Business Finance and Marketing MCQ Quiz - Objective Question with Answer for Business Finance and Marketing - Download Free PDF

The correct answer is Judicial Activism.

Key Points

• Public Interest Litigation (PIL) in India was initiated as a result of judicial activism, which aimed to make justice accessible to disadvantaged and marginalized sections of society.
• The concept of PIL was first introduced in India during the early 1980s by judges like Justice P.N. Bhagwati and Justice V.R. Krishna Iyer.
• Judicial activism enabled courts to relax traditional rules of locus standi, allowing individuals or groups to file cases on behalf of those unable to approach the court themselves.
• PIL became a powerful tool to address issues such as environmental protection, human rights violations, corruption, and social injustices.
• Judicial activism ensures that the judiciary plays a proactive role in safeguarding constitutional rights and promoting social welfare through PILs.

Additional Information

• Public Interest Litigation (PIL)
  • PIL allows any individual or organization to file a petition in court for the enforcement of public interest or general welfare.
  • It is often used to address issues affecting larger sections of society rather than individual grievances.
  • PILs are filed under Articles 32 (Supreme Court) and 226 (High Courts) of the Indian Constitution.
• Judicial Activism
  • Judicial activism refers to the proactive role of the judiciary in interpreting laws and addressing societal issues beyond traditional legal boundaries.
  • It often involves judges stepping in to fill gaps in legislative or executive actions.
  • While judicial activism can lead to progressive change, critics argue that excessive activism may encroach upon the domain of the legislature and executive.
• Locus Standi
  • Locus standi refers to the legal standing or ability of a person to bring a case before a court.
  • Judicial activism in India relaxed locus standi rules, enabling PILs to be filed by individuals or groups not directly affected by the issue at hand.
• Landmark PIL Cases
  • Hussainara Khatoon v. State of Bihar (1979): Focused on the rights of undertrial prisoners.
  • Olga Tellis v. Bombay Municipal Corporation (1985): Addressed the rights of pavement dwellers.
  • M.C. Mehta v. Union of India: Focused on environmental issues such as pollution in the Ganga River.

The correct answer is the Right to be assured.

Key Points

• Right to be assured:
  • This right ensures that consumers have access to a variety of goods and services at competitive prices. It emphasizes the need for marketers to provide a wide range of products in terms of quality, brand, prices, and size, allowing consumers to make informed choices.
  • In the context of a financial enterprise, this right ensures that consumers can choose from various financial products and services like loans, insurance policies, investment options, and other financial instruments, catering to different needs and risk appetites.

Additional Information

• Right to be informed:
  • This right pertains to consumers being provided with adequate information about products and services to make informed decisions. In financial enterprises, this includes clear details about interest rates, fees, terms and conditions, and potential risks associated with financial products.
• Right to consumer education:
  • This right focuses on educating consumers about their rights and responsibilities. For financial enterprises, it includes educating consumers about financial literacy, investment strategies, and managing personal finances effectively.
• Right to be heard:
  • This right ensures that consumers' interests will receive due consideration at appropriate forums. In the financial sector, it means that consumers can voice their concerns or complaints regarding financial services and expect a fair resolution.

The correct answer is All of the above

Key Points

• Consumer protection is the practice of safeguarding buyers of goods and services, and the public, against unfair practices in the marketplace.
• Consumer protection measures are often established by law.
• The Consumer Protection Act (CPA) seeks to protect and promote the consumers’ interest through speedy and inexpensive redressal of their grievances.
• The scope of the Act is very wide.
• It is applicable to all types of undertakings, big and small, 
• Whether in the private or public sector, or in the co-operative sector, 
• whether a manufacturer or a trader, and 
• whether supplying goods or providing services.
• The Act confers certain rights to consumers with a view to empowering them and to protect their interests

The correct answer is 1954.

Key Points

The Prevention of Food Adulteration Act, 1954: The Act aims to check adulteration of food articles and ensure their purity so as to maintain public health.

Objectives of Prevention of Food Adulteration Act 1954 

• It is to protect people from adulterated and poisonous food.
• To restrain the sale of substandard food.
• To protect the interests of the consumers by eliminating fraudulent practices.
   

Additional Information

Legal protection to consumers

• The Indian legal framework consists of a number of regulations which provide protection to consumers.
• Some of these regulations are as under.
• The Consumer Protection Act, 1986: The Consumer Protection Act, 1986 seeks to protect and promote the interests of consumers. The Act provides safeguards to consumersagainst defective goods, deficient services, unfair trade practices, and other forms of their exploitation. 
• The Indian Contract Act, 1872: The Act lays down the conditions in which the promises made by parties to a contract will be binding on each other. The Act also specifies the remedies available to parties in case of breach of contract.
• The Sale of Goods Act, 1930: The Act provides some safeguards and reliefs to the buyers of the goods in case the goods purchased do not comply with express or implied conditions or warranties.
• The Essential Commodities Act, 1955: The Act aims at controlling production, supply and distribution of essential commodities, checking inflationary trend in their prices and ensuring equal distribution of essential commodities. The Act also provides for action against anti-social activities of profiteers, hoarders and blackmarketers.
• The Agricultural Produce (Grading and Marking) Act, 1937: The Act prescribes grade standards for agricultural commodities and livestock products. The Act stipulates the conditions which govern the use of standards and lays down the procedure for grading, marking and packing of agricultural produce. 
• The Prevention of Food Adulteration Act, 1954: The Act aims to check adulteration of food articles and ensure their purity so as to maintain public health.
• The Standards of Weights and Measures Act, 1976: The provisions of this Act are applicable in case of those goods which are sold or distributed by weight, measure or number. It provides protection to consumers against the malpractice of under-weight or under-measure.
• The Trade Marks Act, 1999: This Act has repealed and replaced the Trade and Merchandise Marks Act, 1958. The Act prevents the use of fraudulent marks on products and thus, provides protection to the consumers against such products.
• The Competition Act, 2002: This Act has repealed and replaced the Monopolies and Restrictive Trade Practices Act, 1969. The Act provides protection to the consumers in case of practices adopted by business firms which hamper competition in the market.  
• The Bureau of Indian Standards Act, 1986: The Bureau of Indian Standards has been set up under the Act. The Bureau has two major activities: formulation of quality standards for goods and their certification through the BIS certification scheme. 

The correct answer is It tries to delink the present with the future

Key Points

• Financial Planning is the process of estimating the capital required and determining it’s competition.
• It is the process of framing financial policies in relation to procurement, investment and administration of funds of an enterprise.
• Financial Planning is process of framing objectives, policies, procedures, programmes and budgets regarding the financial activities of a concern.
• This ensures effective and adequate financial and investment policies.

The importance can be outlined as- 

1. Adequate funds have to be ensured.
2. Financial Planning helps in ensuring a reasonable balance between outflow and inflow of funds so that stability is maintained.
3. Financial Planning ensures that the suppliers of funds are easily investing in companies which exercise financial planning.
4. Financial Planning helps in making growth and expansion programmes which helps in long-run survival of the company.
5. Financial Planning reduces uncertainties with regards to changing market trends which can be faced easily through enough funds.
6. Financial Planning helps in reducing the uncertainties which can be a hindrance to growth of the company. This helps in ensuring stability an d profitability in concern.

The correct answer is Judicial Activism.

Key Points

• Public Interest Litigation (PIL) in India was initiated as a result of judicial activism, which aimed to make justice accessible to disadvantaged and marginalized sections of society.
• The concept of PIL was first introduced in India during the early 1980s by judges like Justice P.N. Bhagwati and Justice V.R. Krishna Iyer.
• Judicial activism enabled courts to relax traditional rules of locus standi, allowing individuals or groups to file cases on behalf of those unable to approach the court themselves.
• PIL became a powerful tool to address issues such as environmental protection, human rights violations, corruption, and social injustices.
• Judicial activism ensures that the judiciary plays a proactive role in safeguarding constitutional rights and promoting social welfare through PILs.

Additional Information

• Public Interest Litigation (PIL)
  • PIL allows any individual or organization to file a petition in court for the enforcement of public interest or general welfare.
  • It is often used to address issues affecting larger sections of society rather than individual grievances.
  • PILs are filed under Articles 32 (Supreme Court) and 226 (High Courts) of the Indian Constitution.
• Judicial Activism
  • Judicial activism refers to the proactive role of the judiciary in interpreting laws and addressing societal issues beyond traditional legal boundaries.
  • It often involves judges stepping in to fill gaps in legislative or executive actions.
  • While judicial activism can lead to progressive change, critics argue that excessive activism may encroach upon the domain of the legislature and executive.
• Locus Standi
  • Locus standi refers to the legal standing or ability of a person to bring a case before a court.
  • Judicial activism in India relaxed locus standi rules, enabling PILs to be filed by individuals or groups not directly affected by the issue at hand.
• Landmark PIL Cases
  • Hussainara Khatoon v. State of Bihar (1979): Focused on the rights of undertrial prisoners.
  • Olga Tellis v. Bombay Municipal Corporation (1985): Addressed the rights of pavement dwellers.
  • M.C. Mehta v. Union of India: Focused on environmental issues such as pollution in the Ganga River.

The correct answer is EPS.

Leverage refers to the use of debt (borrowed funds) to amplify returns from an investment or project.
Key PointsCombined Leverage:

The term combined leverage refers to the potential use of fixed costs, both operating and financial, which multiplies the effect of changes in sales volume on the earning per share of the company. 

Combined leverage (CL) = Operating leverage (OL) × Financial leverage (FL) 

OR

= \(\frac {Contribution}{EBIT} \times \frac {EBIT}{EBT}\)

Combined leverage is the total effect of both operating and financial leverage on a company's EPS. It considers how changes in sales impact operating income and how changes in operating income, in turn, impact net income and EPS.

Important PointsOther types of Leverage-

Financial Leverage- Financial leverage is the utilization of funds with a fixed cost to raise earnings per share.

Operating Leverage- Operating leverage is the use of of a fixed-cost asset in order to create sufficient income to pay all fixed and variable expenses.

Additional Information Equity Capital-

• The fund that is raised by issuing equity shares of a company is known as equity capital.
• Investors pay money for regular or preferred stock. In the event of a corporate liquidation, investors will not be refunded until all other creditors have been paid.

Debt Capital-

• A corporation can raise debt capital by borrowing funds from individuals or institutions, for a particular time  period after which they must pay back the entire sum.
• Term Loans, Debentures, and Bonds are examples of debt capital.

Capital Structure- 

• The distribution of various long-term sources of financing is referred to as the capital structure, which is a component of the financial structure.
• Debt and equity capital constitute a corporation's capital structure.

The correct answer is private goods.Key Points

• Private goods are those goods that are directly sold to the consumers and are exclusive in nature.
• These goods are owned by individuals and not shared by the public.
• Cars, clothes, and chocolates are examples of private goods as they are sold to the consumers directly and are owned by individuals.​

Additional Information

• Expensive goods are not a correct option as the price of the goods does not determine whether they are private or public goods.
• Public goods are those goods that are available for use by the public, and their consumption by one individual does not reduce their availability for others.
  • Examples of public goods include parks, streetlights, and public libraries.
• Capital goods are goods that are used in the production of other goods and services, such as machinery, equipment, and factories.
• Therefore, the correct answer to the question is option 1, private goods.

The correct answer is to analyse variance between standard costs and actual costs.

Key Points

•  A financial manager is a professional who is responsible for overseeing the financial health of an organization.
• They are responsible for creating financial reports, developing and implementing financial strategies, and managing investments.

And, Control refers to the comparison of actual cost with the standard cost and working for removing the deviations, if any.

Additional Information 

Variance analysis is the procedure of computing the differences between standard costs and actual costs and recognizing the causes of those differences.

• With the help of above explanation control function of financial manager include variance between standard costs and actual cost.
• Hence the correct answer is to analyse variance between standard costs and actual costs.

The correct answer is high creditors

Key Points

Working Capital

• Working capital refers to the capital of business used in day-to-day activities.
• Two main concepts of working capital: 
• Gross working capital: It simply implies investment in current assets. 
• Net working capital: It implies the excess of current assets (cash in hand/at bank, bills receivable, debtors etc.) over current liabilities (obligatory payments which are due; for example, bills payable, outstanding expenses etc.). Algebraically, Net Working Capital = Current Assets − Current Liabilities Factors affecting the requirement of working capital 
• Type of business: 
• The nature of business is one of the important determinants of working capital requirement. a. For instance, trading organisations have shorter operating cycles, i.e. no processing is done in such organisations. Accordingly, they require low working capital. b. As against this, an organisation dealing in manufacturing would require large working capital. This is because it involves a large operating cycle, i.e. the raw materials first need to be transformed to finished goods before they are offered for sale.
• Scale of operations: 
• Firms which operate on a larger scale require greater working capital than those which operate on a lower scale. This is because firms with greater scale of operations are required to maintain high stock of inventory and debtors. As against this, a business with smaller scale of operation requires less working capital.
• Fluctuations in business cycle: 
• In various phases of the business cycle, the requirement of working capital is different. For instance, in the phase of boom, both production and sales are higher. Accordingly, the requirement of working capital is also high. As against this, in the phase of depression, the demand is low, and so production and sale are low. Accordingly, there is less requirement of working capital. 
• Production cycle: 
• Production cycle refers to the time gap between receiving goods and their processing into final goods. Longer the production cycle for a firm, larger are the requirements of working capital and vice versa. This is because a longer production cycle would imply greater inventories and other related expenses, so greater requirement of working capital. 
• Growth prospects: 
• Higher growth prospects imply higher production, sales and inputs. Accordingly, higher growth prospects for a company imply greater requirement of working capital. 
• Seasonal factors: 
• Companies require huge amount of working capital because of the high level of activity in the peak season, whereas during the lean season they require less as the activities reduce. 7) Credit allowed: Credit policy refers to the average period for collection of sale proceeds. This depends on credit worthiness of clients. So, a company which allows liberal credit policy will require more working capital. 
• Credit availed:
•  A company/firm may get credit from its suppliers depending on their credit worthiness. The more they get such credit, the more the requirement of working capital reduces. 
• Operating efficiency: 
• Companies with a high degree of operating efficiency will require less working capital, whereas companies having a low level of efficiency will require more working capital because efficiency may help the company/firm in reducing the level of raw materials required, average time for which finished goods inventory is held etc. 
• Availability of raw materials:
•  If raw materials are easily and continuously available, then lower levels of stocks would suffice. This will help the firm/company to avoid storing a large amount of raw materials, thereby reducing the need of working capital. However, if the lead time between placing the order and supply of goods increases, then the company will require to store a large amount of stock of raw materials which will lead to more requirement of working capital. 
• Level of competition: 
• If the market is more competitive, the company will require larger stocks of finished goods in order to supply goods on time. So, they maintain higher inventories which require a large amount of capital.

The correct answer is Horizontal Capital Structure

Key PointsHorizontal capital Structure:

• The firm has no component of debt in the financial mix.
• Expansion of the firm is through equity and retained earnings only.
• In a Horizontal Capital Structure, the firm has zero debt components in the capital structure mix.
• The structure is quite stable.
• Expansion of the firm takes in a lateral manner, i.e. through equity or retained earnings only.
• The absence of debt results in the lack of financial leverage.
• Probability of disturbance of the structure is very less.
• In simple words, all the funds required for a particular project are brought out by the owners only.

The correct answer is ​Production concept

Key Points

• Marketing concept is a set of strategies that the firms adopt where they analyse the needs of their customers and implement strategies to fulfil those needs which will result in an increase in sales, profit maximisation and also beat the existing competition.

Production Concept

• This concept was based on the assumption that customers are primarily interested in products which are accessible and affordable. This concept was introduced at a time when business was focused mainly on production.
• It says that a business will be able to lower costs by producing more quantity or mass production of goods.
• Solely focusing on producing goods may lead to the firm deviating from its objective.
• Production Concept is a belief that states that the customers would always acquire products which are cheaper and more readily available (or widely available).
• The production concept advocates that more the products or production, more would be the sales. In countries where labor is cheap and easily available, the production can be maximized while minimizing the costs, hence increasing the production efficiency.
• Production Concept is very important for an economy where certain commodities can be mass produced for consumers keeping the prices low. The supply is always high so shortage does not happen.
• Production concept is relevant in a new market which is not saturated with competition. More you produce, more customers you get.
• The market can still absorb more of the product and can earn profit but still keeping the prices low. It can help grow new categories in the market. Once the competition arrives then the focus can move away from the Production concept.

The correct answer is All of the above.

Key Points

Importance of consumer protection: 

• Consumer Protection has a wide agenda.
• It not only includes educating consumers about their rights and responsibilities, but also helps in getting their grievances redressed.
• It not only requires a judicial machinery for protecting the interests of consumers but also requires the consumers to get together and form themselves into consumer associations for protection and promotion of their interests.
• At the same time, consumer protection has a special significance for businesses too. 

From Consumers’ point of view

The importance of consumer protection from the consumers’ point of view can be understood from the following points:

(i) Consumer Ignorance:

• In the light of widespread ignorance of consumers about their rights and reliefs available to them, it becomes necessary to educate them about the same so as to achieve consumer awareness.

(ii) Unorganised Consumers:

• Consumers need to be organised in the form of consumer organisations which would take care of their interests.
• Though, in India, we do have consumer organisations which are working in this direction, adequate protection is required to be given to consumers till these organisations become powerful enough to protect and promote the interests of consumers.

(iii) Widespread Exploitation of Consumers:

• Consumers might be exploited by unscrupulous, exploitative and unfair trade practices like defective and unsafe products, adulteration, false and misleading advertising, hoarding, black-marketing etc.
• Consumers need protection against such malpractices of the sellers. 

The correct answer is The Sale of Goods Act, 2000.

The Sale of Goods Act, 1930 is correct. 

Key Points

Legal protection to consumers

• The Indian legal framework consists of a number of regulations which provide protection to consumers.
• Some of these regulations are as under.
• The Consumer Protection Act, 1986: The Consumer Protection Act, 1986 seeks to protect and promote the interests of consumers. The Act provides safeguards to consumersagainst defective goods, deficient services, unfair trade practices, and other forms of their exploitation. 
• The Indian Contract Act, 1872: The Act lays down the conditions in which the promises made by parties to a contract will be binding on each other. The Act also specifies the remedies available to parties in case of breach of contract.
• The Sale of Goods Act, 1930: The Act provides some safeguards and reliefs to the buyers of the goods in case the goods purchased do not comply with express or implied conditions or warranties.
• The Essential Commodities Act, 1955: The Act aims at controlling production, supply and distribution of essential commodities, checking inflationary trend in their prices and ensuring equal distribution of essential commodities. The Act also provides for action against anti-social activities of profiteers, hoarders and blackmarketers.
• The Agricultural Produce (Grading and Marking) Act, 1937: The Act prescribes grade standards for agricultural commodities and livestock products. The Act stipulates the conditions which govern the use of standards and lays down the procedure for grading, marking and packing of agricultural produce. 
• The Prevention of Food Adulteration Act, 1954: The Act aims to check adulteration of food articles and ensure their purity so as to maintain public health.
• The Standards of Weights and Measures Act, 1976: The provisions of this Act are applicable in case of those goods which are sold or distributed by weight, measure or number. It provides protection to consumers against the malpractice of under-weight or under-measure.
• The Trade Marks Act, 1999: This Act has repealed and replaced the Trade and Merchandise Marks Act, 1958. The Act prevents the use of fraudulent marks on products and thus, provides protection to the consumers against such products.
• The Competition Act, 2002: This Act has repealed and replaced the Monopolies and Restrictive Trade Practices Act, 1969. The Act provides protection to the consumers in case of practices adopted by business firms which hamper competition in the market.  
• The Bureau of Indian Standards Act, 1986: The Bureau of Indian Standards has been set up under the Act. The Bureau has two major activities: formulation of quality standards for goods and their certification through the BIS certification scheme. 

The correct answer is 1954.

Key Points

The Prevention of Food Adulteration Act, 1954: The Act aims to check adulteration of food articles and ensure their purity so as to maintain public health.

Objectives of Prevention of Food Adulteration Act 1954 

• It is to protect people from adulterated and poisonous food.
• To restrain the sale of substandard food.
• To protect the interests of the consumers by eliminating fraudulent practices.
   

Additional Information

Legal protection to consumers

• The Indian legal framework consists of a number of regulations which provide protection to consumers.
• Some of these regulations are as under.
• The Consumer Protection Act, 1986: The Consumer Protection Act, 1986 seeks to protect and promote the interests of consumers. The Act provides safeguards to consumersagainst defective goods, deficient services, unfair trade practices, and other forms of their exploitation. 
• The Indian Contract Act, 1872: The Act lays down the conditions in which the promises made by parties to a contract will be binding on each other. The Act also specifies the remedies available to parties in case of breach of contract.
• The Sale of Goods Act, 1930: The Act provides some safeguards and reliefs to the buyers of the goods in case the goods purchased do not comply with express or implied conditions or warranties.
• The Essential Commodities Act, 1955: The Act aims at controlling production, supply and distribution of essential commodities, checking inflationary trend in their prices and ensuring equal distribution of essential commodities. The Act also provides for action against anti-social activities of profiteers, hoarders and blackmarketers.
• The Agricultural Produce (Grading and Marking) Act, 1937: The Act prescribes grade standards for agricultural commodities and livestock products. The Act stipulates the conditions which govern the use of standards and lays down the procedure for grading, marking and packing of agricultural produce. 
• The Prevention of Food Adulteration Act, 1954: The Act aims to check adulteration of food articles and ensure their purity so as to maintain public health.
• The Standards of Weights and Measures Act, 1976: The provisions of this Act are applicable in case of those goods which are sold or distributed by weight, measure or number. It provides protection to consumers against the malpractice of under-weight or under-measure.
• The Trade Marks Act, 1999: This Act has repealed and replaced the Trade and Merchandise Marks Act, 1958. The Act prevents the use of fraudulent marks on products and thus, provides protection to the consumers against such products.
• The Competition Act, 2002: This Act has repealed and replaced the Monopolies and Restrictive Trade Practices Act, 1969. The Act provides protection to the consumers in case of practices adopted by business firms which hamper competition in the market.  
• The Bureau of Indian Standards Act, 1986: The Bureau of Indian Standards has been set up under the Act. The Bureau has two major activities: formulation of quality standards for goods and their certification through the BIS certification scheme.