100 questions. Try each one, then open the answer to check yourself and read the explanation.
Commerce is concerned mainly with the
Answer: B (distribution of goods and services)
Commerce deals with distributing goods and services from producers to consumers.
The two main branches of trade are
Answer: B (home and foreign trade)
Trade is divided into home (domestic) trade and foreign (international) trade.
Who among the following is not engaged in a commercial occupation?
Answer: B (An engineer)
An engineer works in industry or gives a professional service; the others are in trade or aids to trade.
On which of the following grounds may a company be compulsorily wound up?
Answer: D (it fails to commence business within a year of its incorporation)
A court may wind up a company that does not start business within a year of incorporation.
The management and control of co-oporative societies are in the hands of the
Answer: C (Committee)
Members elect a management committee, which runs the society on their behalf.
Key industries and those requiring huge capital are usually established as
Answer: A (public corporations)
Government sets up public corporations for key industries that need very large capital, such as power and railways.
Movement of commercial vehicles in Nigeria is controlled by the
Answer: B (National Association of Road Transport Workers)
The road transport workers' union organises and controls the loading and movement of commercial vehicles at motor parks.
The reward for entrepreneurship as a factor of production is
Answer: C (profit)
The entrepreneur earns profit for organising production and bearing risk.
A document issued to a buyer showing the quantity description and prices of goods bought is called
Answer: B (an invoice)
An invoice lists the goods sold, their quantities, prices and the amount due.
Which of the following describes the marketing mix?
Answer: A (Distribution, product policy, promotion, pricing policy)
The marketing mix is the four Ps: product, price, place (distribution) and promotion.
Which of the following is not a negotiable instrument?
Answer: A (Invoice)
An invoice is a bill for goods sold; it cannot be transferred to pass a right to money.
Which of the following is not a function of the Nigerian Airport Authority?
Answer: D (Maintains all aircrafts in the country)
Airlines maintain their own aircraft; the authority runs the airports.
Another name for a foreign order is
Answer: D (indent)
An indent is an order for goods from abroad.
An agreement to deliver goods in the future after payment of the final instalment is known as
Answer: C (conditional sale)
In a conditional sale ownership of the goods passes only when the last instalment is paid.
Which of the following is a pre-sales service to the consumer?
Answer: B (Provision of credit facilities)
Credit arrangements are made before the sale; installation, maintenance, delivery and replacement come after it.
Rate of stock turnover is calculated to determine
Answer: B (number of times goods are bought and sold)
Rate of turnover shows how many times the stock is sold and replaced in a period.
Which of the following is not a feature of hire purchase?
Answer: D (Ownership of goods passes to the customer on payment of a deposit)
Under hire purchase, ownership passes only after the last instalment, not on paying the deposit.
Which of the following is not connected with after-sales services?
Answer: B (Granting trade discount)
Trade discount is part of the price at the time of sale, not a service after it.
Credit in business transaction is
Answer: A (a form of loan)
Selling on credit is like lending the buyer the value of the goods until he pays.
Which of the following is true of rail transport?
Answer: B (Fast over long distances)
Trains move heavy loads quickly over long distances on fixed tracks and timetables.
Which of the following is not a means of controlling credit by the Central Bank?
Answer: C (Clearing inter-bank indebtedness)
Clearing settles debts between banks; it does not control the amount of credit.
Which of the following is not a function of Development Banks?
Answer: C (Issue currency notes)
Only the Central Bank issues currency.
If Mr. Olu insures Mr. Obi's house, the insurer may, in the event of a loss, refuse to pay compensation based on the principle of
Answer: C (insurable interest)
Olu does not own the house and loses nothing if it burns, so he has no insurable interest.
Which of the following shows the quality of money?
Answer: A (Ability to represent both small and large values)
Being divisible into small and large values is a quality (characteristic) of money; the others are its functions.
The speculator in the stock exchange market who sells securities in anticipation of a fall in price is called a
Answer: C (bear)
A bear sells expecting prices to fall so he can buy back cheaper.
An action taken by a seller to avoid risks from unforeseeable price fluctuation is known as
Answer: D (hedging)
Hedging protects a trader against losses from price changes.
An offer of new shares made to existing shareholders at a preferential price is called a
Answer: B (rights issue)
A rights issue offers new shares to existing shareholders, usually at a reduced price.
A trader started business with N30,000 and spent N20,000 in buying premises & equipment, the balance of N10,000 is his
Answer: C (working capital)
The N10,000 left for day-to-day trading is working capital; the N20,000 is fixed capital.
New shares are offered for sale to the public through
Answer: C (issuing houses)
Issuing houses arrange the sale of new shares to the public.
Cash - in- hand and at bank as well as debtors are examples of
Answer: A (current assets)
Cash and debtors are current assets.
Money spent on acquiring vehicles, furniture and fittings by a manufacturing company is termed
Answer: D (fixed capital)
Vehicles, furniture and fittings are fixed assets bought with fixed capital.
Small ships which are used to carry goods and passengers across rivers or canals are called
Answer: E (ferries)
Ferries carry people and goods across rivers and narrow waters.
Which of the following would be best conveyed by rail transport?
Answer: B (Shoes)
Rail suits non-perishable goods; bread, tomatoes and oranges spoil quickly and need faster transport.
Gases are best transported
Answer: D (through pipeline)
Pipelines carry gas continuously and safely.
Which of the following facilities is very useful to an organization that posts a large number of mails regularly?
Answer: A (Franking machine)
A franking machine prints postage on many letters quickly without stamps.
Contraband goods seized by the Customs and Excise authority are kept in the
Answer: D (state warehouse)
Seized goods are kept in the state (government) warehouse.
Business activities responsible for identifying, anticipating and satisfying customers' requirements profitably are called
Answer: C (marketing)
This is the definition of marketing.
Which of the following is a demerit of advertising?
Answer: A (Increases per-unit cost of goods)
The cost of advertising is added to the price of goods.
Which of the following is a form of public relations?
Answer: A (Feature articles)
Feature articles in newspapers and magazines build a firm's image.
When a firm sets a low price for new product, this is said to be
Answer: C (penetration pricing)
A low starting price to win a large share of the market is penetration pricing.
Ola presented his motor-cycle for sale to Musa at a cost of N8,000. Musa agreed and bought the vehicle at the same amount.
The N8,000 for the sale is
Answer: C (a consideration)
The price paid in return for the motor-cycle is the consideration.
Ola presented his motor-cycle for sale to Musa at a cost of N8,000. Musa agreed and bought the vehicle at the same amount.
Ola is the
Answer: A (offeror)
Ola made the offer to sell, so he is the offeror.
When an acceptance to an offer is conditional, the offer becomes
Answer: B (a counter offer)
Accepting with new conditions does not create a contract; it is a counter offer that the other party may accept or reject.
A mercantile agent having title to goods in his possession is known as
Answer: A (factor)
A factor has possession of the goods and sells them in his own name.
A contract to take possession of goods on instalmental payment with the option to transfer ownership after full payment is known as
Answer: C (hire purchase)
Hire purchase gives possession at once and ownership after the final instalment.
Which of the following brings a public corporation into existence?
Answer: C (Acts of Parliament)
A public corporation is created by an Act of Parliament (or decree).
The set of actions of governments, and other organized bodies in response to users' complaints about goods and services is known as
Answer: B (consumer protection)
Consumer protection covers the steps taken by government and organised bodies to safeguard buyers.
The words "Account payee only" on a cheque mean
Answer: B (pay only to the holder's account)
'Account payee only' means the money must be paid into the payee's account.
The management of a company with a view to ending its operation is known as
Answer: C (liquidation)
Liquidation (winding up) ends a company's existence.
Any action taken by a company outside its stated objectives is regarded as
Answer: B (ultra vires)
Acts beyond the powers in the objects clause are ultra vires.
Measuring performance against the set objectives is a management function that relates to
Answer: E (controlling)
Controlling compares results with objectives.
The setting of objectives and determination of the best way to achieve them are known as
Answer: B (planning)
Planning sets goals and decides how to reach them.
When a company sells its shares to an issuing house which later sells to the public, it is called
Answer: A (an offer for sale)
In an offer for sale, an issuing house buys the shares and resells them to the public.
When an industry formerly owned by individuals is taken over by the government, such an industry becomes
Answer: B (nationalized)
Government takeover of private firms is nationalisation.
The major aim of indigenization is to
Answer: B (accelerate participation of citizens in business)
Indigenisation increases citizens' ownership and control of business.
Which of the following specializes in granting loans to distressed economies?
Answer: C (IMF)
The IMF lends to countries with balance of payments difficulties.
Which of the following is not a problem of ECOWAS?
Answer: D (Diversified economy for West Africa)
A diversified economy would help ECOWAS; the other options describe its problems.
Which of the following facilitates settlement of sub-regional indebtedness?
Answer: C (The West African Clearing House)
The West African Clearing House settles payments between member states' central banks.
The dealers who buy and sell stocks and shares in their own name are called
Answer: A (jobbers)
Jobbers deal in shares on their own account.
The amount which the insured pays the insurer periodically is
Answer: B (premium)
The premium is the regular payment for insurance cover.
At what stage is acceptance of offer by post valid? When the letter is
Answer: B (posted)
The postal rule: once a properly addressed acceptance is posted, the contract is made.
The capital of a company indicated in the Memorandum of Association is known as
Answer: A (authorized capital)
The Memorandum states the authorised (nominal) capital.
Which of the following is not a means of water transport?
Answer: E (Truck)
A truck is a road vehicle.
An agency that is involved in moving goods or people from place to place for a fee is called
Answer: D (common carrier)
A common carrier carries goods or people for anyone who pays.
Which of the following guides the operations of a Partnership?
Answer: E (The Deed)
A partnership is run according to its deed of partnership.
A partner who contributes to the capital but does not take part in running the business is known as
Answer: A (a sleeping partner)
A sleeping (dormant) partner provides capital but takes no part in management.
Which of the following assists a Nigerian producer to participate in trade fairs and exhibitions abroad?
Answer: E (Nigerian Export Promotion Council)
The NEPC promotes Nigerian exports, including through foreign trade fairs.
One way of importing goods without the use of foreign exchange is through
Answer: E (counter trade)
Counter trade exchanges goods for goods, so no foreign currency is needed.
Balance of trade is said to be favourable when
Answer: D (visible exports exceed visible imports)
A favourable balance of trade means visible exports are more than visible imports.
The basic principles upon with international trade is carried on among countries is
Answer: C (comparative cost advantage)
International trade rests on comparative cost advantage.
A supplier who needs to make additional charges for goods delivered will send
Answer: A (a debit note)
A debit note increases the amount the buyer owes.
Gross profit is correctly ascertained by
Answer: E (subtracting cost of goods sold from sales)
Gross profit = sales − cost of goods sold.
The returns from capital investment are known as
Answer: D (profit)
Capital invested in a business earns profit.
The total assets of a business minus its total liability is the
Answer: B (capital owned)
Assets − liabilities = capital owned (net worth).
The production process is completed when what is produced
Answer: E (has reached the final users)
Production is complete only when goods reach the final consumer.
Which of the following has no legal capacity to a contract?
Answer: D (A Minor)
A minor (under 18) generally lacks capacity to contract.
Which of the following is a disadvantage of road transport?
Answer: A (Takes an available route)
Road vehicles can only go where there are roads, which limits them; the other options are advantages or not true of road transport.
A speculator who applies for new stocks and shares with the intention of selling them at a higher price is a
Answer: B (stag)
A stag buys new issues hoping to sell quickly at a profit.
Which of the following is not a method of selling?
Answer: D (Stock control)
Stock control manages stock levels; it is not a way of selling.
Price lists, catalogues and COD are mainly used in operating
Answer: D (mail order business)
Mail order firms sell through catalogues and often deliver cash on delivery.
The time allowed for unloading and loading a ship is referred to as
Answer: E (lay days)
Lay days are the days allowed for loading and unloading.
XYZ Ltd's total sales was N100,000. It had opening stock of N20,000 and closing stock of N22,000. It bought goods worth N80,000 and paid N2,000 for rent.
XYZ Ltd's Gross Profit is
Answer: D (N22,000.00)
Cost of goods sold = N20,000 + N80,000 − N22,000 = N78,000; gross profit = N100,000 − N78,000 = N22,000.
XYZ Ltd's total sales was N100,000. It had opening stock of N20,000 and closing stock of N22,000. It bought goods worth N80,000 and paid N2,000 for rent.
XYZ Ltd's Net Profit is
Answer: E (N20,000.00)
Net profit = gross profit N22,000 − rent N2,000 = N20,000.
In the capital structure of a Public Limited Company, the term equity refers to
Answer: B (ordinary shares)
Equity means ordinary shares, whose holders own the company and share what profit is left.
Which of the following is legally used by the insured while the policy is being processed?
Answer: A (Cover note)
A cover note gives temporary cover until the policy is issued.
Which of the following guarantees payment on presentation?
Answer: A (Certified cheque)
When a bank certifies a cheque it sets aside the money, so payment is assured.
One advantage of direct selling is
Answer: B (immediate feedback)
Selling directly to buyers gives the seller their reaction at once.
Penalty imposed by a ship owner for exceeding the period of charter is
Answer: D (demurrage)
Demurrage is charged when a ship is kept beyond the agreed time.
A symbol that is used to distinguish a company's product from others is a
Answer: B (trade mark)
A trade mark is a symbol identifying a firm's goods.
Which of the following is not true of air transport?
Answer: D (Operates normally irrespective of weather conditions)
Bad weather can delay or ground aircraft.
Commerce 2 (answer any five questions)
(a) What is production?
(b) Illustrate with a labelled diagram the main divisions and subdivisions of production.
(a) Production is the creation of goods and services to satisfy human wants; it is complete only when the goods reach the final consumer.
(b) Diagram (labelled tree) showing: PRODUCTION divided into Industry, Commerce and Services.
Industry → Primary/Extractive (farming, fishing, mining, lumbering, hunting); Secondary → Manufacturing and Construction.
Commerce → Trade and Aids to trade. Trade → Home trade (wholesale, retail) and Foreign trade (import, export, entrepot). Aids to trade → transport, banking, insurance, warehousing, advertising, communication (and tourism).
Services → Direct (personal) services, e.g. teachers, doctors, lawyers; Indirect services, e.g. police, army, civil servants.
Marks are for a neat tree diagram with every branch labelled.
Commerce 2 (answer any five questions)
(a) Mention four types of co-operative societies.
(b) State two distinguishing features and two functions of each type mentioned in 2(a) above.
(a) Any four: consumer/retail co-operative society; producer (agricultural) co-operative society; thrift and credit (savings and loans) co-operative society; wholesale co-operative society; multi-purpose co-operative society.
(b) Consumer/retail: features – formed by consumers, profit shared by purchases (dividend on purchases); functions – buys in bulk and sells to members at fair prices, cuts out middlemen. Producer: features – formed by producers (e.g. farmers) of similar goods, members pool resources; functions – joint purchase of inputs/equipment, joint processing and marketing of members' produce. Thrift and credit: features – formed by low-income earners, regular contributions/savings; functions – encourages saving, grants loans to members at low interest. Wholesale: features – formed/owned by retail co-operatives, large capital; functions – buys in bulk from producers, supplies retail societies, may manufacture. Multi-purpose: features – combines several activities, often formed by existing societies; functions – credit, marketing and supply services, education of members.
Two features and two functions for each of the four types.
Commerce 2 (answer any five questions)
(a) Define a bill of exchange.
(b) State six essential features of a bill of exchange.
(c) List the parties to a bill of exchange.
(a) A bill of exchange is an unconditional order in writing, addressed by one person (the drawer) to another (the drawee), signed by the drawer, requiring the drawee to pay on demand or at a fixed or determinable future time a certain sum of money to, or to the order of, a specified person or to bearer.
(b) Any six: it is in writing; it is an unconditional order; it is signed by the drawer; it is addressed to a named drawee; it states a definite sum of money; payable on demand or at a fixed future date (tenor, e.g. 90 days); payable to a named person, his order or bearer; it must be accepted by the drawee (signature across it); it is negotiable – transferable by endorsement; it is dated; it bears stamp duty; three days of grace (for time bills).
(c) Parties: drawer; drawee (acceptor); payee; also endorser and endorsee/holder (holder in due course).
Learn the standard definition and give six features.
Commerce 2 (answer any five questions)
(a) What is an agency?
(b) Explain the features of the following agents:
(i) Factor
(ii) Broker
(iii) Del-credere agent
(iv) Auctioneer.
(a) Agency is a relationship in which one person (the agent) is authorised to act on behalf of another (the principal) in dealings with third parties, so that the principal is bound by the agent's acts.
(b) (i) Factor: mercantile agent who has possession of the principal's goods, sells in his own name, can fix the price and give credit, receives payment and is paid factorage/commission.
(ii) Broker: brings buyers and sellers together; does not have possession of the goods; cannot sell in his own name; is paid brokerage; e.g. stock, insurance and produce brokers.
(iii) Del-credere agent: sells goods for the principal and guarantees that buyers will pay; if the buyer defaults he pays; receives extra commission (del credere commission).
(iv) Auctioneer: sells goods by public auction to the highest bidder; has possession of the goods; sale completed by the fall of the hammer; is paid commission; acts first for the seller and, on sale, for the buyer as well.
Give at least two features for each agent.
Commerce 2 (answer any five questions)
(a) Distinguish between marketing and a market.
(b) In which four ways is marketing important to a developing country?
(a) Marketing is all the activities involved in identifying consumers' needs and moving goods and services from producer to consumer profitably (research, product planning, pricing, promotion, distribution, selling). A market is any arrangement or place where buyers and sellers meet (physically or by communication) to exchange goods and services at a price.
(b) Any four, explained: creates employment; increases sales and so encourages production and investment; raises the standard of living by making a variety of goods available; earns foreign exchange through export marketing; helps producers find out consumers' needs and improve products; encourages competition, better quality and lower prices; generates revenue for government; helps develop new industries and markets.
In (a) define both terms clearly.
Commerce 2 (answer any five questions)
Write the following in full and explain their meanings:
(a) C.I.F
(b) F.O.B
(c) F.A.S
(d) F.O.R
(e) C.F
(a) C.I.F – Cost, Insurance and Freight: the price includes the cost of the goods, insurance and freight to the named port of destination; the buyer pays from there.
(b) F.O.B – Free On Board: the price covers the goods and all costs until they are loaded on board the ship at the port of shipment; freight and insurance are paid by the buyer.
(c) F.A.S – Free Alongside Ship: the price covers the goods delivered alongside the ship at the port; the buyer pays the cost of loading and all later costs.
(d) F.O.R – Free On Rail: the price covers the goods and the cost of loading them onto the railway wagon at the named station; the buyer pays the rest.
(e) C.F (C & F) – Cost and Freight: the price covers the goods and freight to the port of destination, but not insurance, which the buyer arranges.
Write each term in full and say up to what point the seller pays.
Commerce 2 (answer any five questions)
(a) Who is an actuary?
(b) Differentiate between contribution and group insurance.
(c) Describe three types of risks that may be insured against under marine insurance.
(a) An actuary is an expert in statistics and mathematics employed by an insurance company to calculate risks, probabilities (e.g. life expectancy) and the premiums to be charged.
(b) Contribution is a principle of insurance: where the same property is insured with more than one insurer, each insurer pays a share of the loss in proportion to the cover it gave, so that the insured does not recover more than the loss. Group insurance is a type of policy: one policy covering a group of people, e.g. all the employees of a firm, usually paid for by the employer at a reduced premium.
(c) Any three, described: hull insurance – damage to or loss of the ship itself and its machinery; cargo insurance – loss of or damage to the goods carried; freight insurance – loss of the freight (carriage charges) if the goods are lost; also ship-owner's liability (collision with another ship) and perils such as sinking, fire, storms, piracy, jettison/general average.
In (b) note that contribution is a principle while group insurance is a kind of policy.
Commerce 2 (answer any five questions)
(a) Illustrate any four channels of distribution of manufactured goods.
(b) Explain the statement 'the longer the channel, the higher the price'.
(c) Give five reasons why small scale retail businesses may fail.
(a) Any four (drawn as arrow chains): manufacturer → wholesaler → retailer → consumer; manufacturer → retailer → consumer; manufacturer → consumer; manufacturer → agent → wholesaler → retailer → consumer; manufacturer → wholesaler → consumer.
(b) Each middleman in the channel adds his own costs (transport, storage, handling) and profit margin to the price he paid; the more middlemen there are, the more additions are made, so the final price paid by the consumer is higher than in a short channel.
(c) Any five: inadequate capital; poor management and lack of business knowledge; poor record keeping; too much credit/bad debts; bad location; competition from large-scale retailers; mixing personal and business money/drawings; poor choice of goods or overstocking; theft and pilferage; high costs such as rent and taxes.
In (b) mention that each middleman adds costs and profit.
Commerce 2 (answer any five questions)
The state of affairs of Danchukwu Enterprises for the year ended 30th September, 1997 shows the following:
Capital N90,000.00
Creditors N22,000.00
Vehicles N50,000.00
Furniture & Fittings N20,000.00
Cash in hand N18,000.00
Stock N24,000.00
(a) What is Danchukwu's working capital, using the above information?
(b) Mention four uses of working capital.
(c) Differentiate current capital from mixed capital.
(a) Working capital = current assets − current liabilities = (cash N18,000 + stock N24,000) − creditors N22,000 = N42,000 − N22,000 = N20,000.
(b) Any four: buying stock/raw materials; paying wages and salaries; paying running expenses such as rent, electricity, transport; paying creditors and meeting short-term debts; granting credit to customers; meeting emergencies.
(c) Current (circulating) capital is capital used for day-to-day running and constantly changing form – cash, stock and debtors. Mixed capital is the combination of fixed and current capital in a business, i.e. the total of fixed assets and current assets used together to run it.
Show the working in (a): only cash and stock are current assets; vehicles and furniture are fixed.
Commerce 2 (answer any five questions)
(a) (i) What is a trade association? (ii) Give two examples.
(b) Explain any five functions of a trade association.
(a)(i) A trade association is a voluntary body formed by firms in the same line of business (trade or industry) to protect and promote their common interests.
(ii) Any two: Manufacturers Association of Nigeria (MAN); Nigerian Insurers Association; Pharmaceutical Society of Nigeria, Motor Dealers Association, National Association of Nigerian Traders, Nigerian Employers' Consultative Association, Association of Master Bakers.
(b) Any five, explained: represents members in dealings with government and influences policy; fixes standards of quality and conduct for members; collects and shares information and research on the trade; settles disputes among members; trains members and their staff; negotiates with trade unions on wages and conditions; organises joint advertising and trade fairs; may fix common prices or terms of trade; protects members against unfair competition.
Define, give two real examples, then explain five functions.