After successfully completing the CAT 2016 sprint series and the SNAP 2016 sprint series, we are back with the XAT 2017 sprint preparation series – Decision making 1 to boost your prep. This series will consist of 10 sets of questions from past year XAT papers, leading to XAT 2017 and covered almost all the question types that you needed to know come the 8th of January.

 

XAT 2017 sprint preparation series – Decision making 1

 

1. Indian government may hold top executives responsible if state-run power companies fail to meet performance targets and punish them with fines and transfers. The strict performance parameters are aimed at ensuring that at least the reduced target for 62,000 MW of generation capacity addition is achieved before the end of the 11th Plan, said a power ministry official.

Performance of chairman and managing directors of the power Public Sector Units (PSUs) in project implementation will be assessed as per the terms and conditions stipulated in the company’s memorandum of understanding (MoU) with the power ministry, he said, requesting anonymity. Performance parameters of executives had came under strict scrutiny due to a lack of progress in capacity addition program. While the target for the 11th five year plan has alreadybeen scaled down by the government from 78,500 MW, in the first three years of the plan yielded only 22,302 MW of fresh capacity.

If you were the chairman of one of these power PSU’s, which of the following statements (all of which are assumed to be true) could best be used in order to strengthen your case against the government holding top executives responsible?

i. The labour unions, owing allegiance to ruling party at the Center, are not allowing work to progress with their demands for wage hikes that are untenable.

ii. The actions of the mid-level management are not in line with the objectives laid down by the top management.

iii. The delays have been due to difficulties in obtaining funds at reasonable interest rates on account of the recessionary conditions.

iv. We are not to blame. The government is not doing enough to ensure availability of sufficient fuel to power the existing plants, let alone the new plants.

v. The government had ignored the infrastructure availability like roads etc., and environmental clearances required for such projects and therefore set an unrealistic target to begin with, and the revised target is also unrealistic as well.

A. i and ii

B. i and iii

C. i, iii and iv

D. ii, iv and v

E. i, ii, iii, iv and v

Answer Questions 2 and 3 on the basis of the paragraph below.

The CEO of ABC Telecom Ltd. (ABC) is in a quandary since he received the telephone call in the morning from his counterpart at LMN Telecom Ltd. (LMN). Both companies were engaged in a bitter experience a couple of years ago when they had attempted to merge with the intention of creating a behemoth telecom company, possibly the largest in the world. The merger had fallen through due to opportunistic behavior on the part of Mr. Das, then CEO of LMN. During the time the merger talks were taking place, Mr. Das had also approached a few other suitors for LMN in an attempt to force ABC to pay a higher price. Further, there were reports of attempts by management of LMN to scuttle the deal. Back then, ABC had also faced stiff opposition to the deal from one of its large shareholders.

Since then, a lot has changed for both companies. The bleak economic conditions due to recession had led to a drastic fall in the market value of both companies, with ABC comparatively losing much more in terms of market value. Raising money has become more difficult for both companies, especially for LMN. On the brighter side for ABC, the opposing shareholder had recently sold off his stake to another investor who earlier had supported the original merger deal with LMN a couple of years ago.

2. Which of the following would be the most appropriate line(s) of thought for the CEO of ABC to adopt in response to the offer by LMN?

i. Once bitten twice shy. There is simply no way I can think of resuming talks with LMN after their unethical behaviour the previous time around. I would rather spend my time on merger discussions with other companies.

ii. The deal may make less business sense this time around. However, if it goes through, I will become the CEO of the world’s largest telecom company. So let us try our luck once more.

iii. I will resume talks only if they provide guarantees as to the reimbursement of our expenses incurred, in the event of the deal not materializing.

iv. Let me not be biased against dealing with LMN, if we can secure the deal at a reasonably low price, benefiting our shareholders, let us go ahead with it.

v. I am not sure if we can raise the money now. In any event, they are the ones facing greater financial problems. So let’s not hurry now. We might have an opportunity to buy them out at a cheaper price later.

A. i and iii

B. ii and iv

C. ii and iii

D. i and iv

E. iv and v

3. The merger of ABC and LMN has been confirmed after detailed negotiation with LMN holding the majority share of the resultant entity. LMN has financed the merger by taking debt at higher than market interest rates from its bankers, in the hope that it would be able to streamline operations and reduce costs in the resultant entity which will allow it to repay the loan. If you were an investor looking to invest in telecom companies, which of the following could be the strongest reasons for staying away from investing in resultant entity?

A. The new entrants in the telecom market were coming with better offers for the customers.

B. The market would be as competitive as ever for the resultant entity, thus providing no guarantee for success.

C. The combined management did present have any grand strategies to the investors.

D. ABC’s management was giving in to Mr. Das who was a known opportunist.

E. LMN was using high cost debt to purchase another company in the same industry facing similar problems with no visible advantage for the combined entity over competitors.

4. Wind turbine maker Leone Energy posted a net loss of Rs. 250 crore for the fourth quarter ended March 31, 2010 as against a net profit of Rs. 350 crore in the same quarter a year-ago. In the financial year 2009-10, the company clocked a gross income of Rs. 6,517 crore, as against Rs. 9,778 crore in the previous year. Leone Energy clocked a loss of Rs. 1,100 crore in 2009-10, as against a net profit of Rs.320 crore in 2008-09. The sales revenues stood at Rs. 22,400 crore for the year, approximately 21 per cent less against Rs. 28,350 crore last year. For the financial year ending March 31, 2010, Leone Energy’s sales volume (in terms of capacity of projects executed) was 4,560 MW from 2,935 MW a year ago. The CEO of Leone Energy in his message to shareholders suggested that the poor performance of the company was the result of adverse economic conditions during the year ended March 31, 2010.

You are a shareholder owning 5% of the shares of Leone Energy, have seen the stock price decline by more than 50% during the year 2009-10, and are quite upset with the way the management has been handling the business. You have decided to confront the management at the next shareholders’ meeting and have chosen the following 5 point to argue against the CEO’s version of the story. In light of the above paragraph, select the most appropriate order of these 5 statements that you, as a disappointed shareholder, should adopt as a stringing and robust preface in your case against the management in front of the management and other shareholders.

a. The management is not doing its best to maintain the profitability of the company.

b. The company has actually increased its sales volume during the year under consideration.

c. The adverse economic conditions have led to a worldwide increase in the adoption of alternative energy sources, reflecting in all- time highest profits for wind turbine makers in both developed and developing countries.

d. The management has been lax with its employees as the management enjoys a large set of benefits from the company that they would have to forgo if they became strict with employees.

e. The company is trying to increase sales by charging lower, unprofitable prices.

A. b, c, a

B. a, c, b

C. b, e, c

D. c, b, e

E. e, b, c

5. On 1st March, Timon arrived in a new city and was looking for a place to stay. He met a landlady who offered to rent her apartment at a reasonable price but wanted him to pay the rent on a daily basis. Timon had a silver bar of 31 inches, and an inch of the silver bar was exactly equal to a day’s rent. He agreed to pay an inch of the silver bar towards the daily rent. Timon wanted to make minimum number of pieces of the silver bar but did not want to pay any advance rent. How many pieces did he make?

A. 5

B. 8

C. 16

D. 20

E. 31

Read the following case and choose the best alternative (Questions 6 to 9):

Chetan Textile Mills (CTM) has initiated various employee welfare schemes for its employees since the day the mill began its operations. Due to its various welfare initiatives and socially responsible business practices, the organisation has developed an impeccable reputation. Majority of the regular workers in Chetan Mills had membership of Chetan Mills Mazdoor Sangh (CMMS), a non political trade union. CMMS had the welfare of its member as its guiding principle. Both CTM and CMMS addressed various worker related issues on a proactive basis. As a result no industrial dispute had been reported from the organization in the recent past.

These days majority of the employers deploy large number of contract labourers in their production processes. In an open economy survival of an organization depends on its competitiveness. In order to become competitive, an organization must be able to reduce cost and have flexibility in employment of resources. Engaging workers through contractors (contract labourer) reduces the overall labour cost by almost 50%. Indian labour legislations make reduction of regular workers almost impossible, but organisations can overcome this limitation by employing contract labourers. Contract labourers neither get the same benefit as regular employees nor do they have any job security. According to various recent surveys, government owned public sector units and other departments are the biggest employers of contract labourers in the country. Contractors, as middle-men, often exploit the contract labourers, and these government organizations have failed to stop the exploitation.

Over time CTM started engaging a large number of contract labourers. At present, more than 35% of CM’s workers (total 5,000 in number) are contract labourers. CMMS leadership was wary about the slow erosion of its support base as regular workers slowly got replaced by contract workers and feared the day when regular workers would become a minority in the mill. So far, CMMS has refused to take contract labourers as members.

Recently, based on rumours, CTM management started to investigate the alleged exploitation of contract labourers by certain contractors. Some contractors felt that such investigations may expose them and reduce their profit margin. They instigated contract labourers to demand for better wages. Some of the contract labourers engaged in material handling and cleaning work started provoking CTM management by adopting violent tactics.

Today’s news-paper reports that police and CTM security guards fired two or three rounds in air to quell the mob. The trouble started while a security guard allegedly slapped one of the contract labourers following a heated argument. Angry labourers set fire to several vehicles parked inside the premises, and to the police jeeps.

6. In the wake of recent happenings, what decision is expected from CTM management? From the combinations given below, choose the best sequence of action.

I. Stop the current investigation against the contractors to ensure industrial peace; after all allegations were based on rumours.

II. Continue investigation to expose exploitation and take strong actions against trouble makers.

III. Get in direct touch with all contract labourers through all possible means, communicate the need for current investigation to stop their exploitation, and convince them regarding CTM’s situation due to competition. Also expose those contractors who are creating problems.

IV. Promise strong action against the security guards who are guilty.

V. Increase the wages of contract labourers.

A. I, V

B. I, II

C. II, V

D. III, IV

E. III, V

7. In the current context, which among the following represent the most suitable reaction from CMMS leadership?

A. Distance CMMS from the episode and explain that CMMS is not involved in the fiasco through a press conference.

B. Offer membership to contract labourers, which would put the contract worker at par with the regular workers in CMMS.

C. Do not offer membership to contract labourers, but represent their interests during negotiation in order to prevent the formation of another union in CTM.

D. Start another union exclusively for contract labourers of CTM.

E. Adopt a neutral stand in public, and pass on information related to problem creators to the CTM management.

8. Out of the options given below, which one would be the best policy decision by government at the national level?

A. Asking CTM management to pay same wages to both regular and contract workers.

B. Income tax raids in offices of contractors under investigation.

C. Setting up a new labour welfare office within CTM premises.

D. Setting up a new committee to make recommendations for changes in labour legislations with an objective to reduce exploitation of contract labourers.

E. Use entire government machinery to support CTM, which has an impeccable track record.

9. The criminals in the surrounding area often took their cue from the situation in the mill, creating law and order problems outside the mill which would later make it difficult for workers to come to mill safely. Given the circumstances, identify the stakeholder that should be the immediate priority of CTM management.

A. Contract labourers who were allegedly beaten by the security guard of the company.

B. District administration that is concerned about the spread of violence.

C. CMMS that prefers an immediate settlement of the issue.

D. Customers who are concerned about prices and regular supplies.

E. Contract labourers who are demanding job security and same wages as regular employees.

10. A group of nine runners will finish the 400 meters race in a certain The runners are: Ashok, Benjamin, Chetan, Divya, Eshant, Faneesh, Girish, Himani, and Irravaty. They all finish at different times, and their finishing order is as follows:

-Faneesh finishes before Ashok

-Divya finishes before Benjamin and Eshant

-Irravaty finishes after Chetan

-Girish finishes after Ashok

Which is the best position Girish can finish?

A.First

B.Second

C.Third

D.Fourth

E. Fifth

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Solutions

1. Statements 3, 4 and 5 are better. Statement 4 is worded a tad too crudely but as it is a part of all the options that contain 3 and 5, it would be considered okay. Option d.

2. Option e is better than the rest. 4 is the best course of action. Between 1 and 5, 5 is better as it talks about practical problems and a viable business decision. 1 simply uses a past incident to form a judgment which could be dangerous from a business point of view.

3. Option e.

4. Option d.

5. 1 + 2 + 4 + 8 + 15 = 31. So, 5 pieces. Option a.

6. Option d. This one was fairly easy.

7. Option c. Classic XAT middle path method of conflict resolution.

8. Option d. Typical macro level decision making while delaying the eventual decision.

9. Option e.

10. F, A, G

D, B, E

C, I

Girish can finish at the third position. Option c.

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You can follow the entire sprint series here: XAT 2017 Sprint Preparation Series by Learningroots

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