108 questions. Try each one, then open the answer to check yourself and read the explanation.
Which of the following is a commercial service?
Answer: A (Transporting)
Transport is an aid to trade; the others are industrial activities (or, for tailoring, a manufacturing craft).
The tendency for firms and individuals to concentrate on the activity which is of most advantage of them is known as
Answer: D (specialization)
Specialisation means concentrating on the work one does best.
The major divisions of commerce are
Answer: C (trade and aids to trade)
Commerce consists of trade and the aids (auxiliaries) to trade.
The sole purpose of production is
Answer: C (consumption)
Goods and services are produced so that people can consume them and satisfy their wants.
Commerce developed as a result of
Answer: C (specialization)
When people specialise they produce more of one thing than they need and must exchange it, which gives rise to commerce.
Which of the following is concerned with obtaining raw materials from their natural locations?
Answer: A (Extractive industry)
Extractive industry takes raw materials from land, sea or underground.
In which of the following classes of occupation would you place a Commerce teacher?
Answer: C (Direct Service)
Teachers render personal services directly to people, so they are in direct services.
Turnover may be increased by
Answer: B (advertising and cutting prices)
Advertising attracts buyers and lower prices make them buy more, so sales (turnover) rise.
The advantage road transport has over other means of transport is that
Answer: A (intermediate terminal handling is eliminated by door-to-door delivery)
Only road transport can carry goods from the seller's door to the buyer's door without reloading.
In winding-up a company, the assets of the company are vested in the hands of the
Answer: B (liquidator)
The liquidator takes charge of the assets, sells them and pays the creditors.
When more shares are applied for than are offered for sale the offer is said to be over
Answer: C (subscribed)
An issue is oversubscribed when applications exceed the shares offered.
Which of the following deals with the problems involved in the selling of a particular product?
Answer: A (Market research)
Market research studies the market for one particular product; marketing research covers the whole of a firm's marketing.
If a seller discovers that he had undercharged a buyer, which of the following documents will he use to correct the error?
Answer: D (A debit note)
A debit note increases the amount the buyer owes, correcting an undercharge.
The Nigerian Television Authority is an example of a
Answer: E (public corporation)
NTA was set up by law and is owned by the federal government, so it is a public corporation.
The ship owner's receipt for the goods accepted for carriage in a ship is called
Answer: E (bill of lading)
The bill of lading is issued by the shipowner as a receipt for the goods, evidence of the contract of carriage and document of title.
Demurrage is a charge for
Answer: C (exceeding lay days)
Demurrage is charged when a ship is kept beyond the agreed lay days for loading or unloading.
Activities aimed at creating an image for an organization are known as
Answer: C (public relation)
Public relations builds a good image of the organisation.
Patent Right gives the owner the exclusive right to
Answer: B (his invention)
A patent gives an inventor the sole right to make and sell his invention for a period.
The method by which insurance companies spread their risks to other insurance companies is called
Answer: C (re-insurance)
Re-insurance passes part of a large risk to other insurers.
When a number of insurers are liable under one given policy, the principle of insurance that applies is
Answer: D (contribution)
Under contribution, insurers covering the same risk share the loss between them.
The interplay of such variables as product, price, distribution and promotion is known as
Answer: C (the marketing mix)
Product, price, place and promotion together make up the marketing mix.
Which of the following refers to sales promotion?
Answer: B (Offering free samples of products)
Free samples are a sales promotion method.
When shares are sold Ex-div it means that the
Answer: D (seller has the right to the next dividend)
Ex-dividend means 'without dividend': the buyer does not get the coming dividend, the seller keeps it.
The market for short term loans is known as the
Answer: C (money market)
The money market deals in short-term funds; the capital market in long-term funds.
A house insured against damage by flood was burnt down and the owner had no claims. Which of the following prevented him from making any claim? The principle of
Answer: D (proximate cause)
The loss was caused by fire, not by the flood that was insured, so under proximate cause there is no claim.
The practice of selling goods in foreign markets at less than the cost price is known as
Answer: E (dumping)
Dumping is selling goods abroad below cost (or below the home price).
One of the reasons for nationalization of industries is
Answer: D (to control the performance of strategic industries)
Government takes over strategic industries such as oil and power so that they are run in the national interest.
The value stated on the share certificate as opposed to the current value is called its
Answer: C (nominal value)
The nominal (par or face) value is printed on the certificate; the market value changes daily.
The main criticism of advertising is that it
Answer: C (increases the price of the products)
The cost of advertising is added to the price that consumers pay.
The state of scientific knowledge and production process obtainable in a country is part of the
Answer: D (technological environment of business)
Science, technology and production methods make up the technological environment.
The Act designed to reserve certain businesses exclusively for Nigerians is known as the
Answer: C (Nigerian Enterprises Promotion Act)
The Nigerian Enterprises Promotion (Indigenisation) Act reserved some businesses for Nigerians.
Which of the following involves gathering and analysing information about demand, consumer wants and new products?
Answer: B (Market research)
Market research collects and analyses information about consumers and demand.
Which of the following must be submitted to the Registrar of Companies before a company is incorporated?
Answer: C (Articles of Association and Memorandum of Association)
The memorandum and articles are filed for registration; the certificate of incorporation is what the Registrar issues afterwards.
Which of the following is a feature of Co-operative Societies?
Answer: C (All members have equal votes during meetings)
Co-operatives are democratic: one member, one vote.
Workers involved in mining, quarrying or fishing are engaged in
Answer: B (primary production)
Extracting resources from nature is primary production.
Which of the following is not a method of trade restriction?
Answer: B (Stock exchange)
The stock exchange is a securities market, not a way of restricting trade.
When a customer writes a cheque to withdraw cash from his current account, he is both the
Answer: A (drawer and the payee)
He writes the cheque (drawer) and receives the money (payee); the bank is the drawee.
The technique of controlling money supply through the purchase and sale of government bonds is called
Answer: C (open market operations)
Open market operations are the central bank's buying and selling of government securities.
The insurance cover on property being shipped from one location to another comes under
Answer: C (marine insurance)
Goods carried by sea are covered by marine (cargo) insurance.
Debentures are part of a company's
Answer: D (loan capital)
Debentures are loans to the company, not shares.
An application form which is filled by anyone taking out an insurance policy is called
Answer: C (a proposal form)
The proposal form gives the insurer the facts about the risk.
A customer is granted an overdraft by the bank subject to his operating a
Answer: D (current account)
Overdrafts are given on current accounts.
The total assets acquired for permanent use in a business concern is called
Answer: B (fixed assets)
Fixed assets are kept for long-term use, not for resale.
Which of the following is not provided by NIPOST?
Answer: D (Telegram)
Telegrams were sent by NITEL, the telecommunications company, not the postal service.
A service provided by the NITEL through which one can dial any number one wants whether it is a local, trunk or overseas is called the
Answer: C (Subscriber's Dialling System)
Subscriber dialling (subscriber trunk dialling) lets a subscriber dial local, trunk and overseas numbers himself without an operator.
The two main categories of marine losses are
Answer: A (total loss and partial loss)
Marine losses are either total (actual or constructive) or partial (average).
Restoring the insured to his former position by the insurer in the event of his suffering the specified loss is called
Answer: C (indemnity)
Indemnity puts the insured back where he was before the loss, no better off.
The manufacturer would by-pass the wholesaler and the retailer in the distribution of his products if the
Answer: D (the product make-up and use are highly technical)
Technical goods need expert explanation and after-sales service, so the maker sells them directly.
Which of the following is statutorily responsible for providing information and incentives required to increase the volume of Made-in-Nigeria goods in foreign markets?
Answer: B (Nigeria Export Promotion Council (NEPC))
NEPC was set up by law to promote Nigerian non-oil exports.
Which of the following is a retail outlet to eliminate the profits of middlemen?
Answer: B (Consumer co-operative)
Consumer co-operatives buy direct from producers and share the surplus among members, cutting out middlemen's profit.
The use of catalogues is associated with
Answer: E (mail-order business)
Mail-order firms sell by sending catalogues to customers.
A document which a retailer sends to a wholesaler requesting him to supply certain items is called
Answer: D (an order)
An order asks the seller to supply the stated goods.
When a seller sends a pro-forma invoice to a potential customer, it is
Answer: E (an indication that credit will not be granted)
A pro-forma invoice asks for payment before the goods are sent, i.e. no credit.
A merchant wholesaler is one who
Answer: A (takes title to the goods he sells)
A merchant wholesaler buys the goods and owns them before reselling; an agent does not.
A trade deficit means that
Answer: B (exports are less than imports)
A trade deficit means visible imports are greater than visible exports.
A document issued by the government authorizing a person to take goods out of the country for sale abroad is known as
Answer: A (export licence)
An export licence is government permission to export goods.
The naira is a legal tender because it is
Answer: B (backed by law)
Legal tender is money that the law says must be accepted in payment of debts.
Which of the following enhances the lending powers of commercial banks?
Answer: D (Decreased liquidity ratio)
If banks must keep less of their deposits as liquid assets, they have more to lend.
A 'bear' on the stock exchange sells shares in anticipation of
Answer: A (a fall in price)
A bear sells now expecting to buy back cheaper after prices fall.
When a share is bought at a rate below the par value, it is said to have been sold
Answer: A (at a discount)
Below par (nominal value) is at a discount; above par is at a premium.
Which of the following is a function of marketing?
Answer: D (distribution)
Distribution (getting goods to buyers) is a marketing function.
The principle of subrogation in insurance means that
Answer: E (the insurer takes the place of the insured in respect of claims due from third parties)
After paying a claim the insurer takes over the insured's rights against anyone who caused the loss.
Which of the following are the important functions in any organization?
Answer: B (Planning, Organizing, Controlling and Motivating)
Planning, organising, motivating (directing) and controlling are the basic functions of management in any organisation.
Which of the following are elements of the economic environment of business?
Answer: D (inflation and unemployment)
Inflation and unemployment are economic conditions; government policy and politics belong to the political environment, norms and family to the social environment.
Details of a new share for which the public is being invited to subscribe are contained in the
Answer: D (Prospectus)
A prospectus invites the public to buy shares and gives details of the issue.
Which of the following accompanies goods supplied and forms a receipt when signed by the consignee?
Answer: C (Delivery note)
The delivery note travels with the goods; the buyer signs a copy as a receipt.
A cover note is a
Answer: D (temporary insurance certificate)
A cover note gives temporary cover until the policy is issued.
In nationalized industries, losses are borne by the
Answer: A (tax payers)
Public corporations are funded by government, so their losses fall on the public through taxes.
The main aim of ECOWAS is the
Answer: D (promotion of economic and cultural interaction)
ECOWAS was formed to promote economic co-operation and integration among West African states.
The consumer is always right. This describes the doctrine of
Answer: C (consumer sovereignty)
Consumer sovereignty means consumers' choices decide what is produced.
Equity interest in a company is represented by
Answer: E (ordinary shares)
Ordinary shareholders (equity) own the company and bear the most risk.
An organization chart shows the
Answer: A (relative position of employees in a firm)
An organisation chart shows the positions and lines of authority in a firm.
A bill of exchange to which documents of title are attached is known as
Answer: C (documentary bill)
A documentary bill has the shipping documents (bill of lading etc.) attached.
Which of the following policies could be taken for a guaranteed life income?
Answer: C (Annuity)
An annuity pays a fixed income every year for life in return for a lump sum.
Buildings, machines and motor vehicles used for purposes of production are examples of
Answer: D (fixed assets)
Assets kept for long-term use in the business are fixed assets.
The nominal capital of a company is the same as
Answer: A (authorized capital)
Nominal, authorised and registered capital all mean the maximum capital a company may issue.
A document certifying that goods have been entirely or largely manufactured in the country stated is called
Answer: A (certificate of origin)
A certificate of origin states where the goods were made.
A facility used for impressing pre-paid postage rate on letters is called
Answer: E (franking machine)
A franking machine prints the postage paid on letters instead of stamps.
Which of the following ensures that manufactured goods conform to the required standard?
Answer: B (Standards Organization of Nigeria)
SON sets and enforces standards for manufactured goods.
Which of the following is not a function of money?
Answer: C (Determinant of exchange rate)
The functions of money are medium of exchange, unit of account, store of value and standard of deferred payment.
Which of the following is mostly used in Nigeria for settling business transactions?
Answer: D (Bank notes and coins)
Most Nigerian business transactions (at the time) were settled in cash.
When an order cheque is endorsed it becomes
Answer: A (a bearer cheque)
A blank endorsement (payee signs the back) makes an order cheque payable to whoever holds it.
Which of the following requires acceptance by the debtor to make it valuable?
Answer: D (Bill of exchange)
A bill of exchange is drawn by the creditor and becomes binding when the debtor accepts it by signing.
Which of the following is not a reason for imposing customs duty? The need to
Answer: D (decrease the volume of world trade)
Duties may reduce trade, but that is not the reason they are imposed.
Which of the following was the chief means of transport during the Trans-Saharan Trade?
Answer: C (Camels)
Camels could cross the desert, so they carried trans-Saharan goods.
Terms of payments are quoted on the
Answer: E (invoice)
The invoice states the amount due and terms of payment, e.g. 2½% one month.
Who among the following is not a middleman?
Answer: D (consumer)
The consumer is the end of the chain, not a go-between.
The most important factor influencing the form of a business unit is
Answer: C (the amount of capital available)
How much capital is needed and available largely decides whether one starts a sole trade, partnership or company.
The system of parting with authority but not responsibility is known as
Answer: C (delegating)
Delegation passes authority to a subordinate while the manager stays responsible.
That part of the money in circulation not backed by gold is known as
Answer: B (fiduciary issue)
The fiduciary issue is currency backed only by government securities and trust, not by gold.
A document sent to a customer at regular intervals to enable him know his indebtedness to his supplier is known as
Answer: C (statement)
A statement of account sums up dealings and shows the balance owed, usually monthly.
Who is liable for the contracts entered into by the agent on behalf of his principal? The
Answer: B (principal)
An agent acting within his authority binds the principal, who is liable.
An agreement whereby the seller transfers the title to goods at a price is called
Answer: A (contract of sale)
A contract of sale transfers ownership of goods for money.
The reward of land as a factor of production is known as
Answer: B (rent)
Land earns rent.
The outright purchase of one company by another is called
Answer: D (acquisition)
When one company buys another outright it is an acquisition (takeover).
The form of advertising which aims at winning the market for one particular brand is known as
Answer: D (competitive advertisement)
Competitive advertising promotes one brand against rival brands.
The marketing concept which begins and ends with satisfying the needs and wants of the consumer is called
Answer: B (consumer orientation)
Consumer orientation puts the consumer's needs at the start and end of the firm's activities.
The relationship between a country's total receipts and payments in international trade in a given year is called
Answer: B (balance of payments)
The balance of payments compares all receipts from and payments to other countries.
Commerce 2 (answer five questions)
(a) In what ways does transport aid trade?
(b) Explain the following in connection with water transport (i) freight (ii) charter party
(a) Any five: moves raw materials to factories and finished goods to markets; creates place utility – goods reach where they are needed; widens the market, making large-scale production possible; makes specialisation and division of labour possible; helps stabilise prices by moving goods from areas of surplus to areas of shortage; makes international trade possible; carries people (traders, workers) and creates employment.
(b)(i) Freight is the charge paid to a shipowner (carrier) for carrying goods; it also refers to the goods carried. If a charterer does not use all the space hired he pays 'dead freight'.
(ii) Charter party is the written contract by which a shipowner hires out a whole ship or part of it to a charterer, for a voyage (voyage charter) or a period (time charter); it states the ship, cargo, ports, freight and other terms.
Explain each way transport helps trade; define both terms precisely.
Commerce 2 (answer five questions)
Describe five measures each which government may take to: (a) restrict imports (b) promote exports.
(a) Restrict imports (any five): tariffs/customs duties to make imports dearer; import quotas limiting quantities; outright bans/embargoes; import licences; exchange control limiting foreign currency for imports; devaluation of the currency; advance deposits on imports; encouraging local production of substitutes.
(b) Promote exports (any five): export incentives, subsidies and tax relief; export credit and credit guarantee schemes; removal or reduction of export duties; export promotion council (NEPC) giving information and training; trade fairs, exhibitions and trade missions abroad; improving quality and standards of export goods; trade agreements with other countries; export processing zones; devaluation making exports cheaper.
Five clearly described measures on each side.
Commerce 2 (answer five questions)
Mention and explain five functions performed by the Central Bank of Nigeria showing how they facilitate commercial activities
Any five, each with how it helps commerce: sole issue of currency – provides a uniform, acceptable means of payment; banker to the government – handles government accounts, loans and payments that keep the economy running; banker to commercial banks – holds their reserves and runs the clearing house so cheques are settled quickly; lender of last resort – lends to banks in difficulty, so depositors keep confidence; controls credit and money supply (bank rate, open market operations, reserve and liquidity ratios) – keeps prices stable for traders; manages foreign exchange and external reserves – makes foreign exchange available for imports; supervises and regulates banks – ensures a sound banking system; advises government on economic policy; develops the money and capital markets.
Name each function and link it to trade or business.
Commerce 2 (answer five questions)
'Business relationships are deeply rooted in the law of contract'
(a) What is a contract?
(b)(i) State the essential elements of a valid contract (ii) Briefly discuss any three of them
(a) A contract is an agreement between two or more parties that the law will enforce, creating legal rights and obligations.
(b)(i) Offer; acceptance; consideration; intention to create legal relations; capacity of the parties; legality of object; genuine consent (free agreement); possibility of performance; certainty of terms; form where required by law.
(ii) Any three discussed, e.g.: Offer and acceptance – one party makes a definite offer and the other accepts it unconditionally; a counter offer is a rejection. Consideration – each party must give something of value in return (price, goods, a promise). Capacity – parties must be legally able to contract (not minors, insane or drunk persons). Legality – the object must be lawful. Intention – both must intend the agreement to be legally binding (not a social arrangement).
List the elements, then explain three in detail.
Commerce 2 (answer five questions)
Mention and explain five ways in which a business discharges its social responsibilities to the society.
Any five, explained: to consumers – good quality, safe goods at fair prices, honest advertising and labelling, after-sales service; to employees – fair wages paid on time, good and safe working conditions, training, fair promotion; to the community – amenities such as roads, water, schools, scholarships, sponsoring sports and culture; to the environment – avoiding pollution, proper waste disposal, restoring land; to government – obeying laws and paying taxes; to shareholders/owners – fair returns, accurate information, protecting their investment; to creditors and suppliers – paying debts promptly.
Name the group, then say what the business does for it.
Commerce 2 (answer five questions)
The following are the trading figures of Zainab Trading Co. Ltd. for the year ended 31st December 1986:
Creditors N20,000
Premises N20,000
Machinery N20,000
Cash N20,000
Debtors N30,000
Stock N50,000
Cost of goods sold N100,000
Sales N200,000
Plant N30,000
Rent N10,000
From the above, calculate the (a) fixed assets (b) working capital (c) gross profit (d) net profit
(a) Fixed assets = premises + machinery + plant = 20,000 + 20,000 + 30,000 = N70,000
(b) Current assets = stock + debtors + cash = 50,000 + 30,000 + 20,000 = N100,000; current liabilities = creditors N20,000; working capital = 100,000 − 20,000 = N80,000
(c) Gross profit = sales − cost of goods sold = 200,000 − 100,000 = N100,000
(d) Net profit = gross profit − expenses (rent) = 100,000 − 10,000 = N90,000
Show each formula before substituting the figures.
Commerce 2 (answer five questions)
(a) What is a business merger?
(b) Explain the reasons why some businesses merge
(c) Give three disadvantages of business merger.
(a) A merger (amalgamation) is the joining of two or more independent firms to form one larger firm under one management and ownership.
(b) Any five explained: to enjoy economies of large-scale production and lower costs; to reduce or eliminate competition; to raise more capital for expansion; to secure supplies of raw materials (backward integration) or outlets (forward integration); to diversify and spread risk; to survive economic recession or avoid liquidation; to pool skills, technology and management; to gain a larger market share and control prices.
(c) Any three: may create a monopoly that exploits consumers with high prices; loss of jobs as duplicate posts are cut; firm may become too large to manage efficiently (diseconomies of scale); loss of identity and goodwill of the merged firms; conflicts between managements; less choice for consumers.
Distinguish clearly between reasons and disadvantages.
Commerce 2 (answer five questions)
(a) What is marketing?
(b) Distinguish between marketing and selling
(c) Explain five functions of marketing
(a) Marketing is the whole process of finding out consumers' needs and getting the right goods and services to them, at the right price, place and time, at a profit.
(b) Marketing begins before production (research, product design) and continues after the sale (after-sales service); selling is only the exchange of goods for money. Marketing focuses on the needs of the buyer; selling on the needs of the seller to turn goods into cash. Marketing creates time, place, form and possession utility; selling creates mainly possession utility. Selling is only one part of marketing.
(c) Any five explained: market research; product planning and development; pricing; promotion (advertising, sales promotion, personal selling); distribution – transport, warehousing, channels; buying and assembling; standardisation and grading; packaging and branding; financing (credit to buyers); risk bearing; after-sales service.
In (b) give several points of contrast.
Commerce 2 (answer five questions)
(a) Explain five reasons why many small businesses turn into private limited liability companies
(b) What are the disadvantages of such a decision?
(a) Any five, explained: limited liability – owners' private property is protected; separate legal entity – the company can sue and be sued and own property; continuity – it does not end when a member dies or leaves; more capital – up to the legal maximum number of members can contribute; easier to borrow from banks; expansion and economies of scale; shares can be transferred within the family/members, keeping control; affairs still kept fairly private (shares not offered to the public).
(b) Any four: formation is costly and involves legal formalities; must comply with Companies Act – file annual returns and audited accounts; profits shared among more owners; slower decisions; separation of ownership and control may reduce personal interest; cannot raise capital from the public; shares not freely transferable; double taxation (company tax and tax on dividends).
Contrast with the position of a sole trader or partnership.
Commerce 2 (answer five questions)
(a) Why is it important for commercial information to be rapid and accurate?
(b) What are the advantages of courier services over public postal services?
(a) Any five: business decisions (buying, selling, pricing) depend on up-to-date information; delays can lose orders, customers and profits; errors lead to wrong goods being sent, disputes and losses; prices and markets (e.g. stock exchange, commodity prices) change quickly; quick communication speeds up payment and delivery; accurate information builds trust and goodwill; it helps traders deal with emergencies and meet deadlines.
(b) Any five: faster, often same-day or next-day delivery; door-to-door delivery and collection; more secure – items are tracked and signed for; proof of delivery is given; can carry parcels and urgent documents of various sizes; compensation for loss or damage; flexible and reliable, operating outside post office hours; personalised customer service.
Give reasons in (a) and compare directly with the post office in (b).