# Commerce MCQ

1. The following two questions (including this question) will be based on the data provided in the table given below.

Table: Sales Data for an Electronics and Electrical products store.

 Devices No of units Sold Price of one unit (\$) Device A 100 10 \$ Device B 200 5 \$ Device C 50 20 \$

What is the total revenue produced from the sales of all the devices? Answer based on the data given in the above table.

1. \$ 2,000
2. \$ 1,500
3. \$ 2,500
4. \$ 3,000

Explanation: In order to calculate the total revenue from all the devices, we have to add the revenue from all three devices. The revenue produced from Device A is 100 x \$ 10 = \$ 1,000, revenue from Device B is 200 x \$ 5 = \$ 1,000, and revenue from Device C is 50 x \$ 20 = \$ 1,000. Therefore the total revenue produced from all three devices is given by \$ 1,000 + \$ 1,000 + \$ 1,000 = \$ 3,000. Hence option D, 3,000 \$, is the appropriate answer to this question.

2. If the seller offers a 10% discount on all the devices given in the table above, what is the total new revenue produced? Assume that all other factors remain constant.

1. \$ 1,350
2. \$ 1,800
3. \$ 2,250
4. \$ 2,700

Explanation: In order to calculate the total revenue from all devices after giving a 10% discount, we have to subtract the amount of discount from the original total price for all three devices. The discounted price for Device A is 10 \$ – 10 \$x 10 / 100= 9 \$, discounted price of Device B is 5 \$ – 5 \$ x 10 / 100= 4.5 \$, and discounted price for Device C is 20 \$ – 20 \$ x 10 / 100= 18 \$. Now, the revenue produced from Device A is 100 x \$ 9 = \$ 900, revenue from Device B is 200 x \$ 4.5 = \$ 900, and revenue from Device C is 50 x \$ 18 = \$ 900. Therefore the total revenue produced from all three devices is given by \$ 900 + \$ 900 + \$ 900 = \$ 2,700. Hence option D, 2,700 \$, is the appropriate answer to this question.

3. In international trade, what do you think is the objective of a letter of credit?

1. To make sure that the exporter of the goods and services receives payment for the goods and services sold
2. To give assurance that the importer will pay for all the goods and services received
3. In order to give financial assistance/support to the developing countries
4. To decrease the possibility of currency fluctuations in international transactions

Answer: C. To make sure that the exporter of the goods and services receives payment for the goods and services sold

Explanation: A letter of credit in international trade always makes sure that the exporter of the goods and services receives payment for the goods and services sold. The letter of credit decreases the risk of payment failures and helps in smooth financial operations/transactions/deals in international trade.

4. A seller purchased 50 units of a product for 10 \$ each and sold them for 15 \$ each. What is the total profit made on the sale?

1. 150 \$
2. 200 \$
3. 250 \$
4. 300 \$

Explanation: The total cost of the 50 units is 50 X 10 \$ = 500 \$. The total revenue from the sale of the 50 units is 50 X 15 \$ = 750 \$. Therefore, the profit made on the sale is 750 \$ - 500 \$ = 250 \$.

5. Which of the following can be an example of international trade?

1. A local restaurant in Lucknow buys the raw material from a nearby farm.
2. A clothing store in Delhi selling merchandise to customers in another state like Rajasthan.
3. A car manufacturer in India importing parts from another country like Russia.
4. A small business owner in Surat buying office supplies from a nearby store.

Answer: C. A car manufacturer in India importing parts from another country like Russia

Explanation: International trade means sellers and buyers from two different countries are exchanging goods between themselves. A car manufacturer in India importing parts from another country like Russia is an example of International trade. Hence, option C (A car manufacturer in India importing parts from another country like Russia), is the appropriate answer to this question.

6. The following question will utilize the information presented in the table given below. The given table shows the expenditures and sales of Tata Motors in the year 2022.

Table: Sales and Expenditure of Tata Motors in the year 2022

 Devices Amount (in thousands of dollars) Sales Revenue 500 \$ Cost of Cars sold 250 \$ Gross Profit 250 \$ Operating expenses 100 \$ Total profit 150 \$

What is the gross profit margin of Tata Motors in percentage (%) in the year 2022?

1. 50 %
2. 75 %
3. 100 %
4. 150 %

Explanation: In order to calculate the gross profit margin of Tata Motors in the year 2022, we had to divide the gross profit of Tata Motors in 2022 by the sales revenue of Tata Motors in 2022 and then multiply it by 100 to get the percentage profit margin. Based on the information presented in the above table, the gross profit of Tata Motors is 250 \$, and the sales revenue of the same company in the same year is 500 \$. Hence the gross profit margin percentage is given by (250 \$ / 500 \$) x 100 = 50 %. Hence option A (50 %) is the correct answer.

7. The following question will utilize the information presented in the table given below. The given table shows the Financial Statement of Dell Computers Limited in the year 2022.

Table: Financial Statement of Dell Computers Limited in the year 2022.

 Devices Amount (in thousands of dollars) Sales Revenue 1,000 \$ Cost of Computers / Laptops sold 500 \$ Gross Profit 500 \$ Operating expenses 250 \$ Operating Income 250 \$ Interest Expense 50 \$ Earnings before taxes (EBT) 200 \$ Income tax expense 60 \$ Net Income 140 \$

What is the net profit margin of dell computers private limited in percentage in the year 2022?

1. 14 %
2. 20 %
3. 35 %
4. 40 %

Explanation: In order to calculate the net profit margin of Dell Computers private limited in the year 2022, we had to divide the gross income of Dell Computers private limited in 2022 by the sales revenue of Dell computers private limited in 2022 and then multiply it with 100 to get the percentage net profit margin. From the information presented in the above table, the net income of Dell Computers private limited is 140 \$, and the sales revenue of the same company in the same year is 1,000 \$. Hence the net profit margin percentage is given by (140 \$ / 1,000 \$) x 100 = 14 %. Hence option A (14 %) is the correct answer.

8. The following question will utilize the information presented in the table given below. The given table shows the balance sheet of Mahindra Motors Private Limited in the year 2022.

Table: Balance sheet of Mahindra Motors Private Limited in the year 2022.

 Cars Amount (in thousands of dollars) Cash and Cash equivalents 100 \$ Accounts receivable 200 \$ Inventory 300 \$ Property, plant, and equipment 500 \$ Total assets 1,100 \$ Account payable 150 \$ Notes payable 100 \$ Long term debt 200 \$ Common stock 200 \$ Retained earnings 350 \$ Total liabilities and equity 1,000 \$

What is the debt to equity ratio for Mahindra Motors private limited in the year 2022?

1. 0.765
2. 0.655
3. 0.545
4. 0.848

Explanation: In order to calculate the debt to equity ratio of Mahindra Motors private limited in the year 2022, we have to divide the total debt (which includes notes payable and long term debt) of Mahindra Motors private limited in 2022 by the total equity (which includes common stock and retained earnings) of Mahindra Motors private limited in 2022, and then multiplying it with 100 to get the percentage net profit margin. From the information presented in the above table, the total debt of Mahindra Motors private limited is 100 \$ + 200 \$ = 300 \$, and the total equity of the same company is 200 \$ + 350 \$ = 550 \$. Hence the debt to equity ratio is given by (300 \$ / 550 \$) = 0.545. Hence option A (0.545) is the correct answer.

9. The following question will utilize the information presented in the table given below. The given table shows the cash flow statement of Mahindra Motors Private Limited for the year ending December 31, 2022.

Table: Cash flow statement of Mahindra Motors Private Limited in the year 2022.

 Various Attributes Amount (in thousands of dollars) Net income 50,000 \$ Depreciation expense 20,000 \$ Increase in accounts receivable 5,000 \$ Increase in accounts payable 10,000 \$ Capital expenditures 30,000 \$ Dividends paid 5,000 \$ Cash flow from operations 60,000 \$ Cash flow from investing 30,000 \$ Cash flow from financing 5,000 \$ Net increase in cash 25,000 \$ Beginning cash balance 10,000 \$ Ending cash balance 35,000 \$

What was the free cash flow for Mahindra Motors private limited in the year 2022?

1. 10,000 \$
2. 30,000 \$
3. 20,000 \$
4. 25,000 \$

Explanation: In order to calculate the free cash flow of Mahindra Motors private limited in the year 2022, we had to subtract the capital expenditures of Mahindra Motors private limited in 2022 from the cash flow from operations of Mahindra Motors private limited in 2022. From the information presented in the above table, the cash flow from operations is 60,000 \$, and the capital expenditures in the year 2022 are 30,000 \$. Hence the free cash flow is 60,000 \$ - 30,000 \$ = 30,000 \$. Hence option B (30,000 \$) is the correct answer.

10. The following question will utilize the information presented in the table given below. The given table shows the income statement of Dell Computers Private Limited for the year ending December 31, 2022.

Table: Income statement of Dell Computers Private Limited in the year 2022.

 Various Attributes Amount (in thousands of dollars) Revenue 500,000 \$ Cost of goods sold 250,000 \$ Gross profit 250,000 \$ Operating expenses 150,000 \$ Net income before taxes 100,000 \$ Income taxes 30,000 \$ Net income 70,000 \$

11. What was the company’s return on equity (R. O. E.) for Dell Computers private limited in the year 2022, assuming its beginning and ending were 200,000 \$ and respectively?

1. 31.1 %
2. 18.5 %
3. 19.5 %
4. 25 %

Explanation: In order to calculate the Return on equity (ROE) of Dell Computers private limited in the year 2022, we have to divide the net income of individuals at Mahindra Motors private limited in 2022 by the average owner’s equity of Mahindra Motors private limited in 2022. From the information presented in the above table, the net income is 70,000 \$, and the average owner’s equity is (200,000 \$ + 250,000 \$) / 2 = 225,000 \$. Therefore, the ROE is 0.311, or 31.1 %. Hence option A (31.1 %) is the correct answer.

12. The following two questions will utilize the information presented in the table given below. The given table shows the financial statements of Reliance Industries for the year ended December 31, 2022.

Table: Financial statements of Reliance Industries in the year 2022.

 Various Attributes Amount (in thousands of dollars) Revenue 1,000,000 \$ Cost of goods sold 600,000 \$ Gross profit 400,000 \$ Operating expenses 150,000 \$ Net income before taxes 250,000 \$ Income tax expense 50,000 \$ Net income after tax 200,000 \$ Dividends paid 50,000 \$ Change in retained earnings 150,000 \$

What is the return on assets (R. O. A.) for Reliance Industries for the year ended December 31, 2022?

1. 10 %
2. 20 %
3. 25 %
4. None of the above options

Explanation: In order to calculate the Return on assets (ROA) of Reliance Industries in the year 2022, we had to divide the net income after tax of individuals at Reliance Industries in 2022 by the total assets of Reliance Industries private limited in 2022. From the information presented in the above table, the net income after tax is 200,000 \$ and total assets are not given in the table, so we cannot determine the exact ROA. Hence option D (None of the above options) is the correct answer.

13. What is the current ratio for Reliance Industries for the year ended December 31, 2022?

1. 0.67
2. 1.33
3. 1.5
4. 2.0

Explanation: In order to calculate the Current ratio of Reliance Industries in the year 2022, we have to divide the current assets of Reliance Industries in 2022 by the current Liabilities of Reliance Industries private limited in 2022. From the information presented in the above table, the current assets are 600,000 \$ and current liabilities = 300,000 \$. Hence current ratio = 600,000 \$ / 300,000 \$ =2.0. Hence option D (2.0) is the correct answer.

14. A company named Xerox Business Systems has a profit margin of 10 % and a sales revenue of Rs. 100,000. What is the net profit of Xerox Business Systems?

1. Rs. 1,000
2. Rs. 10,000
3. Rs. 90,000
4. Rs. 9,000

Explanation: The net profit of a company is the difference between all expenses and sales revenue of the company. If the profit margin is 10 % and the sales revenue is Rs. 100,000, then the net profit would be Rs. 10,000 (which is 10 % of 100,000).

15. A company named Tekion Private Corp. Limited has a debt to equity ratio of 0.5. If the total debt/Liabilities of the company is Rs. 50,000, what is the equity/ownership value of the company?

1. Rs. 25,000
2. Rs. 50,000
3. Rs. 75,000
4. Rs. 100,000

Explanation: The debt/Liability to equity/ownership ratio can be calculated by dividing the total debt/Liabilities of the company by the equity/ownership value of the company. Here in the question, it is given that debt to equity ratio of the company is 0.5 and the total debt of the company is Rs. 50,000, then the equity would be equal to Rs. 25,000 (0.5 x 50,000).

16. What is the purpose behind defining financial ratios for a company?

1. Financial ratios are defined to evaluate the financial performance and profitability of the company.
2. Financial ratios are defined to check how well the company is performing financially.
3. Financial ratios are defined to evaluate the liquidity position/standing of a company.
4. All of the given options/statements are correct for financial ratios.

Answer: D. All of the above options/statements are correct for financial ratios.

Explanation: For a company, financial ratios are used to evaluate the various aspects/elements of a company’s financial or economic performance, including liquidity/Cash flow, solvency/stability, profitability/ROI (Return on Investment), and efficiency/competency. Therefore, one can say that the purpose of financial ratios is to analyze the financial performance of a company and assess its strength and weaknesses.

17. A company named National thermal power corporation (NTPC) has a current ratio of 2:1. If the current liabilities are Rs. 10,000, what is the value of the current assets of the company?

1. Rs. 5,000
2. Rs. 10,000
3. Rs. 20,000
4. Rs. 15,000

Explanation: The current ratio for the company can be calculated by dividing the current assets / Holdings by the current debts / liabilities. If the current ratio for the company is 2:1 and the current liabilities are Rs. 10,000, then the current assets can be calculated as 2 x 10,000 = Rs. 20, 000. Hence option C is the appropriate/correct answer for this question.

18. Centre for Development of Telematics (CDOT) is considering investing in a new project. The initial investment required for the project is Rs. 100,000, and the company is expecting that it will generate cash flows of Rs. 30,000, Rs. 40,000, and Rs. 50,000 over the next 3 years, respectively. If the cost of capital is 10 % for the company, what is the net present value (NPV) of the project?

1. Rs. 22,727
2. Rs. 33,333
3. Rs. 9,842
4. Rs. 55,555

Explanation: The NPV (Net present value) for the company CDOT can be calculated as the difference between the initial / starting investment and the present value of the anticipated / expected future cash flow / cash position of the company. Now, In the question given above, the present value of the expected future cash flows can be calculated using the formula PV (present value) = CF / (1 + r) ^ n, here CF is the cash position / cash flow, r is the discount factor / discount rate, and n is the number of years. Using the above formula, the present value of the expected future cash flows is Rs. 90,157. Taking the difference between the initial investment of Rs. 100,000 and the present value (PV), the net present value (NPV) comes out to be Rs. 9842. Hence option C (Rs. 9,842) is the appropriate choice for this question.

19. A company named Bharat Petroleum Corporation Limited (BPCL) has a total debt of Rs. 100,000 and equity of Rs. 200,000. Suppose the company has a debt to equity ratio of 0.5. Then what is the total value of the company’s assets?

1. Rs. 100,000
2. Rs. 300,000
3. Rs. 200,000
4. Rs. 150,000

Explanation: The debt to equity ratio of the company can be calculated by dividing the total debt of the company by the equity of the company. As the debt to equity ratio is given as 0.5, and the equity is Rs. 200,000. The total debt is given as 0.5 x 200,000 = Rs. 100,000. Therefore, the total value of the assets of the company is Rs. 300,000 (Rs. 100,000 + Rs. 200,000). Hence option B is the appropriate choice for this question.

20. The following five questions (including this question) will be based on the data provided in the table given below.

Table: Sales Data for an Electronics and Electrical products store

 Devices Cost Price (in Rs.) Selling Price (in Rs.) Device A 1000 1200 Device B 5000 6000 Device C 750 900 Device D 4000 4400

Given, Rs. 1200 is the selling price for the Device A; what is the profit/Gain percentage (%) earned on Device A? Answer based on the data given in the above table.

1. 16.67 %
2. 18 %
3. 20 %
4. 22 %

Explanation: Since Device A was sold for Rs. 1200, the profit made on Device A is the difference between the selling price (S.P.)/ Market price and cost price (C.P.) of the device, which is equal to Rs. 200. Now you know the profit/Gain percentage is given by profit / Gain percentage = (Profit/Gain / Cost price (C.P.)) x 100. Therefore, the profit percentage of device A = (200 / 1000) X 100 = 20 %. Now this answer is not correct because the question asked for the profit percentage earned, which is totally different from the profit percentage. The profit/Gain percentage (%) earned can be calculated on the selling price (S.P.) of the device, not on the cost price (C.P.) of the device. Therefore profit percentage earned on device A = (Profit / Selling price) X 100 = (200 / 1200) x 100 = 16.67 %. Therefore, the correct/appropriate option for this question is A, which represents a profit/Gain percentage (%) of 16.67%.

21. What is the profit earned on the device D? Assume that all other factors did not vary a lot.

1. Rs. 200
2. Rs. 400
3. Rs. 440
4. Rs. 4000

Explanation: In order to calculate the profit made on the device D, we have to subtract the cost price of the device form the selling price of the device. Taking the difference, Rs. 4400 – Rs. 4000 = Rs. 400. Therefore, Rs. 400 is the profit earned on the device D. Hence option B, Rs. 400, is the appropriate answer to this question.

22. Suppose Device B was sold at a discount price of 10 %; then what is the selling price (S.P.) of the device?

1. Rs. 5400
2. Rs. 5600
3. Rs. 6000
4. Rs. 6600

Explanation: We now that the Device B is sold at a discount price of 10 %. And the selling price after a discount of 10 % is 90 % of the original selling price. Therefore, the selling price of the device B is given as, Selling price = 0.90 x 6000 = Rs. 5400. Therefore, the correct/appropriate option for this question is A, which represents a Selling price (S.P.) of Rs. 5400.

23. Suppose Device C was sold at a loss price of 5 %; then what is the selling of the Device C?

1. Rs. 825
2. Rs. 855
3. Rs. 855.5
4. Rs. 900