2010 Dec Fund 53 Business Studies.pdf

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All Rights Reserved

THE ASSOCIATION OF ACCOUNTING TECHNICIANS OF SRI LANKA


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FOUNDATION EXAMINATION - DECEMBER 2010

(53) BUSINESS STUDIES

Time: 02 hours

Instructions to candidates

(1) This paper consists of two (02) Sections A & B. (2) Five (05) questions should be answered as follows: Question No.01 of Section A

Any four (04) questions from Section B (3) Answers should be in one language, in the medium

applied for, in the booklets provided. (4) 100 Marks.

SECTION - A Multiple Choice Questions All questions of this Section should be answered. 40 marks

01. Select from (1), (2), (3), (4) the most correct answer to each of the following questions. Write the number of the

selected answer in your answer booklet with the English letter assigned to the question.

(A) A partner who does not contribute to capital in the partnership is known as a:

(1) Secret Partner. (2) Silent Partner.

(3) Nominal Partner. (4) Sleeping Partner.

(B) Select from the following, the circumstance that would not lead to dissolution of

a partnership by court order:

(1) When a partner deliberately violates the partnership agreement.

(2) Bankruptcy / insolvency of one partner.

(3) When the partnership incurs continuous losses.

(4) Due to bad habit or indecent behaviour of a partner.

(C) Legal personality of a limited company is confirmed after the receipt of:

(1) Articles of Association. (2) Prospectus.

(3) Minimum Subscription. (4) Certificate of Incorporation.

(D) Select from the following, groups which are not considered institutions of the

capital market of Sri Lanka:

(1) Chamber of Commerce and Central bank.

(2) Leasing companies and Finance companies.

(3) Unit Trusts and Employees Trust Fund.

(4) Share market and Insurance Institutions.

23-01-2011 Afternoon 2.00 4.00

No. of Pages: 06 No. of Questions: 07


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(E) Select from the following, the most correct statement in relation to Sri Lanka


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Development Bonds (SLDB)?

(1) To invest in SLDB, special permission should be obtained from the

Exchange Controller of the Central Bank of Sri Lanka.

(2) SLDB are Dollar denominated government bonds.

(3) Only foreign citizens can invest in SLDB.

(4) SLDB are issued by the Board of Investments of Sri Lanka.

(F) Of the following, what function is not being performed by a Merchant Bank?

(1) Providing short-term financing.

(2) Accepting deposits.

(3) Leasing & hire purchasing.

(4) Providing financial advisory services.

(G) The General Agreement on Tariff and Trade aims at:

(1) Providing a forum in which countries can agree to impose tariff.

(2) Increasing the number of trading blocs.

(3) Eliminating quotas and reduce tariff.

(4) Providing a forum in which countries can make bi-lateral trade agreements.

(H) Select from the following, the key documents associated with international trade,

which facilitate transportation:

(1) Letter of credit, Bill of lading. (2) Certificate of origin, letter of credit.

(3) Bill of lading, Certificate of origin. (4) All (1), (2) and (3) above.

(I) Of the following, what is a special crossing?

(1) (2)

(3) (4)

(J) Select from the following, a person who can cancel the crossing in a cheque:

(1) Payee. (2) Drawee.

(3) Commercial bank. (4) Drawer.

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To the Yayees Acooum


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(K) Select from the following, the group which consists only of capital market


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instruments:

(1) Promissory Notes, Unit Trusts, Debentures.

(2) Treasury Bills, Commercial Papers, Promissory Notes.

(3) Commercial Papers, Unit Trusts, Ordinary Shares.

(4) Debentures, Ordinary Shares, Unit Trusts.

(L) Of the following, a third party insurance policy is not covering the financial

losses caused to:

(1) The insured motor vehicle.

(2) The goods carried in the motor vehicle.

(3) The driver of the motor vehicle.

(4) All (1), (2) and (3) above.

(M) Select from the following, the main functions of commercial banks:

(1) Accepting deposits and providing credit facilities.

(2) Issuing credit cards and debit cards.

(3) Issuing bank drafts and providing leasing facilities.

(4) Underwriting shares and pawning of gold Jewellery.

(N) Of the following, select the lowest credit risk rating in according with FITCH

Rating system:

(1) BB+. (2) BBB. (3) CCC. (4) AAA.

(O) The terms of trade for a country in a number of years are given in the following

index:

Terms of Trade Index (2,000 = 100) 2004 90 2005 100

By using the above data, the correct statement of terms of trade between the period 2004 to 2009 is:

(1) Improved by 20%. (2) Deteriorated by 5%.

(3) Improved by 15%. (4) Improved around 28%.

2006 95

2007 100

2008 120

2009 115

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Of the following, what is the correct statement?

(1) Ghana has comparative advantage in the production of both sugar and

wheat flour.

(2) Canada has comparative advantage in the production of both sugar and

wheat flour.

(3) Ghana has comparative advantage in the production of sugar and Canada

has comparative advantage in the production of wheat flour.

(4) Ghana has comparative advantage in the production of wheat flour and

Canada has comparative advantage in the production of sugar.

(Q) Irrevocable letter of credit can be amended or cancelled by the:

(1) Seller. (2) Buyer.

(3) Issuing Banker. (4) In agreement of all parties.

(R) Of the following, the main function of the Sri Lanka Export Credit Insurance

Corporation is?

(1) Insuring the export marine cargo.

(2) Insuring the risk of non-settlement of export invoices.

(3) Insuring the non-settlement of import invoices.

(4) Providing credit facilities for exporters.

(S) From December 2008 to December 2009 the Rupee value of a US dollar changed

from Rs. 110/- to Rs.116/-. This change represents:

(1) A depreciation of the US dollar. (2) A depreciation of the rupee.

(3) A devaluation of the US dollar. (4) None of these.

(T) Which one of the following is an example for Regional Economic Cooperation?

(1) World Trade Organization. (2) European Union.

(3) International Monetary Fund. (4) World Bank.

(02 marks each, Total 40 marks)

(P) Assume that Ghana and Canada are producing both sugar and wheat flour. Units of resources required to

produce one kilogram each of sugar and wheat flour are given in the following table:

Ghana (units)

Canada (units) One kilogram of sugar 2 4

One kilogram of wheat flour 1 1

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SECTION - B Answer any four (04) questions only from this Section. 60 marks

02. (a) Distinguish between commercial services (Auxiliary Services) and direct services.

(05 marks)

(b) List five (05) factors to be considered in locating an industry. (05 marks)

(c) Explain the incentives provided for the development of industries in Sri Lanka.

(05 marks) (Total 15 marks)

03. (a) Explain five (05) rights of partners which are included in Section 24 of the

Partnership Ordinance of 1890. (05 marks)

(b) Compare and contrast a Private Limited Company with a Public Limited

Company.

(05 marks)

(c) State five (05) main features of a sole tradership. (05 marks) (Total 15 marks)

04. (a) Explain the four (04) main sub-markets in the formal money market. (05 marks)

(b) Explain the importance of the share market for the development of an economy.

(05 marks)

(c) List five (05) advantages of scriptless securities. (05 marks) (Total 15 marks)

05. (a) List four (04) Finance Companies Registered with the Central Bank of Sri Lanka and briefly explain three (03)

functions of Finance Companies. (05 marks)

(b) Briefly explain the following main Principles of Insurance:

(i) Insurable interest.

(ii) Utmost good faith.

(iii) Indemnity. (06 marks)

(c) Explain the duties of a banker. (04 marks) (Total 15 marks)

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06. (a) The production of tea and rubber per labour hour by labourers in Sri Lanka and

India are given below:

Sri Lanka India Tea (Kg) 8 4 Rubber (Kg) 4 1

(i) State the country which has absolute advantage in the production of tea and rubber. (02 marks)

(ii) State the country which has comparative advantage in the production of rubber. (02 marks)

(iii) Calculate the benefit to each country when 4 kilograms of tea is exchanged for 4 kilograms of rubber. (02 marks)

(b) Explain four(04) benefits of globalization. (04 marks)

(c) Explain using a suitable diagram how flexible foreign exchange rate is

determined. (05 marks) (Total 15 marks)

07. Write short notes on,

(a) Forward Exchange Transactions.

(b) Chamber of Commerce.

(c) Board of Investment (BOI).

(d) International Monetary Fund (IMF).

(e) Quasi Partner. (03 marks each, Total 15 marks)

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2010 Dec Fund 53 Business Studies.pdf