WAEC Commerce 2000 past questions and answers

Commerce is made up of trade (buying and selling) and the aids to trade such as banking, transport and insurance.

Debentures are loans raised by companies from the public; a sole trader cannot issue them.

A nominal partner only lends his name to the firm and takes no part in running it.

A private limited company restricts the transfer of its shares and cannot sell shares to the public.

Firms at different stages of production (e.g. a farm and a factory) joining together form a vertical merger.

Fixed assets plus current assets give the (gross) capital employed in the business.

Gross profit = (closing stock + sales) − (opening stock + purchases), so P is sales.

Gross profit = (closing stock + sales) − (opening stock + purchases), so G is purchases.

With cumulative preference shares, a dividend not paid in a bad year is carried forward and paid later.

A mortgage debenture is secured on (charged against) the company's assets.

A multiple (chain) shop has many branches in different towns selling a narrow range of goods.

A consignment note goes with goods handed to a carrier (rail or road) for delivery, giving details of the goods and the consignee.

An advice note tells the buyer that goods have been sent and how; it does not show prices.

A drawback is a refund of duty paid on imported goods that are later re-exported.

Comparing both visible and invisible items gives the balance of payments; exports above imports make it favourable.

Branding and packaging are done by manufacturers (or wholesalers), not retailers.

An indent is an order for goods sent by an importer to a foreign supplier or agent.

Warehousing stores goods made ahead of demand until they are needed.

The seller answers an enquiry with a quotation giving prices and terms.

E & OE (errors and omissions excepted) is printed on an invoice so the seller can correct mistakes later.

Trade discount is an allowance off the list price given to traders who buy in large quantities; cash discount is for prompt payment.

A cheque is drawn in local currency on a local bank, so it is not used to pay foreign suppliers; letters of credit and telegraphic orders are.

A bill of exchange is given three days of grace after its due date.

A commodity board markets produce; it does not deal in money or securities.

He writes the cheque (drawer) and receives the money (payee); the bank is the drawee.

Money orders and postal orders are sold and paid out by the post office.

Mortgage banks take savings and give long-term loans for buying or building houses.

Only the central bank issues currency notes.

An annuity pays the insured a regular income for a period, usually after retirement.

Indemnity puts the insured back where he was before the loss, so he is paid the actual loss of N20,000.

After paying a claim the insurer steps into the insured's shoes and takes over his rights: subrogation.

Equities are ordinary shares, whose holders own the company and share its profits after others are paid.

Telex sends typed messages from one teleprinter to another over the lines.

The post office guide gives postal rules, rates and conditions for carrying mail.

Trains can only go where rails are laid, between fixed stations, so they cannot give door-to-door service.

A cargo liner carries goods only on fixed routes between ports.

Sales promotion (free samples, price cuts, gifts, displays) is aimed at boosting sales at once.

Marketing functions are exchange (buying, selling), physical supply, facilitating and information; production comes before marketing.

A brand name lets a firm advertise its product against rivals' products.

Competitive advertising defends existing products and informative advertising introduces new ones.

Trade fairs, shows and exhibitions are sales-promotion methods; jingles, posters and TV are advertising media.

Public relations is planned, continuous effort to keep goodwill between a firm and the public.

In a credit sale ownership passes at once (with the first payment); in hire purchase it passes only after the last.

A del credere agent charges extra commission to guarantee that buyers will pay.

Price control and the Sale of Goods and Trade Descriptions Acts protect buyers; tax laws are for raising revenue.

A valid simple contract needs offer, acceptance, consideration, capacity, intention and legality.

A counter-offer rejects the original offer and puts a new offer in its place.

Consumers have rights to safety, choice, information and value for money; a discount is not a right.

A charter party is the contract to hire a ship; unlike a bill of lading it does not give ownership of the goods.

A doctor gives a personal service straight to the patient: a direct service.

(a) Any four, described: hull insurance (covers the ship and its machinery against perils of the sea; voyage or time policy); cargo insurance (goods carried against loss or damage in transit); freight insurance (covers the freight the owner would lose if cargo is not delivered); ship owner's liability insurance (third-party/collision claims, damage to docks, injury to crew/passengers); time policy; voyage policy; fleet policy; mixed policy.
(b) Indemnity insurance restores the insured to the financial position he was in before the loss, so he cannot profit; the loss can be valued in money. Examples: fire, marine, motor, burglary/theft.
Non-indemnity insurance pays an agreed sum because the loss (life, limb) cannot be measured in money. Examples: life assurance (whole life, endowment), personal accident, annuity.

In (b) the key word is whether the loss can be measured in money.

(a) Industry is the production of goods (extracting raw materials, manufacturing and construction), while commerce is the distribution and exchange of the goods produced (trade and aids to trade).
(b) Commercial occupations (any five, explained): trading/retailing and wholesaling; banking; insurance; transport; communication; warehousing; advertising.
Industrial occupations (three): extractive (farming, fishing, mining); manufacturing (turning raw materials into finished goods); constructive (building roads, houses, bridges).

Industry makes goods; commerce gets them to consumers.

(a) Any five, explained: to raise government revenue; to protect infant/local industries from foreign competition; to correct a balance of payments deficit; to prevent dumping; to discourage the import of harmful or luxury goods; to retaliate against other countries' tariffs; to conserve foreign exchange; to create employment at home.
(b) Any five: collect import and export duties and excise duties; prevent smuggling and illegal imports; examine and clear goods at ports; enforce import/export prohibitions; keep trade statistics; supervise bonded warehouses; check travellers' luggage; grant drawbacks.

Explain each reason in a sentence.

(a) Any six: to protect goods from damage and contamination; to make goods attractive and advertise them; to identify/brand the product; to make goods easy to handle, store and carry; to give information (contents, weight, price, instructions); to make self-service possible; to allow standard quantities and prevent short weight; to preserve goods longer.
(b) Any four: raises cost and price of goods; buyer cannot examine contents; packages may be used to deceive (attractive pack, poor content); waste and pollution from used packs; fixed quantities may not suit every buyer; packaging may be imitated (fake products).

Pre-packaging means goods are packed by the maker before reaching the shop.

(a) Any five, explained: traders move from place to place (hawkers, pedlars, mobile shops); no fixed shop premises; small capital; sell cheap, mostly consumable goods; personal contact with customers; goods carried on head, bicycle or van; low overheads; often sell on cash basis.
(b) Any five: self-service; large shop, usually in towns; wide range of mainly food and household goods; goods pre-packed and price-marked; cash and carry with check-out points; no credit; large capital; attractive displays.

Itinerant means moving about.

Any five, explained: poor transport and road network; poor communication facilities; inadequate banking and finance (low credit); low level of education and illiteracy; political instability; inadequate power supply and infrastructure; low income and low purchasing power; inadequate storage facilities; insecurity and armed robbery; bribery and corruption; government restrictions and multiple taxes; poor attitude to insurance.

Say how each factor slows down trade.

(a) Any seven, explained: unlimited liability of partners (except a limited partner); disagreement among partners; limited capital (members limited to 20); a partner's act binds the others; slow decisions because all must be consulted; profits must be shared; difficulty in transferring a share without consent; lack of continuity (death, retirement or bankruptcy of a partner ends it); loss of independence/personal control.
(b) Any three: where more capital is needed than one person can provide; where different skills are needed (professional practices like law, accounting, medicine); where risks need to be shared; where the business is too large for one person to manage; where the partners trust each other.

Problems in (a) are mainly the disadvantages of partnership.

(a) ECOWAS (any five): to promote trade among member states; to remove customs duties and trade barriers among members; to allow free movement of persons, goods and services; to set up a common external tariff; to improve transport and communication links; to harmonise agricultural, industrial and monetary policies; to raise living standards and promote economic co-operation and peace in the region.
(b) IMF (any five): to promote international monetary co-operation; to promote stable exchange rates; to give short-term loans to members with balance of payments difficulties; to encourage expansion of world trade; to help set up a multilateral system of payments and remove exchange restrictions; to give technical advice to members.

Five aims for each body.

(a) Any five, explained: bank rate (raising it makes borrowing dearer); open market operations (selling securities reduces banks' cash); cash reserve ratio; liquidity ratio; special deposits; selective credit control/directives; moral suasion; licensing and supervision/inspection of banks.
(b) Any five: character and credit-worthiness of the customer; purpose of the loan; customer's ability to repay (income/viability of the business); collateral security or guarantor offered; amount and repayment period; the customer's past dealings with the bank; government/central bank credit policy; the bank's own liquidity.

In (a) say whether each method expands or reduces bank lending.

(i) Marketing concept – the idea that a business should first find out the needs of consumers and produce to satisfy them profitably (the consumer is king).
(ii) Marketing mix – the combination of variables a firm uses to sell its product: product, price, place (distribution) and promotion (the 4 Ps).
(iii) Market segmentation – dividing the whole market into groups of buyers with similar needs (by age, sex, income, location, etc.) and serving each with a suitable marketing mix.
(iv) Product differentiation – making one's product look different from rivals' similar products by brand name, packaging, colour, design or quality.

Define each term clearly.