WAEC Commerce 2002 past questions and answers

Commerce deals with distributing and exchanging goods and services.

Manufacturing raw materials into finished goods is secondary production.

Industry (extraction, manufacturing, construction) actually makes the goods; commerce distributes them.

Membership of a co-operative society is open, with no maximum; partnerships and private companies have upper limits.

A partnership can exist without a written deed (the Partnership Act then applies), so lack of a deed does not end it.

A customs drawback refunds import duty on goods that are re-exported.

A take-over bid is an offer to buy enough shares to gain control of another company.

A company can sue and be sued, so II is false; I, III and IV are features.

Retained (ploughed-back) profit comes from inside the business; the others are borrowed.

Cost of goods sold = 3,500 + 30,000 − 3,000 = 30,500; gross profit = 38,000 − 30,500 = N7,500.

Average stock = (3,500 + 3,000) ÷ 2 = 3,250; rate = 30,500 ÷ 3,250 ≈ 9.4 times.

Turnover is the total net sales for the period: N38,000.

Ex-dividend means without the dividend: the seller keeps the dividend about to be paid, not the buyer.

The prospectus gives details of the company and the shares offered to the public.

A consortium is a temporary association of firms for a large project.

A tied shop sells only the goods of one manufacturer (e.g. a petrol station of one oil company).

The exchange rate is the price of one currency in terms of another.

A bill of exchange becomes binding when the drawee accepts it by signing across it.

Balance of trade compares visible items; it is unfavourable when visible imports are greater than visible exports.

Counter trade is international barter: goods exchanged for goods.

Chain stores and multiple shops are the same: many branches under one firm.

A department store has many departments offering a wide variety of goods.

Under hire purchase, ownership passes only when the last instalment is paid.

The buyer asks about prices and terms in a letter of enquiry; the seller replies with a quotation.

The drawer of a bill usually draws it in his own favour, so if he keeps it (does not discount it) he is also the payee.

A cheque not presented within six months becomes stale and the bank will not pay it.

Fully paid shares can be converted into stock.

The bank rate (minimum rediscount rate) is the rate at which the central bank lends to banks.

Re-insurance passes part of a risk to another insurer.

Hull insurance covers the ship itself and its machinery.

After being compensated, the insured must hand over his rights over the damaged property to the insurer.

Being recognisable is a quality (characteristic) of good money, not a function.

A promoter forms companies; bulls, brokers and jobbers deal on the stock exchange.

Legal tender is money that must by law be accepted in payment: coins and bank notes.

Distance, value and urgency affect the choice; the brand of vehicle does not.

An important document is sent by recorded delivery so its delivery is signed for and can be proved.

A teleprinter (telex) sends only typed text, not pictures.

Giving a product a distinctive name is branding.

ECOWAS is an economic community of West African states aiming at economic integration.

Delivering goods to buyers is a service to customers.

A crossed cheque must be paid into a bank account, so a thief cannot cash it over the counter.

Agreement obtained by threats or force is made under duress.

Government regulation aims to ensure fair dealing and protect consumers.

Consideration is an element needed to form a contract, not a way of ending one.

Changing the terms by adding a new condition turns the reply into a counter-offer.

An agent of necessity acts in an emergency without an agreement, so his duty rests on good faith (trust).

Nationalisation transfers a private business to government ownership.

Traders in the same line of business form a trade association to protect their interests.

(a) Any four: voluntary and open membership; democratic control (one member, one vote); profits shared according to patronage (purchases) or as dividend; limited interest on capital; registered with limited liability/separate legal entity; aims at service to members rather than profit; encourages thrift; managed by an elected committee.
(b) Any three, explained: consumer (retail) co-operative – consumers buy in bulk and sell to members at fair prices; producer co-operative – producers (e.g. farmers) pool resources to produce and market their output; thrift and credit (savings) co-operative – members save regularly and borrow at low interest; marketing co-operative; wholesale co-operative.

Explain what each type does for its members.

(a) Any five: buys in bulk from manufacturers and breaks bulk for retailers; warehousing/storage; finances manufacturers (prompt payment) and retailers (credit); bears risks; grades, packs and brands goods; transports goods; gives information and advice between makers and retailers; stabilises prices.
(b) Any five, explained: manufacturers have their own transport and warehouses; large-scale retailers (supermarkets, chain stores) buy direct; goods are branded, pre-packed and advertised; perishable goods need quick delivery; technical goods need expert advice and after-sales service; costly goods of high value; manufacturers want to control prices and quality; to reduce prices by cutting middlemen's profit; good communication and credit facilities; co-operative societies buying direct.

In (b) say why the manufacturer or retailer no longer needs the wholesaler.

(a)(i) Consequential loss – insurance against loss of profit and extra costs that follow when insured property is damaged (e.g. by fire) and the business cannot operate for a time.
(ii) Cover note – a temporary document issued after the proposal form is completed, giving cover (usually for about 30 days) until the policy is issued or the proposal is declined.
(b) Any four: compensation for loss so business can continue; reduces/transfers risk and worry, encouraging investment; policies can serve as collateral for loans; encourages saving (endowment, pensions for staff); fulfils legal requirements (e.g. motor, employer's liability); protects against liability to third parties; source of funds for investment.

Explain each term in a sentence or two.

(a) A Chamber of Commerce is a voluntary association of businessmen (manufacturers, traders, bankers, insurers, etc.) in a town or area, formed to promote and protect their common commercial interests.
(b) Any six: represents manufacturers in dealings with government (pressure group); influences policies on industry, tariffs and taxes; collects and circulates information to members; encourages high quality standards; sponsors research into raw materials and methods; settles disputes among members; negotiates with trade unions; organises trade fairs and exhibitions; advises members on technical and legal matters.

Note (b) asks about a manufacturers' association, not the chamber.

(a) Any four: customers can look round and choose freely; encourages impulse buying, so sales rise; fewer shop assistants, so lower wage costs; quick service and saves time; no bargaining (prices are marked); goods can be displayed attractively.
(b) Any six, explained: open, attractive shelves with goods clearly displayed; goods pre-packed and price-marked; spacious floor and aisles; trolleys and baskets; check-out points/cash desks with cash registers near the exit; security measures (mirrors, cameras, guards) against shoplifting; clear signs for sections; parking space for customers.

Self service means customers serve themselves and pay at a check-out.

(a) Any five, explained: high tariffs (import duties); import quotas; import licences; exchange control (rationing foreign exchange); outright ban/embargo; import deposits; subsidies to local industries producing substitutes; devaluation.
(b) Any five, explained: export subsidies and tax relief; export credit guarantee/insurance; trade fairs and exhibitions abroad; export promotion council and market information; devaluation (making exports cheaper); removing export duties; export processing (free) zones; improving quality standards; better port facilities; trade agreements with other countries.

Explain how each measure works.

(a) An advertising medium is the means or channel through which an advertising message is passed to the public.
(b) Any eight: newspapers; magazines; radio; television; cinema; posters/billboards (hoardings); handbills/leaflets; neon signs; vehicle stickers/transport adverts; window displays; catalogues; trade fairs; free samples; internet/social media; loudspeaker vans.
(c) Any five: cost of the medium; target audience (age, sex, income, literacy); area covered/number of people reached; nature of the product; media used by competitors; availability of the medium in the area; government regulations; how often the message must be repeated.

Eight different media are needed in (b).

(a)(i) Turnover – the total net sales of a business in a period.
(ii) Rate of turnover – the number of times the average stock is sold in a period (cost of goods sold ÷ average stock).
(iii) Net profit – gross profit less all expenses.
(b)(i) Cost of goods sold = 1,000 + 10,000 − 5,000 = N6,000.
(ii) Average stock = (1,000 + 5,000) ÷ 2 = N3,000; rate of turnover = 6,000 ÷ 3,000 = 2 times.
(iii) Gross profit = 15,000 − 6,000 = N9,000; net profit = 9,000 − wages 1,000 = N8,000.

Find gross profit first, then take off expenses (wages).

(a) Price list – tells buyers the prices of goods (and terms such as discounts); lets retailers compare suppliers' prices; helps salesmen quote prices.
(b) Delivery note – sent with goods so the buyer can check them on arrival; when signed it is proof that goods were delivered.
(c) Consignment note – accompanies goods sent by an independent carrier (rail/road), giving details of the goods; signed by consignee as evidence of delivery; contract with the carrier.
(d) Advice note – informs the buyer that the goods have been sent; states when and how they were sent, so he can prepare to receive them.
(e) Proforma invoice – used where payment is required before delivery (cash with order); sent to agents with goods on consignment; used as a quotation; used to apply for import licence/foreign exchange.

Two uses for each document.

(a) Any four: registered mail costs more (registration fee); sender gets a receipt as proof of posting; recipient signs on delivery; compensation is paid if it is lost; it is handled separately and more securely; used for valuables and important documents; can be traced. Ordinary mail has none of these.
(b) Advantages (any two): cheap for bulky, heavy goods over long distances; carries large quantities at once; fairly safe and regular (fixed timetable); not affected by road congestion.
Disadvantages (any two): no door-to-door service (fixed routes and terminals); not flexible; extra handling causes damage and cost; slow for short distances; limited network.

Compare registered with ordinary mail point by point.