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365 DAYS – DAILY STATIC QUIZ

DAY – 81

1. Question

Consider the following statements regarding interest coverage ratio.

1. The interest coverage ratio is a debt and profitability ratio used to

determine how easily a company can pay interest on its outstanding debt.
2. For calculating interest coverage ratio, a company’s earnings before
interest and taxes is considered.
3. Generally a lower value of interest coverage ratio shows greater ability of a
company to meet its interest obligations from earnings.

How many of the above statements is/are correct?

a) Only one
b) Only two
c) All three
d) None

2. Question

Consider the following statements.

1. Valuation changes arising from an appreciating U.S. dollar can lead

to decline in India’s foreign exchange reserves.
2. The RBI Act, 1934 stipulates that the Central Government orders the rate at
which the RBI shall buy or sell forex to banks.

Which of the above statements is/are incorrect

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a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2

3. Question

Consider the following statements regarding Qualified Stock Brokers (QSB).

1. Qualified Stock Brokers are entities, because of their size and scale of
operations, can likely impact investors and the securities market.
2. A stock broker will be designated as QSB on the basis of number of active
clients, total available assets of clients and their trading volumes.
3. Qualified Stock Brokers have the responsibility to red flag any u nusual
client behaviour to stock exchanges and take necessary measures to
prevent fraudulent activity in the market.

How many of the above statements is/are correct?

a) Only one
b) Only two
c) All three
d) None

4. Question

Consider the following statements.

1. “Friedman” economists are “welfarists” who see the need for a government
hand in the economy.
2. “Keynesian” economists are “monetarists” who want governments out of
the way to let private entrepreneurs produce good outcomes for all.

Which of the above statements is/are correct?

a) 1 only
b) 2 only
c) Both 1 and 2

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d) Neither 1 nor 2

5. Question

Which of the following has the highest weightage under Consumer Price Index
urban?
a) Housing
b) Food and beverages
c) Fuel and Light
d) Clothing and footwear

ANSWER AND EXPLANATIONS

ANSWER 1. Solution: b)

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The interest coverage ratio is a debt and profitability ratio used to determine
how easily a company can pay interest on its outstanding debt. The interest
coverage ratio is calculated by dividing a company’s earnings before
interest and taxes (EBIT) by its interest expense during a given period.

Generally, a higher coverage ratio is better.

ANSWER 2. Solution: d)

India’s foreign exchange reserves can decline due to the valuation changes
arising from an appreciating U.S. dollar.

Section 40 of the RBI Act, 1934 (“Transactions in foreign exchange”)

stipulates that the Central Government orders the “rate” at which the RBI
shall buy or sell forex to banks (authorised persons). This “rate”, in turn, will be
governed by India’s “obligations to the International Monetary Fund [IMF]”.

ANSWER 3. Solution: c)

Sebi defines QSBs as entities who, because of their size and scale of
operations, can likely impact investors and the securities market, as well as
governance and service standards. These stock brokers cater to the needs of a
large number of investors.

Due to their size, trading volumes, and amount of clients’ funds handled by them,
QSBs occupy a significant position in the Indian securities market. The stock
market activity is concentrated to these designated stock brokers. The failure of
such stock brokers has the potential to cause disruption in the services they
provide to large numbers of investors, causing widespread impact in the
securities market.

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A stock broker will be designated as QSB on the basis of four parameters —

number of active clients, total available assets of clients, trading
volumes. and end-of-day margin obligations. All stock brokers with a total score
greater than or equal to five on these four parameters are identified as QSBs.

QSBs will have to red flag any unusual client behaviour to stock exchanges
and take necessary measures to prevent fraudulent activity in the market.

ANSWER 4. Solution: d)

Economic science has dominated public policy since the 20th century. Debates
have raged between “Keynesian” economists and “Friedman” economists:
between “welfarists” who see the need for a government hand in the
economy and “monetarists” who want governments out of the way to let
private entrepreneurs loose and let an “invisible hand” produce go od
outcomes for all. Both sides agree that growth in GDP — the size of the
economy measured in money terms — is essential.

ANSWER 5. Solution: b)

In India, the most important category in the consumer price index is Food and
beverages which has highest weight in CPI rural and CPI urban.

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