WAEC Commerce 1999 past questions and answers

A shoe repairer renders a direct (personal) service to customers.

Capital (producer) goods such as machines are used to make other goods.

Division of labour splits work into tasks so each worker specialises.

Land, labour, capital and entrepreneur together are the factors of production.

Through exchange people obtain goods they do not produce themselves.

Co-operatives share surplus according to how much each member bought (patronage).

Issuing debentures (or more shares) raises long-term capital.

Warehousing stores goods until they are needed.

The deed of partnership sets out how the partnership is run.

A business is insolvent when what it owes is more than what it owns.

Consumer associations protect the interests of buyers.

Registered (nominal) capital = 400,000 × 50k = N200,000.

Issued: 200,000 shares × 50k = N100,000 due; only 50% was received, so paid-up capital = N50,000.

The amount demanded on the 200,000 issued shares is 200,000 × 50k = N100,000.

A prospectus invites the public to buy a company's shares.

Shareholders of a private company have limited liability, while ordinary partners do not.

A bill of lading is both a contract of carriage and a document of title to the goods.

A department store sells many lines of goods in separate departments.

Mail order firms sell through catalogues, which are costly to print and post; they need no shops or salesmen.

Once the drawee signs (accepts) the bill, it can be passed on to others.

A debit note corrects an undercharge, so it adds to what the buyer owes; reducing debits, returns and rebates are done with a credit note.

Before giving credit to a new customer, a seller checks his ability to pay through a status enquiry.

Trade discount gives the retailer his margin (mark-up); prompt payment earns cash discount.

Treasury bills are short-term government borrowing.

Insurance protects people against uncertain future losses.

The law requires notes and coins to be accepted in settlement of debts.

A listed (quoted) company's shares are traded on the stock exchange.

Counterfoils record cheques issued, helping the drawer check his records against the bank statement.

Inflation makes the value of money unstable.

On the telephone the other person replies at once.

A facsimile machine transmits an exact copy of a document over the telephone line almost instantly.

Canals are narrow and shallow, so big ships cannot use them.

Catalogues describe machines cheaply to many buyers; samples of machines are impossible and showrooms are expensive.

Goods made to a customer's order are sold directly to that customer.

Market segmentation divides consumers into groups with similar needs or habits.

ECOMOG was ECOWAS's military monitoring group, a peace-keeping force, not an economic grouping.

Nationalised industries belong to the state, so losses fall on the public (taxpayers).

Vending machines sell small standard items such as cigarettes and drinks.

Technical goods need expert advice, installation and after-sales service, best given directly by the manufacturer.

C.I.F means cost, insurance and freight are all included.

Goods in bond have not paid duty, so customs controls them.

Ownership passes when the hirer has paid the full price.

A dock (warehouse) warrant is the receipt and document of title for warehoused goods.

Factors hold the principal's goods and may keep them until paid.

Place covers distribution: getting goods to where consumers can buy them.

Putting consumers' needs at the centre of all decisions is the marketing concept.

Persuasive advertising appeals to emotions to make people want the product.

Under deferred payment the buyer owns the goods from the first instalment.

Hiding a material fact such as stored petrol breaks the duty of utmost good faith.

A bill is retired when the acceptor pays it before the due date, usually for a rebate.

Any five, explained: ordinary shares (equities) – owners of the company, vote at meetings, dividend varies with profit and is paid last, bear the greatest risk, repaid last on winding up; preference shares – fixed rate of dividend paid before ordinary shares, usually no voting rights, priority in repayment of capital; cumulative preference shares – unpaid dividends in a bad year are carried forward and paid later; non-cumulative preference shares – a missed dividend is lost; participating preference shares – fixed dividend plus a further share of profit after ordinary shareholders receive a stated amount; redeemable preference shares – can be bought back by the company at a fixed date or at its option; deferred/founders' shares – held by founders, receive dividend only after all other shareholders have been paid.

Explain how each class differs in dividend, voting and risk.

(a) Any five, explained: against fake, adulterated or harmful goods and expired drugs; against sub-standard goods; against short weights and measures; against excessive prices and hoarding; against false or misleading advertisements and labels; against unfair credit/hire purchase terms and repossession; because consumers are often ignorant of product details and have little bargaining power against big firms; against monopolies and restrictive practices; to provide means of redress.
(b) Any five: Sale of Goods Act; Hire Purchase Act; Trade Descriptions Act; Weights and Measures Act; Food and Drugs Act (NAFDAC Decree); Standards Organisation of Nigeria Act; Price Control Act; Consumer Protection Council Act; Counterfeit and Fake Drugs Act; Merchandise Marks Act.

Explain each reason in (a); name five laws in (b).

(a) Steps: go to the bank of his choice and ask to open a current account; obtain and fill the account opening (application) form with his personal details; provide two acceptable referees (usually current account holders) who sign reference forms; submit passport photographs and means of identification (and proof of address/employer's letter); give specimen signatures on the signature card; pay in the minimum initial deposit; after references are confirmed the account is opened, and he receives a cheque book and paying-in slips.
(b) Any four: issues currency notes and coins; banker to the government; bankers' bank – keeps commercial banks' reserves and acts as lender of last resort; controls credit and the money supply (bank rate, open market operations, cash reserve ratio, special deposits); manages the national debt; keeps the country's foreign reserves and manages exchange rates; supervises and regulates banks; provides clearing facilities; advises government on monetary policy.

Give the steps in order in (a).

(a) Diagram: TRADE → Home trade and Foreign trade. Home trade → Wholesale and Retail. Foreign trade → Import, Export and Entrepot. (Six branches: home, foreign, wholesale, retail, import, export, entrepot.) Retail outlets shown under Retail (any six): hawkers/itinerant traders; market stalls; kiosks; unit/independent shops; mobile shops; department stores; supermarkets; chain/multiple stores; mail order; vending machines; co-operative retail shops.
(b) Any eight: little capital needed; no fixed shop – goes from place to place; carries goods on head, bicycle or cart; sells small quantities of cheap goods; deals in a few lines of goods, often fast-moving; personal contact with customers; prices often fixed by bargaining; no credit given/cash sales; no rent or rates paid; long and flexible hours; often owner-operated (sole trader); goods exposed to weather and damage; easy to start and stop.

A clear labelled tree diagram is needed in (a).

(a) Branding is giving a product a distinctive name, symbol, design or mark so that it can be identified and distinguished from competitors' products. Examples (any two): Peak milk; Omo detergent; Coca-Cola; Indomie noodles; Golden Penny flour; Lux soap.
(b) Any five: easy identification of the product when buying; assurance of consistent quality and standard; may pay a higher price for the brand; protection against fake products (trademark); helps consumers build loyalty and make repeat purchases easily; informs consumers through brand advertising; makes comparison between products easier; may limit choice or lead to impulse/emotional buying.

Real brand names are needed as examples.

(a) Any five, explained: to explain and demonstrate technical or complex products; to get immediate feedback on customers' needs and complaints; to persuade customers and answer their objections on the spot; to build personal relationships and customer loyalty; to negotiate price and terms with large buyers; to introduce new products; to give after-sales advice and service; to reach buyers who are few in number (industrial buyers).
(b) Any five, explained: owned and controlled by one person; capital provided by the owner (savings, loans from family); unlimited liability – owner's private property can be taken to pay debts; owner takes all profit and bears all losses; quick decision making and flexibility; few legal formalities to start; personal contact with customers and staff; no separate legal entity – the business ends with the owner's death (lack of continuity); usually small in size.

Each point needs a short explanation.

(a) Any five, explained: links buyers and sellers – orders, enquiries and quotations can be sent quickly; speeds up business transactions and decision making; makes advertising possible through the mass media; enables control of branches and agents from head office; helps payment and banking (transfers, electronic banking); widens the market, including foreign trade; reduces the need to travel, saving time and cost; provides market information (prices, supplies); helps in emergencies and in coordinating transport.
(b) Any five, explained: informs consumers about products, prices and where to buy; persuades consumers to buy and increases sales; creates and maintains demand, aiding mass production and lower costs; introduces new products; reminds consumers of existing products and builds brand loyalty; meets competition; educates consumers on uses of products; builds the image of the firm; provides revenue for the media and employment.

Five points each, with explanation.

Fixed assets: fixtures N1,000 + typewriter N4,500 + furniture N2,500 = N8,000.
Current assets: stock N8,000 + debtors N5,000 + cash N7,000 = N20,000.
Total assets = N28,000.
(a) Capital owned = capital + profit = N18,000 + N1,700 = N19,700 (check: total assets N28,000 − all liabilities N8,300 = N19,700).
(b) Working capital = current assets − current liabilities = N20,000 − N4,200 = N15,800.
(c) Current liabilities = creditors N3,000 + bank overdraft N1,200 = N4,200.
(d) Fixed capital = fixed assets = N8,000.
(e) Capital employed = fixed assets + working capital = N8,000 + N15,800 = N23,800 (= capital owned N19,700 + loan N4,100).

Group the items into fixed assets, current assets, current liabilities and long-term liabilities first. The one-year loan is treated as a long-term liability.

(a) Trade association (any two): protects members' interests and represents them before government; sets standards of quality and conduct; provides information and training; settles disputes among members.
(b) Consumer association (any two): protects consumers against exploitation, fake and sub-standard goods; educates consumers on their rights; tests and compares products; presses government for consumer laws; takes up consumers' complaints.
(c) Customs authority (any two): collects import and export duties and excise duties; prevents smuggling and seizes contraband; controls bonded warehouses; enforces import bans and quotas; compiles trade statistics.
(d) Manufacturers' Association (any two): represents manufacturers' interests to government (tariffs, taxes); promotes local manufacturing and use of local raw materials; organises trade fairs and exhibitions; provides information, research and training to members.
(e) Chamber of commerce (any two): promotes trade, commerce and industry in its area; represents business interests to government; organises trade fairs; provides commercial information and issues certificates of origin; settles trade disputes by arbitration.

Two short points under each heading.

(a) A contract is a legally binding (enforceable) agreement between two or more parties, made by offer and acceptance, with consideration, capacity, intention to create legal relations and a legal object.
(b) Any six, explained: performance – both parties do what they promised; agreement – the parties agree to end it or replace it; breach – one party fails to perform, so the other may end it and claim damages; frustration – an event beyond the parties' control makes performance impossible (e.g. destruction of the goods, death); lapse of time – the contract was for a fixed period which has expired; operation of law – death, bankruptcy or insanity of a party, or a change in the law making it illegal; rescission because of misrepresentation, fraud, mistake or duress; merger into a higher contract.

Define with its elements; explain each way of ending a contract.