CAT 2000 — DILR Question 22
Answer the following question based on the information given below.
The table shows trends in external transactions of Indian corporate sector during the period 1993-94 to 1997-98. In addition, following definitions hold good.
Salesi , Importsi, and Exportsi respectively denote the sales, imports and exports in year i.
Deficit in year i, Deficiti = Importsi – Exportsi.
Deficit Intensity in year i, DIi = Deficiti / Salesi.
Growth rate of deficit intensity in year i, GDIi = (DIi – DIi-1)/DIi-1
Further, note that all imports are classified as either raw material or capital goods.
Trends in External Transactions of Indian Corporate Sector (All figures in %)
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In 1997-98 the total cost of raw materials is estimated as 50% of sales of that year. The turn over of Gross fixed assets, defined as the ratio of sales to Gross fixed assets, in 1997-98 is, approximately
Answer & solution
- A
3.3
4.3
- C
0.33
- D
not possible to determine
Total cost of raw material = 0.5 × Sales
âµ Import of raw material = 20.2 × Total cost of raw material
∴ Import of raw material = 10.1 × Sales
âµ Import of Capital Goods = 17.6 × Gross fixed assets (GFA)
âµ Imports = Raw Materials + Capital Goods
∴ Imports = (10.1 × Sales) + (17.6 × GFA)
âµ Imports = 14.2 × Sales
∴ 14.2 × Sales = (10.1 × Sales) + (17.6 × GFA)
Hence, option (b).