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Billing statement format for corporations

study IQ I affordable hello students let us start with 2022 preim previous year questions from the economy section now the first question that appeared in the year 2022 from economy was related to a current event now if you can recall back in 2022 Sri Lanka was facing severe balance of payment crisis that is it did not have enough foreign exchange reserves to pay for imports now Sri Lanka in general is dependent on Imports to fulfill most of its domestic demand for food fuel Etc and this created a economic crisis in Sri Lanka so naturally like Pakistan Sri Lanka also approached many countries to gain emergency funds and this also included approaching the international monetary fund and this was the subject of this year question however the question was not asked on Sri Lanka rather it was asked on funds utilized by the international monetary fund to provide emergency credit line of credit to countries who are facing Bop crisis and this year it was Sri Lanka now these funds are not just available for countries during emergency crisis but are also available for them to undertake various development of their infrastructure as well as undertake good governance reform but the subject of the news was emergency line of credit to absolve or to solve the Bop crisis and this was why the rapid financing instrument and Rapid credit facility both are part of international monetary fund that is why this question was asked now what is more important among this two is the rapid credit facility called as RCF because it is a part of poverty reduction and growth Trust of the IMF and it provides financial assistance which are consession concessional in nature to lowincome countries now this is to alleviate their balance of payment crisis and also these Financial supports can be tailored for undertaking the diverse requirements of the least income countries now let us move to another question and this one is a tough one why because it does not ask you the value of Indian rupee whether it depreciates or not but rather it goes deep by asking nominal effective exchange rate and real effective exchange rate understood now for example you may have heard in the news that value of rupee Vis US dollar is depreciating that is earlier for $1 you could gain as much as 50 rupees but now you end up paying for $1 you end up paying almost 84.5 rupees so this is an example of depreciation of Indian rupe but you have to understand that India does not trade only with the US rather it trades with every Other Nation on the planet for example it trades with Japan and there the payments may be made in Yen or if it trades with United Kingdom there the payments may be made in US sorry in pound sterling and this is where the net effective exchange rate or the concept of effective exchange rate comes in because it is like an index where the important trading partners of the nation the weighted average of the total trade value that is happening between India and its partner Nations it is calculated in a form of index now when the weight weighted average of these trade is taking place that is called as a noral effective exchange rate but if you adjust this near or nominal effective exchange rate with that of inflation the term is called a real effective exchange rate but you have to understand that any increase in the nominal or the real effective exchange rate means that the currency value is appreciating that means if near increases that means the value of rupee also increases and same is that with relation to real effective exchange rate so the first statement an increase in need indicates the appreciation of rup is correct the second statement an increase in re indicates an improvement in trade competitiveness now how does value of rup relates to trade competitiveness of Indian products now for example earlier the value of Indian rupee for every dollar was rupes 50 so technically for every $1 paid by a citizen of America they can get goods worth value of R50 however coming to the present time where value of $1 is more than 84.5 rupees that means for every dollar now the American citizen will be getting 84.5 rupe worth of Indian made Goods which means for every dollar they are getting more amount of money so in terms of competitiveness it is naturally more beneficial for an American citizen to get more am amount of rupee per every dollar they spend and this is the sign of trade competitiveness that is the value of Indian Goods in outside Market they are cheaper now which means it will promote Indian exports to other countries so an increase in real effective exchange rate means appreciation of currency which means you can understand that is India's trade competiveness will reduce and not increase so second statement here is incorrect now there is this indicator called if the real effective exchange rate is greater than the value of 100 that means rupee or the trade competitiveness of Indian Goods reduce now I told you the difference between nominal and real effective exchange rate is that nominal is the value of exchange rate in the current year whereas real effective exchange rate comes after adjusting near with that of inflation so in case there is an increased amount of inflation in any country the value of near and reer will diverge and this third statement an increasing Trend in domestic relation inflation relative to inflation in other countries is likely to cause an increasing Divergence between near and re it is a correct statement so which of the above statement is or are correct second is incorrect so option C that is first and third are correct is the right answer now let us move to another question with reference to Indian economy consider the following statements and the first statement here it says that if inflation is too high the RBI is likely to buy government securities now you have to understand how how does RBI intervene in the money supply or how it controls the money supply for example whenever there is an inflation which means there is an increase in money supply understood Now to control or to reduce the money supply in order to reduce the inflation what the RBI does is that it tries to reduce the money supply and by reducing money supply RBI can control the inflation and it can reduce the money supply by selling government securities that is whenever government security is sold in the market that means the investors now will have government securities in hand whereas the cash they had will now go to RBI thus sucking out the liquidity in the market so in case the inflation is too high the RBI is likely to sell and not buy government securities because if RBI buys government securities it will provide the investors with the requisite amount of cash furthering the inflation that is taking inflation higher so this is an incorrect statement now if the rupe is rapidly depreciating RBI is likely to sell dollars in the market now whenever the rupee depreciates or the value of rupee goes down sorry whenever the value of rupee goes down it means the supply of rupe is too high and this supply of rupee is Vis compared to foreign currencies like US dollar so this supply and demand mismatch between rupee and dollars can lead to either appreciation or depreciation of rupe now rupe depreciation happens whenever the supply of rupe is higher compared to dollars so to balance this equation what RBI does is that either it sucks out excess rupe or it pumps up pumps out excess Dollar in the market so in case the rupe is depreciating RBI is likely to sell dollars in the market to increase the supply of dollar thereby controlling the supply of rupe and preventing its depreciation so second statement here is a correct statement now moving to third statement if interest rates in us or European Union were to fall it is likely to induce RBI to buy dollars now whenever an interest rate lowers in an economy the value of its currency decreases why because the supply of currency increases so whenever a currency is available for for cheaper amount of money it is more likely that any foreign Bank such as RBI will buy those money at a cheaper rate that is why if the interest rate in us or European Union were to fall that means the value of dollar or the value of Euro will reduce thereby making it cheaper for RBI to buy these and hence third statement here is also correct now we have to identify correct option hence option b here is the correct answer now moving to another question with reference to Indian economy what are the advantages of inflation indexed bonds now bonds you understand are debt instrument which are sold in the market and the returns that the investors get of holding these bonds are in form of interest income however the the interest rate charg by these bonds are called as nominal interest rate that is suppose a bond offers 5% interest rate that is called as nominal interest rate but what happens if that year the inflation of in the economy was higher than the bond rate which means what if the inflation was 6% so technically the investor will be losing money and this is where the inflation index Bond come in because because these inflation index bonds they say that we will pay you premium over the inflation rates for example if the wholesale price index or this Consumer Price Index is 6% the inflation index Bond says that we will pay 2.5% over and above the value of inflation and this is just an example so the int of bringing these kind of bonds is to provide protection to investors from uncertainty regarding the inflation thereby option second here is correct now can government reduce its coupon rates by borrowing in way of inflation index bonds technically yes because as against offering a lumpsum of interest rate if the government says that we will provide you some premium over the inflation rates it means that that in case the inflation goes down the government ends up paying less amount of Interest whereas if the inflation was fixed irrespective sorry the interest rate was fixed irrespective of the inflation levels so there may be a time where the government ends up paying higher interest so technically the cost of borrowing through index inflation index bonds can reduce and thereby government can reduce the coupon rates because the investors are are already protected from the impacts of inflation option second here is first is also correct now moving to the third statement the interest receives as well as the capital gains on inflation index bonds are not taxable it is incorrect because like every debt instrument both the interest income as well as the capital payment are subject to be liable for capital gains taxes thereby third statement is incorrect now we have to identify correct options here option A is right because first and second was true okay now let us move to another question which is related to foreign direct investment or foreign owned Ecommerce firms now technically e-commerce firms they are of two types that is inventory based firms or Marketplace companies now in inventory based firms such as blinket big basket these companies or e-commerce companies they maintain inventory by themselves that is they purchase goods from other companies and they stock it with themselves thus thereby enabling them to fulfill the orders which are made by consumers on their platform on the other hand Marketplace model for example these include Amazon Flipkart these are Marketplace models that means means these websites they provide a platform to sellers such as a b c whereas these sellers list their goods on the website provided by the service provider and the consumers order them from this website however in the process of marketplace model the websites which are hosting the market Marketplace model they do not have any inventory with themselves and in India the foreign direct investment is permitted in Market Marketplace model whereas it is not permitted in the inventory based model now there are certain restrictions on Marketplace model also that is the companies which are related to the providers of the marketplace model should not sell their goods on the marketplace model company and also they are not liable to holding any inventory of their own so the first statement they can sell their own Goods in addition to offering the the platforms as marketplaces they are incorrect whereas the second the degree to which they can own big sellers on their platform is limited it is also incorrect because they cannot own any company which are sellers on their platform so it is not limited rather it is prohibited so in case the word here was prohibited this would have been a correct statement which it is not right now so from our discussion what we infer that both first and second are incorrect thereby option D neither one and two is the right answer to this practice question now moving to another uh question which is somewhat a straightforward question but is also a tricky one because it asks you to identify which of the following activities constitute real sector in the economy now what do you mean by real sector real sector is the one where you cultivate produce and sell the goods and services that is called as real sector of the economy as against there is another paper sector or financial sector these are interchangeable terms that means any uh sector which involves transaction of money and funds or finances these are called as paper sector Now understand the difference between real and paper sector so farmers harvesting their crops it is an example of real sector hence it is correct textile milk converting raw cotton into fabric a production activity again example of real sector now third and fourth a Commercial Bank lending money to Trading Company is it real no it is related to money or financial transaction hence it is a financial sector a corporate body corporate body pay close attention issuing a rupe denominated bond overseas now here the corporate body is not producing anything rather it is issuing a debt instrument in the market which is an example again of paper sector so third and fourth is incorrect because they are examples of paper and not real sector whereas first and second are correct that is why option A here is the right answer now which of the following situation reflects indirect transfers often talked about in the media with reference to India now India is a country where foreign investors invest in sectors such as defense uh web uh it Etc now there is this catch that is whenever these foreign investors are inves investing in India so naturally they want to take out the returns also but these returns are not taken out in a direct form rather they are done so in an indirect manner that is an investor might be investing in a company and a return of which they might be getting their shares so rather than selling the physical items of the company what the investor does is that they transfer their shares to other investors and this is the what called as the process of IND direct transfers that is a foreign company when they transfer their shares and such share derives their value from the assets located in India is an example of indirect transfer that is for example Amazon India has certain amount of shares which is owned by the parent company that is Amazon Inc located in us now suppose to get out of India what Amazon Inc can do is that they can sell out their warehouses and other assets which are located in India but rather than selling that assets it can lead to significant amount of protest from India what Amazon does is that it transfers the share to another investor and this is what an indirect transfer is all about hence option D here is the right answer it was a straightforward question directly appeared from the news so students who were appearing in that year might not have faced any problem with this particular question now coming to another question which is related to expenditures made by an organization then now expenditures made by organization are of two types they are of Revenue expenditures that are expenditures occurred which occurs in their day-to-day operations like paying salaries or buying goods and services or paying pensions to their ex employees all of these are recurring uh instances of expenditures thereby categorized as Revenue expenditures on the other hand there are capital expenditures which means any expenditure made by company on buying more assets like land establishing factories buying new Machinery or even upgrading their current ones are examples of capital investment because these capital investment they are ended to expand the businesses of company and enable the company to gain higher profits in years to come so it is a long-term investment whereas Revenue expenditures are short-term expenses of the company now acquiring new technology is a capital expenditure which is a correct statement quite straightforward that is acquiring new technology will help company have a technological upgradation which again will enable the company to have higher productivity and naturally higher profits in upcoming years so first statement here is quite straightforward and also correct now the second statement debt financing is considered a capital expenditure whereas Equity financing is considered a revenue expenditure now capital account deals with expenditures or liabilities made by the company whereas Revenue are not liabilities that is in case company sells goods and services into the market the money coming in return for those goods and services are Revenue income of the company whereas if the company takes Loan in one form or the other be it Equity selling of their shares through Equity or getting loan from the bank in form of bonds and agreements these are examples of capital receipt which means it creates a kind of liability on a company which the company has to return after the expiration of that liability so both examples of debt financing as well as Equity financing are considered into the capital account and not revenue account hence second statement here is incorrect now the correct answer of this practice question is is of this pyq is option A because only first statement was correct now moving to another question with reference to Indian economy we have to consider following statements the first statement a share of household Financial savings goes towards government borrowing now which financial savings is the question talking about is the quest related to public Provident fund as well as other small savings schemes such as Suk Sami yoga now a significant portion of the money of Indian people are invested in such small savings schemes because government offers higher return as compared to market returns thereby first statement here is correct that is a share of Indian household Financial savings goes towards government borrowings now these borrowings made by the government are a liability on the government that is after certain years government has to return the principal amount of money in addition to interest rate to the original investors so that is why they are a liability on the government account and from polity these are part of not Consolidated account but public account of India now moving to second statement dated securities issued at that market related rates in auctions form a large component of internal debt now internal debt is the debt which the government sources from inside India it can be debt from other governmental bodies it can be debt from RBI or it can be debt from its own citizens now major chunk of India's debt that is more than 90% of debt incurred by Indian government is sourced from domestic sources and the how government borrows these money is through marketable as well as non-marketable instruments now example of Market instruments are government securities treasury bills because the holders of these government securities can sell them in their open market to get the original money back from another investor which means these instruments are liquid in nature now now about 70% of total government debt goes from or is taken from these following instruments that is why they are a large component of internal debt that is more than 70% in total so second statement here is also correct thereby the correct answer to this pyq here is option C that is both one and two are correct now I've given a detailed explanation of this also so and I if you can see here dated Securities account for More than 70% of total internal debt by the government so that is why they are large component and marketable debt instruments include treasury bills which are issued in auctions and also other instruments such as government securities or state developmental loans which is securities issued by various state governments now moving to the next question which is quite a straightforward question tight monetary policy of United States Federal Reserve could lead to Capital flight now what happens if US Federal Reserve would were to follow tight monetary policy which means the interest rates in US economy will rise which means it will make it attractive for investors to invest their money in the US economy so in case the US Federal Reserve increases the interest rate that is following a Tight money policy that will lead to Capital flight from countries like India where otherwise foreign investors have been investing their money from so first statement here is correct because tight monetary policy increases the attractiveness of any economy and if it happens in us that can lead to Capital flight from countries like India to us now now Capital flight may increase the interest cost of firms with existing external commercial borrowings now what happens when a company goes to borrow from external sources or outside India now technically the borrowings made by companies from outside India are made in foreign currency which means whenever they have to pay the money back originally they will converting their domestic currency into foreign currency now in cases of capital flight what happens is that the supply of dollars in Indian economy reduce and it increases the depreciation of Indian rupe which means earlier if you were to pay only 80 rupees per dollar after Capital flight there is a chance that the value of $1 in Indian currency terms may increase to 85 or 90 so naturally if you were to return fixed amount of dollars from from India it will require you to spend more rupe for every dollar that you have to do and this may increase the interest cost of firms also so second statement here is correct now devaluation of domestic currency decreases the currency risk associated with ecbs now in case of devaluation of domestic currency the value of rupee decreases which increases the cost of companies of returning their loan back that is you can also say that when the cost is increasing that means the risk is also increasing right so third statement here is incorrect because devaluation of domestic currency increases and not decreases the currency risk associated with external commercial borrowing so third statement was incorrect that is why option a here is the right answer because we have to identify correct options now moving to another question and it was somewhat a tough question because the questions is related to credit rating agency now you all may have heard about what are credit ratings because these credit ratings which are issued for you and I it reflects our ability to return any loan that we have taken back so higher is the credit rating which means the more it is likely that the person with that higher credit rating will return the money back and Banks naturally want to give loans to trusted people that are people who can return money back timely and this is what credit rating agencies do that they assess our ability based on various data that is data of our previous transaction with financial institutions data related to our utility payment such as electricity bill telephone bills these are data which are utilized by credit rating agencies to provide a credit rating for individual borers now this was called a credit score which is related to individual borers credit rating agencies they assess credit rating of companies or of sovereign bodies like governments now in India these credit rating agencies are regulated by Securities and change Board of India and not the Reserve Bank of India so first statement here is incorrect now second and third statement if you can see are very factual in nature that is why I told you this question will be tough now there is this rating agencies called IC which was set up back in 1991 as a public limited Company by our country's leading financial institutions Banks as well as other independent financial services company now the purpose of this body is to provide or act as a credit rating agency hence if you can see second statement here is a correct statement because although it is a public limited company however it is also a credit rating agency now moving to the third statement Brick Works rating is an Indian credit agency again a very factual statement and also a correct statement because this company is indeed an Indian credit rating agency and the name of this company is also reflected in the website of sebi probably from which the upsc has formed a question so these kind of questions which have absolute facts and in case you do not have an idea about the absolute facts you may try to skip this question because guessing this question is a tough job now as first was incorrect second and third was correct that is why option b here is the right answer because we were to identify statements that are correct now let us move to another question this was a simple one it is reference to bank boards Bureau now Bank boards Bureau was an agency previously which was replaced Now by a different body called Financial Services institution Bureau now if you can recall this was an autonomous body part of government of India which was tasked primarily to select and search for persons who can appoint it to be the board of public sector units and Banks now not just banks these com these board was also responsible for selecting an approving of persons who can be appointed to the directors of public sector insurance companies also now the Mandate of this Bureau in addition to appointing and searching the eligible people was also to help the government deal better with the banking business and in that regard this Bureau also provided helps to banks by developing Better Business strategies and how to raise capital from market now the chairman of this banking board Bureau was appointed by the union govern and he was not the chairman of or he was not the governor of RBI so this was an easy question so coming back to the question the RBI Governor is he the chairman of Bank board Bureau no incorrect because chairman of Bank board Bureau is a different person who's appointed by Union government and X cji Mr vodra who you may recall became famous because of 2G scam because he Unearthed the scam he was appointed as the first chairperson of the bank boards Bureau coming to the second statement Bank board Bureau recommends the selection of heads for public sector Banks directly a correct statement because it was the primary responsibility of Bank boards Bureau and the third statement it helps public sector banks in developing strategies and capital raising plans so third statement here also correct that is why option b is the right answer because second and third is the correct statements now let us deal with question related to convertible bonds now you may realize bonds are debt instruments which means investors in bonds are liable to get interest income in addition to their repayment of capital now the question is what are convertible bonds now there is an option in a convertible bond that the holders of the bonds they may change their debt stake into an equity stake that is for exchange of their money that they have paid as a debt they can change their ownership of the debt into an ownership of a stock and this gives the benefits of the investors such as the investors are now are now liable after converting their bonds into an equity instrument of undertaking or gaining more profits from the company and this is what the convertible bonds is all about that there is an option to exchange these bonds for Equity therefore convertible bonds in general they pay lower rate of interest because they are a more flexible kind of instruments that means the person who is owning a convertible Bond can change their bond to an equity instrument anytime that is why their demand in the market are higher so the companies provide lower interest rates on these bonds now the option to convert to equity affords the bond holder a degree of indexation to Rising consumer prices now what happens in case any fixed Bond witnesses an increase in inflation now I told you already there is a normal interest rate which the bond might offer say 10% okay but what if the inflation levels in the economy becomes 12% so from that logic the real interest rate on these bonds is minus 2% that is the investor is losing 2% of their money because of rising interest rates now in case there is an increase inflation so what the convertible Bond owner will do is that he or she will change that Bond into a sorry into a convertible bond which means their debt becomes Equity thereby they are liable to be protected against increase in interest rates so second statement here is correct whereas first also was correct because the uh convertible Bond are a more lucrative investment device that is why the demand for these instruments are higher in the market which enables the companies to lower down their interest rates so option C is the right answer because first and second statement are correct now moving to last two questions and these two questions are very straightforward which of the following is responsible for maintaining stability by controlling inflation now if you can recall our previous discussions that the RBI Act of the Year 1934 was amended back in 2015 and it gave the responsibility to RBI to keep the inflation levels in Indian economy between 2 to 6% that is 4% and plusus 2% so the RBI now has a statutory responsibility that means it is legally a responsibility of the RBI to control inflation in the economy and how does RBI control inflation through monetary policy that is it can increase or lower the money supply in an economy which naturally will control the inflation so option D here is the right answer quite a straightforward question and with this another question which of the following compiles information on Industrial disputes in India it is the Labor Bureau which does that as it compiles the information related to which companies are facing closures or they laying of employees so Labor Bureau is the right answer to this question so this concludes our discussion of the Year 2022 prelims pyqs and will now move on to the pyqs belonging to the year 2021 study IQ is Affordable