105 questions. Try each one, then open the answer to check yourself and read the explanation.
The major divisions of Commerce are
Answer: C (trade and auxiliaries to trade)
Commerce is divided into trade (buying and selling) and the aids or auxiliaries to trade.
Which of the following statements is not true?
Answer: B (There cannot occur commercial services until goods have been produced)
Commercial services such as banking, insurance and transport are needed before and during production, not only after goods are made.
The three main divisions of production include industrial,
Answer: B (commercial and services)
Production is divided into industrial, commercial and (direct) services.
Which of the following is one of the functions of commerce?
Answer: C (Storage of goods)
Storage (warehousing) is an aid to trade and so part of commerce; the others are industrial activities.
Which of the following does not belong to the extractive industry?
Answer: B (Insuring)
Insuring is a commercial service; farming, mining, drilling and fishing take resources from nature.
Use the information given below to answer Questions 6 & 7:
Opening stock – N1000
Closing stock N9000
Purchases N14,000
The average stock is
Answer: C (N5000)
Average stock = (opening + closing stock) ÷ 2 = (1000 + 9000) ÷ 2 = N5000.
The oldest and commonest form of business in Nigeria is
Answer: C (sole proprietorship)
The one-man business (sole proprietorship) is the oldest and most common business unit.
If a retailer Mr. Aigbojie buys goods manufactured by Adefila Limited from wholesaler Mrs. Jumai, who will prepare the delivery note?
Answer: C (Mr Jumai)
The delivery note is prepared by the seller who sends the goods, here the wholesaler Jumai (printed 'Mr Jumai' in option C).
Which of the following is not a factor of production?
Answer: E (Staffing)
The four factors of production are land, labour, capital and organisation (entrepreneur); staffing is a management task.
In which class of occupation would you place a taxi-driver?
Answer: E (Commercial services)
A taxi driver provides transport, which is one of the commercial services (aids to trade).
The purpose of issuing a credit note is to
Answer: A (correct errors of overcharging)
A credit note reduces what the buyer owes, e.g. when he was overcharged or returned goods.
The exchange of goods for other goods in home trade is known as
Answer: C (barter trade)
Exchanging goods directly for goods without money is barter; counter trade is the international form.
Which of the following advertising media combines the advantages of sound and motion?
Answer: E (Television)
Television gives sound and moving pictures together.
Which of the following is a form of sales promotion?
Answer: D (Offering free samples to customers)
Free samples are a sales promotion method; the others are forms of advertising.
Efforts geared towards establishing and maintaining good image for a company is termed
Answer: C (public relations)
Public relations builds and keeps a good image of the firm in the eyes of the public.
Which of the following is sent as a reply to an inquiry?
Answer: E (Quotation)
A seller replies to a letter of inquiry with a quotation giving prices and terms.
Use the following document to answer Questions 18 and 19:
A. B and Sons Ltd.
Aba, Nigeria
20th October, 1986
AVO Ire Youths Ltd
27 Amadi Road,
Accra Ghana.
Bought of Avo Ire Youths Ltd
Order No 131 — Carriage paid
100 cartons of baby powder at N10 a carton — N1,000.00
200 pairs of lady shoes at N15 a pair — N3,000.00
Total — N4,000.00
E & O. E
Terms 2½% one month
The above trade document is called
Answer: D (an invoice)
'Bought of…' with goods, prices, total, E & O E and terms of payment is an invoice from the seller.
Which of the following statements best describes net profit? The excess of
Answer: A (total revenue over total expenditure)
Net profit is what remains when all expenses are taken from all revenue.
A business is in existence primarily to
Answer: A (make profit)
A private business is set up mainly to earn profit for its owners.
A number of shops under one roof is the feature of a
Answer: C (department store)
A department store has many departments (like separate shops) under one roof and one management.
An agreement between two parties which will give rise to enforceable rights and obligation is known as
Answer: B (a contract)
A contract is an agreement enforceable by law.
Auctions and Tenders become binding when they are
Answer: A (accepted)
A bid at an auction or a tender is only an offer; it binds when accepted (fall of the hammer, award of the tender).
The organized efforts of consumers to protect themselves against the unfair practices of businessmen is called
Answer: B (consumerism)
Consumerism is the movement to protect consumers' rights.
Which of the following is the most suitable means of transporting bulky goods from Lagos to Kaduna? By
Answer: A (Train)
Rail carries heavy, bulky goods cheaply over long inland distances such as Lagos to Kaduna.
Which of the following is the quickest and accurate means of communication?
Answer: D (Telex)
Telex sends a typed, printed message instantly, so it is both fast and accurate.
Which of the following is the safest means of sending a postal order from Lagos to a friend in Jos?
Answer: C (Registered letter)
Money and valuables such as postal orders should be sent by registered post, which gives compensation if they are lost.
One of the objectives of the indigenisation programme of the Federal Government of Nigeria is to
Answer: D (maximize local retention of profits)
By giving Nigerians ownership of businesses, more of the profits stay in the country.
The law which stipulates that labels should give an accurate account of a product is the
Answer: C (trade description act)
The Trade Descriptions Act makes it an offence to describe goods falsely.
Which of the following is not an essential of a contract?
Answer: C (All contracts written out)
Many valid contracts are oral; writing is not essential for most contracts.
One advantage of personal selling is
Answer: B (immediate feedback)
Face-to-face selling lets the seller hear the buyer's reaction at once and answer questions.
Charges paid by a ship for staying at a port beyond agreed sailing time is called
Answer: E (demurrage)
Demurrage is the charge for delaying a ship (or wagon) beyond the agreed time.
Entrepot Trade refers to
Answer: E (importing for re-export)
Entrepot trade is importing goods in order to export them again.
Which of the following could account for a favourable balance of payment?
Answer: D (Higher exports than imports)
When exports bring in more than imports cost, more money flows into the country, giving a surplus.
Which of the following is not part of the facilities provided by the Nigerian Ports Authority?
Answer: C (Collection of customs duties)
Customs duties are collected by the Customs Service, not the Ports Authority.
The main purpose of branding is to
Answer: B (differentiate goods from other similar goods made by other producers)
A brand name or mark sets a product apart from similar products of other firms.
An individual who makes the final use of goods and services provided by a firm is the
Answer: C (consumer)
The consumer is the final user of goods and services.
The Organisation of Petroleum Exporting Countries (OPEC) is an example of a
Answer: A (cartel)
OPEC members agree on output quotas to influence oil prices, which is how a cartel works.
When a business is insolvent it may result in
Answer: C (liquidation)
A business that cannot pay its debts may be wound up (liquidated) and its assets sold to pay creditors.
In insurance the term Uberrimae fidei stands for
Answer: A (utmost good faith)
Uberrimae fidei is Latin for utmost good faith.
Fidelity guarantee is an insurance cover against loss arising from
Answer: C (dishonest staff)
Fidelity guarantee insures an employer against fraud or theft by his employees.
Which of the following is a type of marine insurance?
Answer: B (Freight)
Marine insurance covers hull, cargo and freight.
The word Ltd written after the name of a company means that
Answer: C (members are liable to the extent of their holding)
Limited liability means a shareholder can lose only the amount he invested in shares.
Which of the following is a public corporation? The
Answer: B (Nigerian Ports Authority)
The Nigerian Ports Authority is set up and owned by government by law; the others are private bodies.
Which of the following is not required in a Memorandum of Association? The
Answer: C (names of the Board of Directors)
The memorandum contains the name, registered office, objects, liability and capital clauses; directors are not listed in it.
The amount paid by the insurance company to the insured upon giving up his policy is called
Answer: A (Surrender value)
Surrender value is paid when a life policy is given up before it matures.
The amount paid by the assured to the insurer is called
Answer: B (premium)
The premium is the regular payment made by the insured for cover.
With the exception of life assurance and personal accident insurance, contracts of insurance are contracts of
Answer: B (indemnity)
Most insurance only restores the insured to his position before the loss (indemnity); a life cannot be valued, so life and personal accident policies are not indemnity contracts.
Which of the following is a function of money?
Answer: C (Standard for deferred payment)
Money is a standard for deferred payment; durability, portability and divisibility are qualities, not functions.
An overdraft is usually granted to a
Answer: C (current account holder)
An overdraft lets a current account holder draw cheques for more than his balance.
Which of the following documents may be used when an importer requires a longer period of credit before settlement?
Answer: E (Bill of Exchange)
A (term) bill of exchange lets the importer pay at a future date, e.g. in 90 days.
The value of anything expressed in monetary terms is the
Answer: B (price)
Price is value stated in money.
Which of the following is not a means of making payment to a businessman?
Answer: E (Statements)
A statement of account only shows what is owed; it is not a means of payment.
The production of goods in anticipation of demand is made possible by
Answer: B (Warehousing)
Goods made ahead of demand must be stored in warehouses until they are needed.
Total sales less total returns inwards is called
Answer: E (net sales)
Net sales (turnover) = sales − returns inwards.
Which of the following currencies does/do not belong to any country within the ECOWAS?
Answer: E (Kwasha and Shilling)
Naira (Nigeria), Dalasi (Gambia), Cedi (Ghana) and Leone (Sierra Leone) are ECOWAS currencies; kwacha and shilling are used in east and southern Africa.
A memorandum of association is a document
Answer: D (defining a company's relationship with the public)
The memorandum governs the company's dealings with the outside world; the articles regulate its internal affairs.
Which of the following is not a means of raising capital by a promoter?
Answer: A (Goodwill)
Goodwill is the value of a business's reputation; it does not by itself raise cash for a new business.
Which of the following is a feature of co-operative society?
Answer: D (Democratic control and management)
Co-operatives are run democratically: one member, one vote.
A company has recently advertised an issue of one million ordinary shares of 50 kobo at 65 kobo per share. When the issue is fully paid the company will collect
Answer: C (N650,000.00)
The issue price is what is paid: 1,000,000 × 65k = 65,000,000k = N650,000.
A private limited liability company differs from a public limited liability company because
Answer: A (of its inability to offer shares to the public)
A private company cannot invite the public to buy its shares; a public company can.
Which of the following is not the function of a small retailer?
Answer: E (Selling in large quantities)
Retailers sell in small quantities; selling in large quantities is the wholesaler's job.
A speculator in the Stock Exchange Market who sells securities in expectation of a fall in their prices is called
Answer: C (a bear)
A bear sells now, hoping to buy back more cheaply when prices fall.
An association formed by tyre manufacturers to safeguard and promote their interests is known as a
Answer: E (trade association)
Firms in the same trade form a trade association to protect their common interests.
The reward of capital is
Answer: B (interest)
Land earns rent, labour wages, capital interest and the entrepreneur profit.
To inform the buyer that the goods are in transit, the seller sends him
Answer: D (an advice note)
An advice note tells the buyer that the goods have been sent.
The main source of capital for a limited liability company is
Answer: E (share subscriptions)
A company raises most of its capital by selling shares.
The authorised capital of a company is also referred to as its
Answer: D (nominal capital)
Authorised, nominal and registered capital all mean the maximum capital stated in the memorandum.
Which of the following is an aspect of the marketing concept?
Answer: C (Consumer orientation)
The marketing concept puts the consumer's needs first.
A study to discover consumer's preferences and needs is called
Answer: C (market research)
Market research collects information about what consumers want.
A partnership agreement specifying the relationship amongst partners is called
Answer: D (Partnership Deed)
The partnership deed sets out the partners' rights and duties.
What is planning?
Answer: E (Anticipating the future and making decisions for future action to achieve company's objective)
Planning is looking ahead and deciding in advance what to do; the others describe co-ordinating, communicating, directing and organising.
Management can be defined as
Answer: A (getting things done through people)
A manager achieves the firm's aims by directing the work of other people.
Money spent for the day-to-day running of a business is called
Answer: B (working capital)
Working capital pays for day-to-day expenses such as stock and wages.
Which of the following is not a fixed asset of a business?
Answer: A (Sundry debtors)
Debtors are current assets because they will soon be turned into cash.
The main purpose for establishing a public corporation is to
Answer: C (provide essential services)
Public corporations provide essential services such as water and electricity at fair prices.
A document that regulates the internal operations of a company is known as
Answer: B (Articles of association)
The articles of association are the internal rules of a company.
Which of the following is not a reason for imposing a tariff? To
Answer: C (encourage imports)
A tariff makes imports dearer, so it discourages imports.
Customs Duties are
Answer: E (import tariffs)
Customs duties are taxes on imported (and some exported) goods, i.e. tariffs; excise duties are on home-made goods.
Which of the following documents transfers title to goods?
Answer: C (Bill of lading)
The bill of lading is a document of title: whoever holds it can claim the goods.
The purchase of one company by another is called
Answer: B (merger)
When one company buys another and they become one business, it is a merger (takeover).
The main object of a cartel agreement is to control
Answer: A (output to maintain price)
Cartel members limit output so as to keep prices up.
Which of the following concepts is concerned with determining the business objectives and how they can be achieved?
Answer: A (Planning)
Planning sets objectives and decides how to reach them.
A holding company assumes control of its subsidiaries through
Answer: C (majority shareholding)
A holding company controls other companies by owning more than half of their voting shares.
The accomplishment of a company's objective by guiding and motivating subordinates is known as
Answer: E (Directing)
Directing means guiding, leading and motivating staff to do their work.
The taking over by state of ownership and control of certain business enterprises is known as
Answer: B (nationalization)
Nationalisation is government taking over ownership of private businesses.
The concept of marketing as a process which begins and ends with the needs and wants of the consumer rather than those of the organization is called
Answer: B (consumer orientation)
Consumer orientation means everything the firm does starts and ends with the consumer's needs.
Which of the following is not an advantage of advertising? It
Answer: D (improves the quality of products)
Advertising tells people about products and boosts sales, but it does not by itself make products better.
Which of the following is the acceptable classification of warehouse?
Answer: E (Private, public and bonded warehouse)
Warehouses are classed as private (owned by a firm), public (rented out) and bonded (for goods awaiting customs duty).
A cheque made payable to "bearer"
Answer: C (can be negotiated for cash by any holder)
A bearer cheque is paid to whoever presents it, without endorsement.
Which of the following arguments are in favour of establishing ECOWAS? I. The countries concerned would be able to expand market beyond their territorial boundaries II. Currency union is the final objective of member countries III. Capital movement is not allowed across the boundaries IV. Free movement across the borders of members would be allowed
Answer: C (I, II and IV only)
A wider market, a common currency and free movement of people support ECOWAS; banning capital movement would not.
Which of the following countries is not a member of ECOWAS?
Answer: E (Cameroun)
Cameroon is in Central Africa and belongs to ECCAS/CEMAC, not ECOWAS.
The major dealers on a stock exchange market are the
Answer: B (Jobbers)
Jobbers dealt in shares on their own account and made the market; brokers act as agents for the public.
A trade document signed by a representative of the country to which goods are being sent is called
Answer: E (consular invoice)
A consular invoice is certified by the consul (representative) of the importing country.
Which of the following is not an element of the marketing mix?
Answer: D (Merchandising)
The marketing mix is the 4 Ps: product, price, promotion and place (distribution).
Retail outlets which sell from specialised vans are
Answer: E (mobile shops)
Mobile shops are vans that carry goods to customers.
Commerce 2 (answer five questions)
Akani and Sule are sole proprietors. Akani proposed that their businesses be merged to form partnership
(a) Explain to Sule how such a partnership would be to their mutual benefit
(b) State reasons why Sule might be reluctant to accept the proposal.
(a) Benefits, explained: more capital pooled from two owners; joint decisions and wider skills/experience; division of work and specialisation; losses and risks shared; easier to borrow (two people's security); business can expand and compete better; continuity when one partner is ill or away.
(b) Reasons for reluctance: loss of sole control – decisions must be shared; profits must be shared; unlimited liability – he may lose private property because of Akani's actions; partners are bound by each other's acts; disagreements may arise; partnership may end on death, bankruptcy or withdrawal of a partner; partner's share cannot be transferred without consent; loss of privacy of his business affairs.
Write from the point of view of the two sole traders, contrasting with sole proprietorship.
Commerce 2 (answer five questions)
(a) Explain the following terms: (i) bearer cheque (ii) open cheque; (iii) order cheque; (iv) crossed cheque
(b) Explain any six factors which a bank manager would take into consideration in evaluating application for a loan
(a)(i) Bearer cheque: payable to whoever presents it (the bearer); no endorsement is needed.
(ii) Open cheque: an uncrossed cheque that can be cashed over the counter.
(iii) Order cheque: payable only to the named payee or to whoever he orders by endorsing it.
(iv) Crossed cheque: has two parallel lines across its face, so it cannot be cashed over the counter and must be paid into a bank account.
(b) Any six: character and integrity of the borrower; purpose of the loan (viability of the project); capacity to repay – income/cash flow; collateral/security offered; amount and duration of the loan; past record with the bank (account operation); borrower's own capital in the business; government credit guidelines; state of the economy and the industry.
Define each cheque precisely; in (b) explain each factor briefly.
Commerce 2 (answer five questions)
State the functions of: (a) NIPOST (b) NITEL
(a) NIPOST: collects, sorts and delivers letters and parcels; sells stamps, postal orders and money orders; registered post, recorded and express delivery; private mail bags and boxes, poste restante; courier (EMS) services; agency services e.g. collecting payments; philatelic services.
(b) NITEL: provides local, trunk and international telephone services; installs and maintains telephone lines and exchanges; telex and telegram services; leased lines and data transmission; directory/enquiry services; public call boxes; links Nigeria to other countries by satellite and cable.
List several clear functions for each body.
Commerce 2 (answer five questions)
(a) Distinguish between nationalization and indigenisation
(b) State any five advantages of nationalization and two objectives of indigenisation
(a) Nationalisation: government takes over ownership and control of private businesses, usually with compensation. Indigenisation: transfer of ownership and control of businesses from foreigners to citizens of the country (private Nigerians), e.g. by the Indigenisation Decrees.
(b) Advantages of nationalisation (any five): provides essential services at fair prices; avoids exploitation by private monopolies; strategic industries kept under national control; profits go to the government; economies of scale; employment and even regional development; investment in projects too large or unprofitable for private firms.
Objectives of indigenisation (any two): give Nigerians greater participation and control in the economy; keep more profit within the country; develop local entrepreneurs and managers; reduce foreign domination.
Make the distinction in terms of who takes over (government vs citizens).
Commerce 2 (answer five questions)
(a) What is marketing?
(b) Explain any six reasons why a manufacturer may sell directly to consumers
(a) Marketing is the process of identifying consumers' needs and getting goods and services that satisfy them to the consumers at a profit; it includes market research, product planning, pricing, promotion and distribution.
(b) Any six: goods are perishable (bread, fish); goods are technical and need demonstration/after-sales service; goods made to order; to cut middlemen's profit and sell cheaper; to keep direct contact with consumers and get feedback; few customers who are close by; to control the price and the way goods are displayed; manufacturer has his own retail outlets and enough capital; middlemen unwilling to stock the product.
Six distinct reasons, each explained.
Commerce 2 (answer five questions)
(a) What are the functions of the Nigeria Export Promotion Council (NEPC)?
(b) What are the steps an exporter would take to export goods from the receipt of an indent to the shipment of the goods?
(a) NEPC: promotes non-oil exports; gives information on foreign markets and export procedures; organises trade fairs and missions abroad; administers export incentives and grants; registers and advises exporters; trains exporters; helps improve the quality and packaging of export goods.
(b) Steps: receive the indent and check the importer's credit/letter of credit; obtain export permit/registration and complete export documents (e.g. NXP form); obtain or produce the goods, pack and mark them; book shipping space with the shipping company (or forwarding agent); arrange marine insurance (if CIF); obtain certificate of origin, consular invoice and inspection certificate; prepare shipping note and clear goods through customs; goods loaded – obtain the bill of lading; send invoice, bill of lading, insurance certificate and other documents to the importer or his bank to receive payment.
Present (b) in the correct order.
Commerce 2 (answer five questions)
(a) What is delegation of authority?
(b) State four advantages of delegation of authority
(a) Delegation of authority is when a manager gives a subordinate the right to carry out certain tasks and take decisions on his behalf, while the manager remains ultimately responsible.
(b) Any four: reduces the workload of top managers so they can focus on planning; quicker decisions; trains and develops subordinates for higher posts; motivates staff and raises morale; uses the special skills of subordinates; ensures work continues when the manager is absent.
Mention that responsibility cannot be fully delegated.
Commerce 2 (answer five questions)
(a) Explain each of the following: (i) Chamber of Commerce (ii) Trade Association
(b) Give any four functions each of a Chamber of Commerce and a Trade Association
(a)(i) A chamber of commerce is a voluntary association of businessmen of all kinds (traders, manufacturers, bankers, etc.) in an area, formed to promote and protect their common business interests.
(ii) A trade association is a voluntary association of firms in the same line of business (e.g. tyre manufacturers) formed to protect their common interests.
(b) Chamber of commerce (any four): represents members' views to government; provides commercial information and publishes journals; organises trade fairs and exhibitions; issues certificates of origin; settles disputes by arbitration; promotes trade missions and foreign contacts; trains members.
Trade association (any four): fixes standards and quality; may fix prices/terms of trade; negotiates with trade unions; represents the trade to government; carries out research; shares information among members; settles disputes between members; advertises the trade.
Distinguish membership: all trades (chamber) vs one trade (association).
Commerce 2 (answer five questions)
(a) What is marketing concept?
(b) Explain the four elements of the marketing mix
(a) The marketing concept is the business philosophy that a firm achieves its goals (profit) by finding out the needs and wants of consumers and satisfying them better than competitors – the consumer comes first.
(b) Product – designing the right goods (quality, features, packaging, branding) to meet consumers' needs.
Price – setting a price consumers will pay that also covers cost and gives profit, taking competitors' prices into account.
Place (distribution) – getting goods to where consumers can buy them through suitable channels and transport.
Promotion – informing and persuading consumers through advertising, personal selling, sales promotion and public relations.
The 4 Ps: product, price, place, promotion.
Commerce 2 (answer five questions)
(a) Give the meaning of each of the following: (i) balance of trade (ii) balance of payments
(b) Describe four ways by which an adverse balance of payments may be corrected.
(a)(i) Balance of trade is the difference between the value of a country's visible exports and visible imports over a period.
(ii) Balance of payments is the record of all a country's transactions with the rest of the world over a period – visible and invisible trade and capital movements.
(b) Any four, described: restrict imports by tariffs, quotas or bans; promote exports through incentives and export promotion; devalue the currency so exports are cheaper and imports dearer; exchange control to limit foreign spending; borrow from abroad or the IMF / use reserves; reduce government spending abroad; encourage foreign investment and tourism; encourage local production of imported goods (import substitution).
Explain how each measure cuts payments out or brings payments in.