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CAT 2000 — DILR Question 22

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Passage / Data

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

Correct answer: 4.3

  • A

    3.3

  • 4.3

  • C

    0.33

  • D

    not possible to determine

Solution

Total cost of raw material = 0.5 × Sales

∵ Import of raw material = 20.2 × Total cost of raw material

∴ Import of raw material = 10.1 × Sales

∵ Import of Capital Goods = 17.6 × Gross fixed assets (GFA)

∵ Imports = Raw Materials + Capital Goods

∴ Imports = (10.1 × Sales) + (17.6 × GFA)

∵ Imports = 14.2 × Sales

∴ 14.2 × Sales = (10.1 × Sales) + (17.6 × GFA)

 ∴SalesGFA=17.64.1=4.3

Hence, option (b).

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CAT 2000 DILR Q22: In 1997-98 the total cost of raw materials is estimated as 50% of sales of that year. The turn over of Gross f — Solution | TheCATExam