108 questions. Try each one, then open the answer to check yourself and read the explanation.
Use the diagram below to answer Questions 1, 2 and 3. From the above diagram, the box marked H stands for
Answer: C (occupation)
Occupations are grouped into industrial (W), commercial and direct services, so the box at the top that splits into all three is occupation.
Use the diagram below to answer Questions 1, 2 and 3. The box marked W stands for
Answer: A (industry)
Alongside commerce and direct services, the third branch of occupation is industry (extractive, manufacturing and constructive).
Use the diagram below to answer Questions 1, 2 and 3. The box marked M stands for
Answer: D (trade)
Commerce is trade plus the aids to trade; the aids (transport, advertising, warehousing, insurance, banking) are listed under M, so M is trade.
Paper money originated in form of receipts given by
Answer: B (goldsmiths)
People kept gold with goldsmiths, who gave them receipts; these receipts were passed round in payment and became the first paper money.
An insurance broker is involved in
Answer: C (commercial occupation)
Insurance is an aid to trade, so an insurance broker is in a commercial occupation.
The process of buying, selling and distribution of goods and services is known as
Answer: B (commerce)
Commerce covers buying and selling (trade) and all the services that help distribute goods.
The practice of employing specialists in relevant occupations is a feature of
Answer: E (division of labour)
Division of labour means splitting work so that each person specialises in what he does best.
Which of the following converts raw materials into finished goods?
Answer: B (Manufacturing industry)
Manufacturing industry turns raw materials (or semi-finished goods) into finished goods.
Which of the following supports the view that there was commerce in Nigeria many years ago?
Answer: A (Communities were interdependent)
Communities depending on one another for goods means they exchanged goods, which is commerce; a subsistence economy with little specialisation means little trade.
Which of the following towns was important to the trans-Saharan traders?
Answer: E (Kano)
Kano in the far north was a major terminus of the trans-Saharan caravan routes.
Production ends when goods
Answer: D (and services reach the final user)
In commerce, production is not complete until the goods or services reach the final consumer.
A counter offer operates as
Answer: C (a rejection)
A counter offer changes the terms, so in law it rejects the original offer (and becomes a new offer).
In the contract of sale of goods, 'let the buyer beware' is signified by
Answer: C (caveat emptor)
Caveat emptor is Latin for 'let the buyer beware'.
Branding is a good example of
Answer: E (competitive advertising)
A brand name sets one firm's product apart from rival products, which is the aim of competitive advertising.
The critical factor in organizing a business is
Answer: D (management)
Money, capital and machinery are useless without good management to plan and combine them.
Which of the following is not an attribute of an effective business manager?
Answer: B (Subjectivity)
A good manager judges situations fairly and objectively; being subjective (biased by personal feelings) is a weakness.
Prior to the issue of a certificate on a motor insurance contract, the insured is issued with
Answer: C (a cover note)
A cover note gives temporary cover until the full policy or certificate is ready.
The worth of a life assurance policy before maturity date is known as
Answer: B (surrender value)
Surrender value is what the insurer pays if the policyholder gives up the policy before it matures.
Under the law of insurance, exemption clauses
Answer: B (protect the insurance company under the contract)
Exemption (exclusion) clauses list losses the insurer will not pay for, so they protect the insurance company.
The assured is the
Answer: B (insurance company's client)
The assured (insured) is the client who takes out the policy and pays the premium.
If a limited liability company wishes to finance expansion in operation by using its retained earnings, it will issue
Answer: D (bonus shares)
Bonus shares are free shares made by turning retained profits into share capital.
A partnership formed for banking business is made up of
Answer: A (2-10 members)
The law limits a banking partnership to between 2 and 10 partners (ordinary partnerships to 20).
Which of the following statements is true of limited partnership?
Answer: D (There is at least one ordinary partner)
A limited partnership must have at least one general (ordinary) partner with unlimited liability.
Which of the following is not required for the dissolution of a partnership?
Answer: E (Order from the Registrar of companies)
A partnership can end by agreement, notice, expiry or completion of the venture; the Registrar of Companies does not dissolve partnerships.
Organizations formed mainly by traders and manufacturers to cater for the interest of their members is called
Answer: C (trade association)
A trade association is formed by firms in the same line of business to protect their common interests.
The power of attorney that transfers to a third party the shareholders right to vote is called
Answer: C (proxy)
A proxy is a person (or the form) authorised to vote at a meeting on behalf of a shareholder.
The means by which printed messages sent by cable are recorded is called
Answer: E (telex services)
Telex sends typed messages over lines and prints them out at the receiving teleprinter.
In which of the following would you advise Mr X Y to check and con firm the exact telephone number of a bank located in Ibadan?
Answer: E (Telephone directory)
Telephone numbers of subscribers in a town are listed in the telephone directory.
Which of the following is a function of NIPOST?
Answer: A (Issuing money order)
The postal service sells money orders and postal orders for sending money.
Which of the following is charged by the NIPOST on Postal order?
Answer: C (Poundage)
Poundage is the small fee charged by the post office for issuing a postal order.
Which of the following describes a distinctive symbol title or design that readily identifies the company or its product?
Answer: B (Trade mark)
A trade mark is a registered symbol or design that identifies a firm's products.
One disadvantage of advertising is that it
Answer: A (could be misleading through its false claims)
Adverts sometimes exaggerate or make false claims; the other options are advantages (or untrue).
The activities of a company designed to stimulate consumers by giving them samples, premium, or conducting contests are referred to as
Answer: C (sales promotion)
Free samples, gifts and competitions are sales promotion methods.
A clean bill of lading is so-called because
Answer: D (it has no record of damaged goods)
A clean bill of lading shows the goods were received in good order, with no note of damage or shortage.
The receipt issued by a warehouse keeper for goods taken into the store is called
Answer: D (dock warrant)
A dock (warehouse) warrant is the receipt given for goods stored, and it is a document of title to them.
If a businessman imports stockfish with a view to exporting them to other countries, this form of trade is known as
Answer: B (entrepot trade)
Entrepot (re-export) trade is importing goods in order to export them again.
A trader who wants to buy goods from another country sends
Answer: E (an indent)
An indent is the order sent by an importer to buy goods from abroad.
Which of the following is an invisible export of Nigeria?
Answer: A (Shipping services Nigeria renders to Russia)
An invisible export is a service sold to another country that brings in foreign money; shipping services sold to Russia are such a service.
Most payments in international trade are made by means of
Answer: D (letters of credit)
A letter of credit from the importer's bank guarantees payment, so it is the usual method in international trade.
A deficit in the balance of trade occurs when
Answer: C (visible imports exceed visible exports)
Balance of trade compares visible exports and imports; it is in deficit when visible imports are greater.
The amount of capital with which a new company proposes to be registered is called
Answer: B (nominal capital)
Nominal (authorised or registered) capital is the maximum capital stated in the memorandum when the company is registered.
The part of business capital that does not change its form in the process of production is known as
Answer: D (fixed capital)
Fixed capital (buildings, machines) stays in the same form while it is used again and again.
Which of the following is gilt-edged security?
Answer: A (Government bonds and stocks)
Gilt-edged securities are government stocks and bonds, very safe because the government guarantees them.
Pure profit is the element of profit paid
Answer: D (to an entrepreneur)
Profit is the reward of the entrepreneur for bearing risk; land earns rent, capital interest and labour wages.
The factor of production which is described as wealth set aside for the production of further wealth is called
Answer: C (capital)
Capital is man-made wealth used to produce more wealth.
Buying and selling of goods and services within the geographical areas of a country is called
Answer: C (domestic trade)
Domestic (home) trade takes place within one country's borders.
Which of the following is not an obligation of a common carrier?
Answer: D (Insuring goods in transit)
A common carrier must carry goods safely, by the agreed route, deliver them and be liable for loss; insuring the goods is the owner's choice, not the carrier's duty.
Which of the following conditions may make the manufacturer sell directly to the consumer?
Answer: C (The nature of the commodity involved)
Perishable, bulky or technical goods (by their nature) are often sold straight from the producer to the consumer.
Which of the following is a disadvantage of Hire Purchase to the consumer?
Answer: B (Temptation to buy more than one can pay for)
Hire purchase makes buying easy, so consumers may take on more debt than they can repay.
The three main types of speculators found in the Stock Exchange market are
Answer: B (bulls, bears and stags)
Bulls, bears and stags are speculators; brokers and jobbers are members who deal for others or in shares.
Which of the following functions is performed by the stock exchange market?
Answer: C (Provision of the purchase and sale of existing securities)
The stock exchange is a market for buying and selling existing (second-hand) securities.
Which of the following is not a true characteristic of a Chamber of Commerce?
Answer: B (It is open only to political party members)
A chamber of commerce is open to businessmen, not to political party members.
The management function of evaluating the company's performance to determine whether it is achieving its objective is
Answer: A (controlling)
Controlling means checking actual performance against plans and correcting any shortfall.
Which of the following is primarily responsible for protecting consumers against poor quality goods?
Answer: D (Standards Organization of Nigeria)
The Standards Organisation of Nigeria (SON) sets and enforces quality standards for goods.
Information about new goods is passed on to buyers through
Answer: D (advertising)
Advertising tells buyers about new goods and where to get them.
Which of the following is not a component of a company's marketing mix?
Answer: D (Economic plan)
The marketing mix is product, price, promotion (including public relations) and place (distribution); an economic plan is not part of it.
An important marketing concept is that all company planning and operations should be
Answer: E (customer-oriented)
The marketing concept says a firm should find out and satisfy customers' needs.
Which of the following is the main aim of the Indigenization Decree? To
Answer: D (allow Nigerians greater participation in commercial activities)
The Indigenisation Decree reserved some businesses for Nigerians and gave them bigger shares in others.
Which of the following institutions provides the volume of credit to the public?
Answer: E (Bank)
Banks, through loans and overdrafts, provide most of the credit used by the public.
When a cheque has special crossing it should be
Answer: C (paid into a named bank)
A special crossing names a bank, and the cheque can only be paid into that bank.
Through which of the following does the Central Bank carry out the monetary policy of the country?
Answer: B (bank rate)
By raising or lowering the bank rate the Central Bank makes credit dearer or cheaper, which controls money supply.
Which of the following is not a quality of money?
Answer: C (Accessibility)
Good money must be divisible, portable, recognisable and durable; accessibility is not one of its qualities.
Which of the following is not a means of effecting payments through a current account?
Answer: C (Giro system)
Cheques, standing orders, credit transfers and card payments are drawn on a current account; the giro system (the post office giro) works outside the current account.
A bill holder wishing to dispose of his bills before maturity would be paid
Answer: A (the discounted value of the bill)
Selling a bill before it is due means discounting it: the buyer pays the face value less a discount.
Which of the following is not a necessary seaport facility?
Answer: E (Tarmac)
A tarmac (runway/apron) belongs to an airport, not a seaport.
The main disadvantage of rail transport to the trader is that
Answer: C (it is slow and inflexible)
Trains run only on fixed tracks and timetables and cannot deliver door to door, so rail is slow and inflexible.
A telephone call within a town is called
Answer: E (local call)
A call within the same town or exchange area is a local call; a trunk call is between towns.
The body controlling the installation and maintenance of telephone in Nigeria is
Answer: C (NITEL)
NITEL (Nigerian Telecommunications Ltd) ran the national telephone network at the time.
A teleprinter is used to transmit
Answer: B (typed messages quickly over a long distance)
A teleprinter (telex) sends typed messages quickly over long distances.
Warehousing is one of the functions of the
Answer: A (wholesaler)
The wholesaler buys in bulk and stores goods until retailers need them.
Which of the following price quotations contains the cost price, insurance charges and the cost of transporting the goods?
Answer: E (C.I.F)
C.I.F. stands for cost, insurance and freight.
Any powers exercised by a company in pursuance of objectives not authorized by the Memorandum of Association is regarded as
Answer: C (ultra vires)
Ultra vires means 'beyond the powers' given in the objects clause of the memorandum.
The process whereby a firm buys over the assets and liabilities of another firm is known as
Answer: A (amalgamation)
Taking over another firm's assets and liabilities so that the two become one business is amalgamation (merger/absorption); a holding company only buys controlling shares.
It is advantageous to provide services which are natural monopoly through
Answer: D (public enterprises)
Natural monopolies such as water and electricity are best run by public enterprises so that the public is not exploited.
Use the following information to answer Questions 76-78: A company had an authorized share capital of N30,000. It offered applicants N20,000 share capital out of which the company collected N15,000.
What was the issued capital?
Answer: D (N20,000)
Issued capital is the part of authorised capital offered to the public: N20,000.
Use the following information to answer Questions 76-78: A company had an authorized share capital of N30,000. It offered applicants N20,000 share capital out of which the company collected N15,000.
What was the paid-up capital?
Answer: D (N15,000)
Paid-up capital is the money actually received from shareholders: N15,000.
Use the following information to answer Questions 76-78: A company had an authorized share capital of N30,000. It offered applicants N20,000 share capital out of which the company collected N15,000.
What was the unissued capital?
Answer: D (N10,000)
Unissued capital = authorised − issued = N30,000 − N20,000 = N10,000.
Which of the following is not necessary when ordering goods?
Answer: C (Invoice)
The invoice is sent by the seller after the order has been met, so the buyer does not need it to place an order.
With regard to payment, the amount payable when no deductions are made is called
Answer: A (net price)
'Net' terms mean the full price must be paid, with no discount deducted.
Sending a proforma invoice to a potential customer is
Answer: E (a polite way of refusing to sell on credit)
A pro-forma invoice asks for payment before the goods are sent, which politely refuses credit.
Exchange in the international market which does not involve the use of money as a medium is known as
Answer: B (counter trade)
Counter trade is international barter: goods are exchanged for goods without money.
A shipping company's document detailing the charges for carrying a particular cargo for a specified journey is known as
Answer: B (freight note)
The freight note is the shipping company's bill for carrying the cargo.
Which mode of transport would you suggest as the most suitable for natural gas?
Answer: C (Pipeline)
Gases and liquids such as natural gas and oil are best carried continuously by pipeline.
Which of the following is true of debenture?
Answer: B (Debenture holders receive interest)
Debenture holders are creditors who lend the company money and receive fixed interest, whether or not there is profit.
Which of the following documents contains the complete information on goods available in the wholesaler's warehouse? The
Answer: A (catalogue)
A catalogue lists and describes all the goods a seller has, often with prices.
Which of the following are true of small shops? I. They exist to serve a local market II. They provide personal services to customers III. There is not much opportunity for expansion IV. There is no need to employ paid assistants
Answer: A (I, II and III only)
Small shops serve the neighbourhood, give personal service and have little room to grow; many do employ paid assistants, so IV is not always true.
The essence of marketing is
Answer: A (exchange)
Marketing is about bringing about exchange: giving something of value (goods or services) to get something of value (money) in return, to satisfy both sides.
For continuous existence, a service oriented concern depends on
Answer: C (patronage of consumers)
A service business survives only as long as customers keep using (patronising) its services.
Which of the following is not a problem of distribution, sales and merchandising?
Answer: E (Easy payment for purchases)
Easy payment helps sales; the others are difficulties in getting goods to buyers.
Which of the following is not one of the functions of warehousing?
Answer: A (Goods are available where they are required)
Warehousing makes goods available when they are needed (time utility); making them available where they are needed is the work of transport.
Which of the following shows the financial position of a business on a given date?
Answer: B (Balance sheet)
A balance sheet lists assets, liabilities and capital at a particular date.
The last link in the chain of distribution is the
Answer: C (consumer)
Goods move from producer to wholesaler to retailer and finally to the consumer.
The management function of anticipating the future and determining the best course of action to achieve company objective is
Answer: D (planning)
Planning is looking ahead and deciding what to do to reach the firm's goals.
All advertising campaigns for consumer goods must pay attention to
Answer: C (point of sale)
Point-of-sale displays catch the consumer at the moment of buying, so every consumer-goods campaign needs them.
Which of the following is an insurance principle?
Answer: C (Proximate cause)
Proximate cause is one of the principles of insurance, with utmost good faith, insurable interest, indemnity, contribution and subrogation.
Which of the following is an insurance cover undertaken by the Government for its employees?
Answer: D (Pensions scheme)
Government provides for its workers' old age through the pension scheme.
The treaty establishing ECOWAS on May 28, 1975 was signed by
Answer: A (15 Heads of State)
The Treaty of Lagos (28 May 1975) was signed by the Heads of State of 15 West African countries.
One of the main aims of the ECOWAS is to
Answer: A (foster interchange of goods and services among its members)
ECOWAS aims to promote trade and economic co-operation among member states.
Commerce 2 (answer five questions)
(a) What is Commerce?
(b) State and explain the importance of any five ancillary services to trade
(a) Commerce is all the activities involved in buying and selling goods and services (trade) and the services that help trade (aids to trade) to get goods from producers to consumers.
(b) Any five, each named and explained:
Transport – moves goods from where they are produced to where they are needed (place utility).
Warehousing – stores goods until they are needed, so production can run ahead of demand (time utility) and prices stay steady.
Insurance – covers traders against risks such as fire, theft and accidents, so they can trade with confidence.
Banking/finance – provides loans, overdrafts and safe means of payment such as cheques.
Advertising – informs buyers about goods and persuades them to buy, increasing sales.
Communication – lets buyers and sellers exchange information quickly (telephone, post, internet).
Define commerce in one clear sentence, then explain how each aid removes a hindrance to trade.
Commerce 2 (answer five questions)
(a) Messrs Ola and Musa are both merchants. Ola trades on cash basis only while Musa allows credit. Give four reasons each why Ola insists on cash payment and Musa allows credit sales
(b) Distinguish between cash discount and trade discount
(a) Ola (cash only), any four: avoids bad debts; keeps his capital free for buying new stock (no money tied up in debtors); avoids the cost of collecting debts and going to court; less book-keeping; small capital cannot finance credit.
Musa (credit), any four: to attract more customers and increase sales; to meet competition from rivals who give credit; to clear stock quickly, especially perishable or slow-moving goods; to keep the loyalty of regular customers; he can charge higher prices on credit; he has enough capital to wait for payment.
(b) Trade discount is a reduction from the list price given by one trader to another (e.g. manufacturer to retailer) to allow for profit or for bulk buying; it is deducted on the invoice and not entered in the books.
Cash discount is a reduction allowed to a buyer for paying promptly or within a stated period; it is given at the time of payment and recorded in the cash book.
Give four separate reasons on each side, then contrast the two discounts by purpose and timing.
Commerce 2 (answer five questions)
(a) Explain the meaning of working capital and state its importance
(b) Outline any seven factors which might affect the rate of turnover.
(a) Working capital is current assets minus current liabilities: the funds available to run the business day by day.
Importance: pays for stock, wages and other running costs; shows whether the business can pay its short-term debts (liquidity); allows the firm to take advantage of cash discounts and bulk buying; prevents the business from stopping for lack of funds.
(b) Any seven: price of the goods; nature of the goods (perishable/fast-moving or durable); amount of capital to buy stock; advertising and sales promotion; credit facilities offered; location of the business; competition; season/fashion and changes in taste; efficiency and attitude of sales staff; income of customers; the range of goods stocked; transport and communication facilities.
Give the formula for working capital, then list seven distinct factors briefly.
Commerce 2 (answer five questions)
(a) What is a Bonded Warehouse?
(b) State four ways in which a bonded warehouse may be useful in international trade
(a) A bonded warehouse is a warehouse, approved and supervised by the customs authority, where imported goods on which duty has not been paid are kept until the duty is paid or the goods are re-exported.
(b) Any four: the importer pays duty only when he takes goods out, in instalments, so his capital is not tied up; goods meant for re-export (entrepot trade) can be re-exported without paying duty; goods can be blended, packed, sorted or graded while in bond; buyers can inspect samples there; goods are kept safe under customs watch; government revenue is protected.
Stress that duty is unpaid while goods are in bond.
Commerce 2 (answer five questions)
(a) Give any five advantages of advertising
(b) What are five distinctive merits of television as a medium of advertising?
(a) Any five: informs consumers about new products; increases sales and turnover; makes large-scale production possible and so lowers unit cost; creates employment; helps consumers make choices; educates people on how to use products; builds goodwill and brand loyalty; brings revenue to the media.
(b) Any five: combines sight, sound and movement, so it attracts attention; can demonstrate how a product is used; reaches a very large audience at once, including people who cannot read; adverts can be repeated often; prestige – it gives the product a good image; it reaches people at home when they are relaxed.
In (b) give merits special to television, not general advantages of advertising.
Commerce 2 (answer five questions)
Distinguish between the following
(a) Broker and jobber
(b) Gross profit and net profit
(c) Fixed capital and liquid capital
(d) Factors and del credere agents
(e) F.O.B and C. I. F
(a) A broker buys and sells shares on behalf of the public and earns commission; a jobber dealt in shares on his own account with brokers only and earned a profit (the jobber's turn).
(b) Gross profit = sales − cost of goods sold; net profit = gross profit − expenses (rent, wages, etc.).
(c) Fixed capital is assets used over a long period without changing form (buildings, machines); liquid capital is cash or assets easily turned into cash (cash, bank balance, debtors).
(d) A factor is an agent who has possession of the goods, sells them in his own name and may fix the price; a del credere agent sells for a principal and, for an extra commission, guarantees payment by the buyers he introduces.
(e) F.O.B. (free on board): the price covers all costs until the goods are loaded on the ship; the buyer pays freight and insurance. C.I.F.: the price covers cost of goods, insurance and freight to the port of destination.
Give both sides of each pair so the difference is clear.
Commerce 2 (answer five questions)
(a) What is consumerism?
(b) Give three reasons why consumers need protection
(c) State any five measures taken by government or associations to protect consumers in Nigeria
(a) Consumerism is the organised movement by consumers, government and groups to protect consumers' rights and interests against unfair practices of producers and sellers.
(b) Any three: to prevent sale of fake, adulterated or harmful goods; to stop overcharging and short measures/weights; to stop false and misleading advertisement; to stop hoarding and artificial scarcity; consumers are often ignorant of product quality.
(c) Any five: laws such as the Weights and Measures Act, Food and Drugs Act, Hire Purchase Act and Price Control Act; agencies such as Standards Organisation of Nigeria (SON), NAFDAC and the Consumer Protection Council; price control boards; consumers' associations educating and representing consumers; trade associations' codes of conduct; Advertising Practitioners Council (APCON) controlling adverts; courts giving redress.
Name real Nigerian laws and agencies in (c).
Commerce 2 (answer five questions)
(a) What is meant by the term insurable risk?
(b) Explain any four circumstances when an insured may not be indemnified
(a) An insurable risk is a risk whose chance of loss can be calculated from past statistics, so that an insurer can fix a premium for it (e.g. fire, theft, accident). Losses from speculative risks such as trade losses are not insurable.
(b) Any four, explained: the insured failed to disclose material facts (breach of utmost good faith); the insured has no insurable interest in the property; the loss was not proximately caused by the risk insured against; the loss was deliberately caused by the insured, or is fraudulent; the policy had lapsed or premium was not paid; the loss is excluded by an exemption clause; the insured tries to profit from the loss (indemnity/contribution limit the claim to the actual loss).
Link each circumstance to an insurance principle.
Commerce 2 (answer five questions)
(a) List five types of business units in Nigeria
(b) Give five main differences between a retail co-operative society and a public limited liability company
(a) Sole proprietorship; partnership; private limited liability company; public limited liability company; co-operative society; public corporation (any five).
(b) Any five: aim – co-operative serves members' welfare (cheap goods), company aims at profit; control – co-operative: one member one vote; company: votes according to number of shares; surplus – co-operative shares surplus by patronage (purchases), company pays dividend according to shares held; membership – co-operative open to people with a common interest, shares not sold on the stock exchange, company shares sold to the public on the stock exchange; registration – co-operative registered under Co-operative Societies law, company incorporated under Companies Act; management – committee elected from members vs board of directors; size of capital – company usually much larger.
Present (b) point by point, comparing the two on the same feature.
Commerce 2 (answer five questions)
Describe any five advantages of the Stock Exchange Market
Any five, described: provides a market for buying and selling existing securities, so investors can turn shares into cash (liquidity); helps companies and government raise long-term capital; encourages saving and investment; prices quoted show the value of shares and the health of companies and the economy; protects investors through strict rules for listing and dealing; helps government borrow by selling stocks and bonds; attracts foreign investment.
Five clear advantages, each with a sentence of explanation.