6. Commercial Policy Quiz
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This quiz is designed to test the candidate's knowledge of the Commercial Policy course.
Questions and Answers
- 1.
Algypug's standard freight terms are?
- A.
Ex-Works
- B.
Delivered, duty paid
- C.
FOB
Correct Answer
A. Ex-WorksExplanation
Ex-Works is the correct answer because it refers to a freight term where the seller is responsible for making the goods available at their premises, and the buyer is responsible for all other costs and risks associated with transporting the goods to their final destination. This means that Algypug's standard freight terms require the buyer to arrange and pay for the transportation of the goods from Algypug's premises to their desired location.Rate this question:
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- 2.
Algypug's payment terms for standard products are?
- A.
100% in advance
- B.
Against delivery
- C.
30 Days PDC
- D.
90 Days LC
Correct Answer
B. Against deliveryExplanation
The payment terms for Algypug's standard products are "Against delivery." This means that customers are required to make the full payment at the time of receiving the products.Rate this question:
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- 3.
Algypug's payment terms for special products are?
- A.
Against delivery
- B.
30% advance, balance against delivery
- C.
30 days PDC
- D.
100% advance
Correct Answer
B. 30% advance, balance against deliveryExplanation
The correct answer is 30% advance, balance against delivery. This means that Algypug requires customers to pay 30% of the total payment upfront as an advance, and the remaining balance is to be paid upon delivery of the special products.Rate this question:
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- 4.
It is never possible to give credit to customers.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Credit may be given to customers with the permission of the MD, or if the customer is willing to open an LC, Bank Guarantee or provide a PDCRate this question:
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- 5.
LC stands for?
Correct Answer
Letter of CreditExplanation
LC stands for Letter of Credit. A Letter of Credit is a financial document issued by a bank on behalf of a buyer, guaranteeing that payment will be made to the seller upon the completion of certain conditions. It is commonly used in international trade to ensure that the seller will receive payment for goods or services provided. The bank acts as an intermediary, providing a guarantee of payment to the seller, which reduces the risk for both parties involved in the transaction.Rate this question:
- 6.
BG stands for?
Correct Answer
Bank GuaranteeExplanation
BG stands for Bank Guarantee. A bank guarantee is a type of financial instrument provided by a bank to ensure that a specific obligation will be fulfilled by the party requesting the guarantee. It serves as a promise from the bank to cover the losses incurred if the party fails to fulfill their obligations. Bank guarantees are commonly used in business transactions to provide assurance to the receiving party that payment will be made or services will be delivered as agreed.Rate this question:
- 7.
PDC stands for?
Correct Answer
Post-Dated Cheque
Post Dated ChequeExplanation
PDC stands for Post-Dated Cheque. A post-dated cheque is a cheque that is written with a future date. It cannot be cashed until that date arrives. This is often done when a person wants to make a payment or give a cheque as a guarantee for a future transaction. It ensures that the recipient cannot cash the cheque before the agreed-upon date. Therefore, PDC is an abbreviation for Post-Dated Cheque.Rate this question:
- 8.
The maximum allowable credit period to be given against a PDC is
- A.
90 days
- B.
30 days
- C.
45 days
- D.
60 days
Correct Answer
B. 30 daysExplanation
The maximum allowable credit period to be given against a PDC is 30 days. This means that if a post-dated check is given as a form of payment, the recipient can provide a maximum of 30 days for the check to be cleared and the payment to be received. After the 30-day period, the recipient can take appropriate actions if the check has not been honored or cleared.Rate this question:
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- 9.
If the customer is willing to open an LC, Algypug will bear the LC opening charges?
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
If the customer opens an LC, the customer must bear all the charges for doing so.Rate this question:
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- 10.
The MD is the only person who is authorised to offer open credit terms to customers.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement implies that only the Managing Director (MD) has the authority to provide open credit terms to customers. This means that no other person in the company, such as other employees or managers, can offer credit terms without the MD's authorization. Therefore, the statement is true as it states that the MD is the sole authorized person for offering open credit terms to customers.Rate this question:
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- 11.
Packing Charges are to be added to the quotations and invoices at what rate?
- A.
3%
- B.
2%
- C.
1%
Correct Answer
A. 3%Explanation
Packing charges are added to quotations and invoices at a rate of 3%. This means that when providing a quote or issuing an invoice, an additional 3% of the total cost will be included as packing charges. This helps cover the expenses associated with packaging materials and labor involved in preparing the goods for shipment.Rate this question:
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- 12.
Packing Charges are calculated on what?
- A.
Gross Invoice Value
- B.
Basic Invoice Value
- C.
Total Invoice Value
Correct Answer
B. Basic Invoice ValueExplanation
Packing charges are calculated based on the Basic Invoice Value. This means that the charges for packing materials and services are determined by the initial cost of the goods being packed, without including any additional charges or taxes. The Basic Invoice Value serves as the basis for calculating the packing charges, ensuring that they are directly proportional to the value of the goods being packed.Rate this question:
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- 13.
It is the customer's responsibility to take insurance for products sent from Algypug.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement is true because it states that it is the customer's responsibility to take insurance for products sent from Algypug. This means that Algypug does not automatically provide insurance for the products they send, and it is up to the customer to decide if they want to purchase insurance for their items.Rate this question:
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- 14.
Which of the following will must be included in the quotation and the invoice?
- A.
Payment terms
- B.
Freight terms
- C.
Packing terms
- D.
Insurance
Correct Answer(s)
A. Payment terms
B. Freight terms
C. Packing termsExplanation
The payment terms, freight terms, and packing terms must be included in both the quotation and the invoice. The payment terms specify when and how the payment should be made, ensuring clarity and agreement between the buyer and seller. The freight terms outline who is responsible for the shipping costs and arrangements. The packing terms detail how the goods will be packaged and shipped. Including these terms in both the quotation and invoice ensures consistency and transparency in the transaction process.Rate this question:
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- 15.
In order to get Excise exemption, the customer must issue which type of form at the time of invoicing?
Correct Answer(s)
CT3
CT 3Explanation
To obtain excise exemption, the customer needs to issue a CT3 or CT 3 form at the time of invoicing. This form serves as a proof that the goods being purchased are meant for further manufacturing or processing, and not for immediate consumption. By submitting this form, the customer can avail the exemption on excise duty for such goods.Rate this question:
- 16.
Under what circumstances can a customer get Excise exemption?
- A.
When they are located in a different state
- B.
When they are located in a Special Economic Zone
- C.
When they are selling products to a different country
- D.
When they are in a different country
Correct Answer(s)
B. When they are located in a Special Economic Zone
C. When they are selling products to a different country
D. When they are in a different countryExplanation
Customers can receive excise exemption under three circumstances: when they are located in a Special Economic Zone, when they are selling products to a different country, and when they are in a different country. These situations allow customers to be exempt from paying excise taxes on their products.Rate this question:
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- 17.
What is the current rate of Excise?
- A.
10%
- B.
11%
- C.
12%
- D.
14.5%
Correct Answer
C. 12%Explanation
The current rate of Excise is 12%.Rate this question:
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- 18.
What is the current rate of Education Cess?
- A.
2% on ED
- B.
1% on ED
- C.
2% on Basic Invoice Value
- D.
1% on Basic Invoice Value
Correct Answer
A. 2% on EDExplanation
The current rate of Education Cess is 2% on ED. This means that a 2% tax is imposed on the Education Cess for a particular item or service. The Education Cess is calculated based on the Excise Duty (ED) imposed on the item or service.Rate this question:
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- 19.
What is the current VAT rate?
- A.
12.5%
- B.
14.5%
- C.
14%
- D.
10%
Correct Answer
B. 14.5%Explanation
The current VAT rate is 14.5%.Rate this question:
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- 20.
VAT is applicable on packing charges.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The given statement is true because Value Added Tax (VAT) is a consumption tax that is applied to the sale of goods and services. Packing charges are considered as part of the overall cost of the goods or services being sold, therefore, VAT is applicable on them. This means that the seller must include VAT in the total price of the goods or services, including any packing charges.Rate this question:
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- 21.
CST is applicable in the following circumstances?
- A.
When the products are sold outside Bangalore
- B.
When the products are sold outside Karnataka
- C.
When a 'C' Form is provided by the customer
- D.
When at CT3 form is provided by the customer
Correct Answer(s)
B. When the products are sold outside Karnataka
C. When a 'C' Form is provided by the customerExplanation
CST (Central Sales Tax) is a tax levied on the sale of goods in inter-state transactions in India. The correct answer states that CST is applicable when the products are sold outside Karnataka and when a 'C' Form is provided by the customer. This means that if goods are sold to customers outside the state of Karnataka, CST will be applicable. Additionally, if the customer provides a 'C' Form, which is a declaration form for claiming exemption from CST, then CST will also be applicable.Rate this question:
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- 22.
Who is primarily responsible for getting C Forms?
- A.
Customer
- B.
Sales Team
- C.
Finance
- D.
No one
Correct Answer
B. Sales TeamExplanation
The sales team is primarily responsible for getting C Forms. C Forms are important documents used in the process of sales tax assessment. They are issued by the sales team to customers who make interstate purchases. These forms serve as proof that the customer has purchased goods for resale and is therefore exempt from paying sales tax. The sales team is responsible for ensuring that these forms are obtained from customers and properly filed for tax assessment purposes.Rate this question:
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- 23.
If 'C' Forms are not collected, what percentage of a sale does the company lose?
- A.
2%
- B.
10%
- C.
14.5%
- D.
12.5%
Correct Answer
D. 12.5%Explanation
The company will lose the difference between the CST rate and the VAT rate (ie 14.5% - 2%)Rate this question:
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- 24.
The Shipping and Billing address must always be the same for legal reasons.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The shipping and billing address can be different, and it is the responsibility of the sales team to ensure that this is clarified at the time of taking the order.Rate this question:
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- 25.
The Gross Invoice Value includes?
- A.
Basic Invoice Value
- B.
VAT/CST
- C.
Packing Charges
- D.
Freight Charges
- E.
Excise Duty + Education Cess + Cess on Secondary & Higher Education
- F.
Insurance
- G.
Basic Rate
Correct Answer(s)
A. Basic Invoice Value
B. VAT/CST
C. Packing Charges
D. Freight Charges
E. Excise Duty + Education Cess + Cess on Secondary & Higher Education
F. InsuranceExplanation
The Gross Invoice Value includes all the components mentioned in the answer: Basic Invoice Value, VAT/CST, Packing Charges, Freight Charges, Excise Duty + Education Cess + Cess on Secondary & Higher Education, and Insurance. These are all the different charges and taxes that are added to the basic rate of the product or service being invoiced. The Gross Invoice Value represents the total amount that the customer needs to pay, including all these charges and taxes.Rate this question:
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- 26.
Type question here
- A.
True
- B.
False
Correct Answer
A. True -
- 27.
The MD is the only person who is allowed to authorise a standard discount for an account.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The explanation for the given correct answer is that the MD (Managing Director) holds the highest authority in the company and is responsible for making important decisions. Therefore, they are the only person who has the power to authorize a standard discount for an account. Other employees may have limitations or require approval from the MD before granting any discounts.Rate this question:
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- 28.
Generally, the maximum discount on our standard products is?
- A.
5%
- B.
10%
- C.
15%
Correct Answer
B. 10%Explanation
The correct answer is 10%. This suggests that the maximum discount offered on the standard products is 10%. This implies that customers can avail a discount of up to 10% on the regular prices of these products.Rate this question:
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- 29.
To be eligible for a 10% discount, the account must have an Annual Buying Value of approximately how much?
- A.
5 lakhs
- B.
10 lakhs
- C.
15 lakhs
- D.
20 lakhs
Correct Answer
B. 10 lakhsExplanation
To be eligible for a 10% discount, the account must have an Annual Buying Value of approximately 10 lakhs. This means that if the account's Annual Buying Value is 10 lakhs, the customer will receive a discount of 10% on their purchases.Rate this question:
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- 30.
The discount structure is directly linked to the sales incentive you get: the higher the discount, the less incentive you receive.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement suggests that there is a direct relationship between the discount structure and the sales incentive. It states that as the discount increases, the sales incentive decreases. This implies that the company provides lower incentives for higher discounts, possibly to discourage excessive discounting and maintain profit margins. Therefore, the answer "True" aligns with the given explanation.Rate this question:
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- 31.
If you sell a product with no discount, what is the sales incentive you are eligible to receive?
- A.
1% on contribution
- B.
2% on contribution
- C.
0.5% on contribution
- D.
1.5% on contribution
Correct Answer
B. 2% on contributionExplanation
When selling a product with no discount, the sales incentive that you are eligible to receive is 2% on contribution. This means that for every sale made, you will receive a bonus of 2% of the total contribution made by the sale. This incentivizes salespeople to maximize their efforts in selling the product and generating higher contributions, as it directly impacts their earnings.Rate this question:
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- 32.
Assuming you get approximately Rs 10 lakhs of sales @ 30% contribution in a month, how much incentive would you be eligible for?
- A.
Rs 3000
- B.
Rs 4000
- C.
Rs 5000
- D.
Rs 6000
Correct Answer
D. Rs 6000Explanation
Based on the information given, if you have approximately Rs 10 lakhs of sales with a 30% contribution, it means that you would have made a profit of Rs 3 lakhs (30% of Rs 10 lakhs). The question asks about the incentive you would be eligible for, and since the answer is Rs 6000, it suggests that the incentive is 2% of the profit made. Therefore, if you made a profit of Rs 3 lakhs, your incentive would be Rs 6000 (2% of Rs 3 lakhs).Rate this question:
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Current Version
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Dec 12, 2023Quiz Edited by
ProProfs Editorial Team -
Nov 02, 2013Quiz Created by
Bmerton
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