104 questions. Try each one, then open the answer to check yourself and read the explanation.
The three main divisions of production are
Answer: C (industry, commerce and direct service)
Production is grouped into industry (extraction, manufacturing, construction), commerce (trade and aids to trade) and direct services.
Division of labour is limited by
Answer: D (the extent of the market)
Specialisation only pays if there is a big enough market to buy all the extra output, so the size of the market limits division of labour.
Into which of the following two broad areas can trade be divided?
Answer: A (home and foreign trade)
Trade is either home (domestic) trade within a country or foreign (international) trade between countries.
Which of the following is not true of sole proprietorship?
Answer: A (It has a separate legal entity)
A sole proprietorship is not a separate legal person; the owner and the business are the same in law.
Which of the following investors earns profit on the basis of his patronage?
Answer: D (co-operative member)
Co-operative societies share surplus to members as a patronage dividend, in proportion to how much each member bought from the society.
A group of retailing shops under one management and selling the same products is known as
Answer: A (multiple shop)
Multiple (chain) shops are many branches owned by one firm, all selling the same kind of goods.
Which of the following saves consumers the time and cost involved in travelling to commercial centres for shopping?
Answer: C (Mobile shop)
A mobile shop moves to where customers live, so they do not have to travel to the town centre to shop.
When payment is required for goods at the time the order is placed, the term of payment quoted is
Answer: B (C. W. O)
C.W.O. means cash with order: the buyer pays when sending the order.
The provision of all kinds of services is related to
Answer: E (tertiary production)
Tertiary production covers services: commercial services and direct personal services.
Which of the following is the primary purpose of a business concern? To
Answer: B (provide goods and services to customers at a profit for itself and shareholders)
A business exists to satisfy customers' wants with goods and services and earn a profit for its owners in doing so.
When a motor dealer undertakes routine maintenance of customers' vehicles, he is offering
Answer: C (after-sales service)
Servicing a car after it has been sold is an after-sales service.
Which of the following has the main objective to differentiate between similar products from different manufacturers?
Answer: A (Branding)
A brand name or mark identifies one maker's product and sets it apart from similar products of other makers.
Which of the following abbreviations permits the drawer of a document to correct any errors therein?
Answer: C (E. & O. E)
E. & O. E. (errors and omissions excepted) on an invoice lets the seller correct mistakes in it later.
The most important function of the retailer is to
Answer: C (make goods available in units)
The retailer breaks bulk, selling in the small quantities consumers want.
A trade agreement in which two countries exchange goods and services is known as
Answer: B (bilateral trade)
Bilateral means two-sided: a trade agreement between two countries.
UTC, Kingsway Stores and Leventis Stores are typical examples of
Answer: B (department stores)
These were large stores selling many kinds of goods in separate departments under one roof.
Which of the following is a receipt for goods deposited in a public warehouse?
Answer: C (Warrant)
A warehouse (dock) warrant is the receipt given for goods stored in a public warehouse; it is also a document of title.
Which of the following is not a reason for forming a customer association?
Answer: E (Making profit for consumers)
Consumer associations protect consumers' interests; they are not formed to make profit.
The main similarity between commercial banks and other financial institutions is
Answer: A (the acceptance of customers' deposits and making payments on their behalf)
Like commercial banks, other financial institutions take deposits from customers and pay out on their behalf; creating money and night safes are special to commercial banks.
Warehouses are located in Lagos because of
Answer: C (nearness to sea and airports)
Warehouses are sited near ports and airports so imported and exported goods can be stored close to where they are loaded and unloaded.
A speculator who buys shares and stocks in anticipation of a rise in their prices at the Stock Exchange is a
Answer: A (bull)
A bull buys shares expecting their prices to rise so he can sell at a profit.
A del credere agent is distinguished from other agents in that he
Answer: D (usually guarantees payment in any transaction)
For an extra commission, a del credere agent guarantees that the buyers he finds will pay.
The diagram below illustrates the mark of
Answer: D (a registered letter)
A registered envelope is marked with two lines crossing it (a cross), front and back.
Which of the following cannot be used as a means of transport between Kano and Lagos?
Answer: B (Ship)
Kano is far inland with no sea or navigable river link to Lagos, so a ship cannot be used.
Which of the following is common to both large and small firms?
Answer: D (Profit making)
Every business, large or small, aims to make a profit.
Nearness to a city centre and a busy street is not a necessary condition for siting
Answer: E (a wholesale warehouse)
A wholesale warehouse needs space and good transport links, not a busy city-centre street where land is costly.
The minimum number of membership for a public limited company is
Answer: A (two)
Under Nigeria's Companies and Allied Matters Act, a public limited company needs at least two members. The old rule of seven members was dropped long ago.
Which of the following functions is not performed by a small retailer?
Answer: B (Financing producers)
Financing producers is a wholesaler's function; a small retailer has too little capital.
Which of the following products is likely to have a low rate of turnover?
Answer: D (Furniture)
Furniture is costly and bought rarely, so it sells slowly; the others are bought often.
Which of the following marketing functions involves the actual movement of goods?
Answer: B (Distribution function)
Physical distribution covers transporting and storing goods to move them to buyers.
The abbreviation ECOWAS stands for
Answer: A (Economic Community of West African States)
ECOWAS is the Economic Community of West African States, set up in 1975.
The difference between cost and selling prices gives
Answer: C (gross profit or loss)
Sales minus the cost of goods sold gives gross profit (or gross loss).
A sales agreement whereby the buyer takes possession but not title to goods is called
Answer: D (hire purchase)
Under hire purchase the buyer uses the goods at once but ownership passes only after the last instalment is paid.
Any paid form of non-personal presentation of goods and services by an identified sponsor is known as
Answer: B (advertising)
This is the standard definition of advertising: paid, non-personal and by a known sponsor.
The document issued to a lender under a company's seal acknowledging a debt is called
Answer: D (debenture)
A debenture is a sealed certificate showing that the company has borrowed money from the holder.
One means of making payment through the NIPOST is the
Answer: B (money order)
Money orders and postal orders are bought at the post office to send money.
The abbreviation IDAPOLY on the letter-headed papers of the Federal Polytechnic Idah is an example of a
Answer: D (telegraphic address)
A telegraphic address is a short registered code name used in place of a full address on telegrams.
Which of the following is not a reason for dishonouring a cheque?
Answer: B (Signed alteration on the cheque)
An alteration signed by the drawer is valid, so the bank can still pay the cheque.
A cheque is specially crossed if
Answer: C (the name of a bank is written across it)
A special crossing names a particular bank, which is the only bank that can collect the cheque.
The difference between the value of imports and exports of goods for a particular year is known as
Answer: C (balance of trade)
Balance of trade compares the values of goods (visible items) exported and imported in a year.
Commerce increases the utility of goods by making them available when they are wanted. This function is performed by the use of
Answer: E (warehousing)
Warehousing stores goods until they are needed, creating time utility.
In foreign trade, a country specializes in the production of a commodity in which it has
Answer: B (the greatest relative advantage)
By the law of comparative advantage, a country specialises where its relative (comparative) advantage is greatest.
A bill of lading is best described as the
Answer: A (document of title to the goods on board a ship)
The bill of lading is a receipt and document of title for goods shipped; whoever holds it can claim the goods.
Organizations licensed and authorized to deliver fast mails, and parcels are engaged in
Answer: A (courier services)
Courier companies are licensed to deliver letters and parcels quickly.
Parties to a bill of exchange that is endorsed to a third party are the
Answer: D (drawer, drawee, payee)
The three parties to a bill of exchange are the drawer (who writes it), the drawee (who must pay) and the payee (who is paid).
Bonded warehouses are controlled by
Answer: D (Customs and Excise authorities)
Goods in a bonded warehouse have not yet paid duty, so the Customs and Excise authorities control it.
In large offices where a large number of mails is posted daily, which of the followings quickens the stamping of envelopes?
Answer: A (Franking)
A franking machine prints the postage mark on envelopes, so stamps need not be stuck on one by one.
The following factors must be considered before setting up a retail business except
Answer: E (public relationship.)
Capital, experience, location and market size must be considered first; public relations is not a starting condition.
Which of the following ancillary services helps to maintain close contact between buyers and sellers?
Answer: D (Communication)
Communication (post, telephone and so on) keeps buyers and sellers in touch with each other.
The system of collecting information with a view to determining the extent of demand for a product is known as
Answer: B (marketing research)
Marketing research gathers and studies information about the market and demand for a product.
Which of the following organizations aims primarily at protecting the consumer?
Answer: A (Standards Organisation of Nigeria)
SON sets and enforces quality standards for products, protecting consumers.
A modern method of retailing whereby customers can make their purchases without the help of an assistant or cashier is called
Answer: D (automatic vending)
With a vending machine the customer puts in money and takes the goods; no assistant or cashier is needed.
A cheque that is drawn in the name of a bank instead of the account holder's name is called
Answer: E (bank draft)
A bank draft is a cheque drawn by a bank on itself, so payment is assured.
A deduction made by a wholesaler from the catalogue price and which represents a retailer's profit margin is called
Answer: C (trade discount)
Trade discount is an allowance off the list price to traders, which gives the retailer his profit margin.
A cheque dated 5/8/91 but presented for payment on 2/8/91 was dishonoured because it was a
Answer: D (post-dated cheque)
The cheque carried a date later than the day it was presented, so it was post-dated and could not be paid yet.
An order stating the goods required but not the manufacturer from whom the foreign buyer intends to buy his goods is called
Answer: B (open indent)
An open indent leaves the choice of supplier to the agent; a closed indent names the maker.
Use the information in the following diagram to answer questions 61 & 62.
The above document is
Answer: A (an inland bill of exchange)
It orders Abiodun Tutu to pay a sum at a future date, and both parties are in Nigeria, so it is an inland bill of exchange.
Use the information in the following diagram to answer questions 61 & 62.
T. Orok is the
Answer: C (creditor)
T. Orok drew the bill to be paid to himself, so he is the drawer and creditor who is owed the money.
Commercial bank deposits with the Central Bank help to
Answer: B (control the supply of money and credits)
By changing the reserves commercial banks must keep with it, the Central Bank controls how much they can lend.
Which of the following is a non-insurable risk?
Answer: E (Loss from staking in lotteries)
Gambling losses are chosen speculative risks and cannot be insured.
The policy which safeguards the employer from loss sustained as a result of fraudulent acts of his workers is the
Answer: E (fidelity guarantee policy.)
Fidelity guarantee insurance covers an employer against theft or fraud by employees.
Which of the following is responsible for advertising vacant positions existing in companies?
Answer: C (Personnel Department)
The personnel department recruits staff, which includes advertising vacancies.
Which of the following associations will be directly affected by legislations on tariffs and taxes on raw materials? The
Answer: D (Manufacturers' Association of Nigeria)
Manufacturers buy raw materials, so tariffs and taxes on them directly affect MAN's members.
The process whereby a business organization regularly compares physical events with the standards set and takes corrective action is
Answer: D (controlling)
Controlling means checking actual results against plans and correcting any shortfall.
The sole aim of the formation of the Niger Basin Commission is to
Answer: D (jointly use the Niger for the overall benefit of the region)
The Niger Basin Commission was set up so the countries along the River Niger develop and use it together.
Which of the following is not a member country of the Lake Chad Basin Commission?
Answer: B (Togo)
The Lake Chad Basin Commission was formed by the countries bordering Lake Chad: Chad, Cameroon, Niger and Nigeria. Togo is not near the lake.
Which of the following is not a component of a company's marketing mix?
Answer: C (Policy plan)
The marketing mix is the four Ps: product, price, place (distribution) and promotion.
Marketing activities start at the
Answer: A (idea stage)
Marketing begins before production, with the idea of a product that will satisfy consumers' needs.
Which of the following is not a basic utility created by marketing?
Answer: E (Form)
Changing raw materials into a new form is done by production; marketing adds time, place and ownership (possession) utility.
The sign shown in the picture on a Volkswagen represents the
Answer: A (trade mark)
The VW badge is a registered symbol that identifies the maker's products, so it is a trade mark.
Which of following is a good example of a capital market?
Answer: D (The Stock Exchange)
The Stock Exchange is where long-term capital (shares and stocks) is raised and traded.
An advance that is specially given for housing or building projects is called
Answer: E (a mortgage)
A mortgage is a long-term loan for buying or building property, secured on that property.
Voyage policy is issued when goods are insured
Answer: A (between one port and another)
A voyage policy covers a ship or cargo for one journey from one port to another; a time policy covers a period.
The essence of the marketing concept is that all company planning, operations and other activities should be
Answer: A (consumer- oriented)
The marketing concept puts the consumer's needs at the centre of everything the firm does.
Details or services available and information regarding terms of carriage by post are contained in a
Answer: B (post office guide)
The Post Office Guide sets out all postal services, charges and rules for sending items by post.
Another name for hoarding is
Answer: B (billboards)
Hoardings are large outdoor advertising boards, also called billboards.
Which of the following is true of limited partnership?
Answer: E (A limited partner has no share in the management of the firm)
A limited partner only contributes capital; he may not take part in running the firm.
Group of firms co-operating to carry out a giant project too large for a single firm to undertake is called a
Answer: C (consortium)
A consortium is a temporary group of firms joining together for one big project.
An organization of people, engaged in same trade or manufacturing, formed to safeguard its interest is generally called the
Answer: C (trade association)
A trade association is formed by firms in the same trade to protect their common interests.
Which of the following departments may a wholesale warehouse organization not have?
Answer: D (Production department)
A wholesaler buys and sells finished goods; it does not manufacture, so it has no production department.
Which of the following is not a function of a Chamber of Commerce?
Answer: D (Issuing consular invoice to exporters)
A consular invoice is issued by the importing country's consulate, not by the Chamber of Commerce.
The giving of free samples to stimulate consumers' demand for a company's product is called
Answer: E (sales promotion)
Free samples, gifts and price offers are sales promotion methods.
Moving an employee to a new position in which both his status and responsibilities are increased is called
Answer: D (promotion)
Promotion moves a worker to a higher post with more status and responsibility.
Business mergers are on the increase these days for the main purpose of
Answer: B (enjoying advantages of large-scale activities)
Firms merge mainly to become bigger and enjoy economies of large-scale production.
Which of the following is not a sound argument for the elimination of the wholesaler?
Answer: E (The retailer buys and stores goods until they are demanded)
Storing goods until needed is actually a service the wholesaler gives, so it argues for keeping him, not removing him.
Import duties are imposed for the following reasons except to
Answer: A (raise revenue form income tax)
Import duties are taxes on goods, not income tax, so they cannot raise income-tax revenue.
Which of the following is not a function of the Nigerian Ports Authority?
Answer: C (Collecting import and export duties)
Import and export duties are collected by the Customs service, not the Ports Authority.
Where a company has acquired control of another company by the purchase of at least 51 percent of its voting shares, it is referred to as a
Answer: D (holding company)
A holding company controls another (subsidiary) company by owning more than half of its voting shares.
The term subrogation relates to
Answer: E (insurance)
Subrogation is an insurance principle: after paying a claim, the insurer takes over the insured's rights against third parties.
Branding is a good example of
Answer: A (competitive advertising)
Brands are advertised to win customers from rival products, which is competitive advertising.
A number of firms producing similar goods is called
Answer: B (an industry)
An industry is a group of firms making similar products.
Which of the following is a Public Limited Company?
Answer: D (United Bank for Africa)
UBA's shares are sold to the public; the others are government-owned public corporations or development banks.
When and where was the ECOWAS treaty signed?
Answer: C (May 28, 1975 in Lagos)
The ECOWAS treaty was signed in Lagos on 28 May 1975.
Into which of the following countries does a Nigerian not need a visa to enter
Answer: B (Ghana)
Ghana is an ECOWAS member, and ECOWAS citizens may enter member states without a visa.
Commerce 2
(a) What five benefits does Nigeria derive from engaging in international trade?
(b) State and explain five problems likely to be faced by a businessman who wants to sell his goods overseas.
(a) Benefits (any five): gets goods it cannot produce or produces at high cost; wider market for its exports (oil, cocoa, groundnuts) so producers expand; foreign exchange earnings; specialisation according to comparative advantage raises output; higher standard of living and wider choice for consumers; transfer of technology and skills; employment in export industries and related services; government revenue from import and export duties; better international relations and co-operation.
(b) Problems (any five, explained): language differences; different currencies and exchange-rate changes; long distance – high transport and insurance costs and delays; risk of non-payment by foreign buyers and difficulty getting information about them; different laws, customs regulations, trade barriers (tariffs, quotas, embargoes); difficult documentation (bill of lading, certificate of origin, consular invoice etc.); different tastes, weights and measures and standards; political instability or war in the buying country; keen competition from other exporters.
Name each point, then explain it in a sentence or two.
Commerce 2
(a) Describe any four types of Co-operative Societies.
(b) Explain three advantages and three problems of Co-operative Societies.
(a) Any four described: consumer (retail) co-operative – consumers buy in bulk and sell to members at fair prices, sharing surplus as patronage dividend; producer co-operative – producers (e.g. farmers) pool resources to produce and market output; credit and thrift co-operative – members save regularly and borrow at low interest; marketing co-operative – members sell their produce jointly for better prices; wholesale co-operative – retail co-operatives join to buy in bulk from producers; multi-purpose co-operative.
(b) Advantages (three): encourage saving; cheap loans to members; lower prices through bulk buying and cutting out middlemen; democratic control – one member one vote; surplus shared by patronage; educates members.
Problems (three): shortage of capital; poor management and lack of skilled staff; dishonesty/embezzlement by officials; members' lack of loyalty; limited membership and market; competition from big firms; little government support.
In (a) say who the members are and what each type does.
Commerce 2
(a) Mention five types of business environment.
(b) Why do companies continue to advertise inspite of the criticism levelled against it?
(a) Five: economic environment; political and legal environment; social (socio-cultural) environment; technological environment; demographic environment; physical/ecological (natural) environment; competitive environment.
(b) Reasons (any five): to create and increase demand and sales; to introduce new products; to inform consumers of prices, uses and where to buy; to meet and beat competition; to build brand loyalty and the company's image; to remind customers and keep sales steady; to support salesmen and retailers (stock movement); to educate the public on use of the product; to increase profit through large-scale sales and lower unit costs.
In (b), give the benefits advertising brings to the firm.
Commerce 2
(a) What is the importance of warehousing to Commerce?
(b) What factors should be considered in siting a small scale retail shop?
(a) Importance (any five): storage of goods produced ahead of demand; creates time utility – goods available when needed; price stability by releasing goods gradually; allows continuous production; bonded warehouses let importers delay paying duty until goods are sold; goods can be blended, packed, graded there; protects goods from damage and theft; warehouse warrant can be used to sell goods or as security for loans; provides employment.
(b) Factors (any five): nearness to customers/population (market); competition in the area; accessibility and transport facilities; cost of rent or land; availability of security; availability of amenities (water, electricity); nearness to suppliers/wholesalers; government regulations (zoning, permits); availability of capital.
Explain each point briefly.
Commerce 2
(a) What is personal selling?
(b) Explain five ways in which personal selling is important to a firm.
(a) Personal selling is face-to-face (direct) presentation of goods to prospective buyers by a salesman in order to persuade them to buy.
(b) Importance (any five, explained): salesman can explain and demonstrate the product; answers customers' questions and removes doubts at once; persuades and wins new customers, increasing sales; builds good personal relationships and customer loyalty; brings feedback from customers to the firm (market information); can adapt the message to each customer; collects orders and debts; gives after-sales advice and service; useful for technical and costly goods.
Define first, then explain five benefits to the firm.
Commerce 2
(a) Explain the Second Tier Security Market.
(b) Justify the existence of the Second Tier Security Market.
(a) The Second-Tier Securities Market (SSM), set up by the Nigerian Stock Exchange in 1985, is a section of the Stock Exchange where small and medium-sized companies that cannot meet the strict listing requirements of the main (first-tier) market can raise capital and have their shares quoted, under easier conditions (e.g. lower minimum capital, fewer years of track record, smaller share of capital offered to the public, lower fees).
(b) Justification: enables small and medium firms to raise long-term capital; helps indigenous businesses grow and become public companies; widens share ownership among Nigerians; provides a market where their shares can be bought and sold; improves the firms' image and credibility; encourages saving and investment; supports economic growth and employment; prepares firms to move later to the first-tier market.
Contrast with the main (first-tier) market.
Commerce 2
(a) What is Planning?
(b) What are the benefits of planning in business management?
(c) Mention four functions of the Personnel Department of a business establishment.
(a) Planning is deciding in advance what the organisation wants to achieve (objectives) and how, when and by whom it will be done.
(b) Benefits: gives the firm clear goals and direction; helps to use resources efficiently; reduces uncertainty and risk; provides a basis for control (standards to measure performance); helps co-ordination of departments; aids decision-making; prepares the firm for the future.
(c) Four: recruitment and selection of staff; training and development; promotion, transfer, discipline and dismissal; staff welfare; wages and salary administration; keeping staff records; industrial relations with trade unions.
Define planning in one sentence, then list benefits and functions.
Commerce 2
(a) Explain five reasons why consumers need protection.
(b) Mention any five government legislations aimed at protecting the consumer.
(a) Reasons (any five, explained): to prevent sale of fake, adulterated or substandard goods; to stop false and misleading advertising; to prevent short weights and measures; to stop exploitation through overpricing and hoarding; to protect health from harmful, expired or unwholesome goods and drugs; to ensure goods carry proper labels and instructions; consumers are often ignorant of their rights and unorganised; to provide redress when consumers are cheated.
(b) Legislations (any five): Sale of Goods Act; Hire Purchase Act; Weights and Measures Act; Food and Drugs Act (NAFDAC Act); Standards Organisation of Nigeria Act; Price Control Act; Trade Marks Act; Consumer Protection Council Act; Merchandise Marks Act; Patents and Designs Act.
Each reason in (a) should show a way consumers are exploited.
Commerce 2
(a) Explain the following services provided by the NIPOST (i) Business Reply Service (ii) Express Delivery (iii) Poste Restante (iv) Cash on Delivery (v) Recorded Delivery
(b) State five ways in which communication is important to Commerce.
(a)(i) Business Reply Service: a firm licensed by the post office gives customers specially printed reply cards or envelopes; customers post them without stamps and the firm pays the postage (plus a fee) when they are delivered.
(ii) Express Delivery: for an extra fee, a letter or parcel is delivered faster than ordinary mail, by special messenger or priority handling.
(iii) Poste Restante: letters for travellers with no fixed address are addressed to the post office of the town and kept there until the addressee collects them with proof of identity.
(iv) Cash on Delivery: the post office delivers goods to the buyer, collects the price from him and remits it to the seller, less its charges.
(v) Recorded Delivery: the sender gets a certificate of posting and the addressee signs on receipt, giving proof of delivery (compensation is small).
(b) Importance (any five): links buyers and sellers; quick placing of orders and enquiries; aids advertising; speeds up business decisions and transactions; makes foreign trade easier; helps banking (transfers, payments); saves time and cost of travelling; helps management co-ordinate branches.
Explain how each service works, not just its name.
Commerce 2
Explain any five obstacles working against the achievement of the objectives of ECOWAS.
Any five, explained: language differences (English, French, Portuguese); many different currencies and lack of a common payment system; political instability, coups and wars in member states; fear of domination by bigger members such as Nigeria and unequal benefits; loyalty to former colonial powers and membership of other groupings (e.g. CFA franc zone); poor transport and communication links; members produce similar primary goods, so little to trade with each other; failure to pay dues and lack of funds; non-implementation of protocols and border harassment; smuggling and poor customs co-operation.
Each point needs a short explanation of how it hinders ECOWAS.