian surplus
c) Total welfare
d) All of the above
e) Producer surplus
Answer: d) All of the above

Solution:
● Consumer surplus or consumers' surplus is the monetary gain obtained by consumers
because they are able to purchase a product for a price that is less than the highest price
that they would be willing to pay
● It is the difference between the maximum price a consumer is willing to pay and the
actual price paid.
● An example of a good with generally high consumer surplus is drinking water. People
would pay very high prices for drinking water, as they need it to survive. The difference in
the price that they would pay, if they had to, and the amount that they pay now is their
consumer surplus. The utility of the first few litres of drinking water is very high (as it
prevents death), so the first few litres would likely have more consumer surplus than
subsequent litres.
Q.50) Which theory of motivation is complementary to Management by Objectives?

a) Goal setting theory
b) Expectancy theory
c) Social learning theory
d) Reinforcement theory
e) Both a and b
Answer key: a
Solution:
● Goal setting theory of motivation was introduced by Edwin Locke.
● The theory says intentions to work towards a goal are a major source of motivation.
● A systematic way to utilize goal setting is Management By Objectives (MBO) which

emphasizes participatively set goals that are tangible, verifiable and measurable.
● The theory says Specific goals increase performance; difficult goals, when accepted, result
in higher performance than do easy goals; feedback leads to higher performance than
non-feedback.
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SEBI GRADE A

SEBI Grade A Free Mock Test PDF – Paper 2

Q.4) Which among the following is not a financial derivative?

Q.5) Which of the following is not an objective of Management Accounting?

Answer: e) Preparation of balance sheet

a) Reducing government debt

What is the Leadership style?

Q.11) AS 2 is applicable to companies of?

Q.12) Which of the following is right w.r.t. Keynesian consumption model?

Q.13) Hawthorne studies led to the evolution of

What was found in these experiments?

Passive Management by Exception: Transactional leaders intervene only when standards

Q.18) Higher the Interest coverage ratio then

Capital & Liabilities (₹) Assets (₹)

Capital 2450 Cash 1300

Bank Loan 500 Inventory 650

Profits 300 Plant and Equipment 1800

Total 3750 Total 3750

● This type of issue gives existing shareholders securities called rights.

Q.25) Journal is also known as

Q.26) Selection committee of NCLT consist of

Q.27) What is/are the differences between WPI and CPI?

Q.28) Which leadership model involves contingent reward and punishment?

Q.30) Which of the following is/are the objective/s of Unit costing?

Answer: d) All the above

vi. To facilitate the preparation of tender or quotation.

Q.31) Which of the following is/are feature/s of marginal costing?

Answer: c) Only the variable costs are considered

Q.32) Planned Maintenance System is regarded as one of the Pillars of:

Answer: c) Total Productive Management

Q.33) Which of the following is not a function of RBI?

✔ Monetary policy formulation.

Q.36) Identify the stages of business cycles

Answer: c) Expansion, Boom, Contraction, Depression

Q.40) The law of demand states that

Answer: b) Mistake proofing

Q.55) Job Card is also termed as

Answer: b) Job Ticket

Q.46) The market capitalisation of entity after bonus issue will,

Q.47) Expansion in the level of output of an economy by fiscal or monetary measures is

Answer: d) Process Costing

Q.49) Consumer Surplus is also called as

Answer: d) All of the above

Q.50) Which theory of motivation is complementary to Management by Objectives?

● A systematic way to utilize goal setting is Management By Objectives (MBO) which

SEBI Grade A Online Course

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FREE MOCK TESTS + TOPIC TESTS + SECTIONAL TESTS

For Banking, Insurance, SSC & Railways Exams

Your one-stop destination Interact with peers & experts,

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