58 questions. Try each one, then open the answer to check yourself and read the explanation.
A transporter who offers to carry goods for anyone at a fee is called
Answer: B (a common carrier)
A common carrier carries goods for anyone who pays.
A dormant partner is one who
Answer: D (does not partake in running the business)
A dormant (sleeping) partner provides capital but takes no part in running the business.
The right that a debenture holder has on the earnings of a company is
Answer: C (interest)
Debenture holders are lenders and earn interest.
Which of the following does not determine the size of a business unit?
Answer: A (The quality of its products)
Quality of products does not decide how big a business is; capital, market and nature of business do.
The printing of catalogues is one of the costs associated with the operation of
Answer: C (mail order shops)
Mail order firms sell through catalogues.
Labour and entrepreneur are examples of
Answer: A (factors of production)
Land, labour, capital and entrepreneur are the factors of production.
House builders belong to
Answer: B (constructive industry)
Building houses is construction.
Which of the following groups of activities are commercial services?
Answer: B (Vending, purchasing and banking)
Vending, purchasing and banking are all commercial activities; the others mix in industry.
The price quotation where the buyer uses his own means to collect goods from the producer's warehouse is
Answer: B (ex-works)
An ex-works price covers the goods only at the producer's premises; the buyer collects them.
Which of the following is used only in international trade?
Answer: B (Certificate of origin)
A certificate of origin is needed only when goods cross borders; enquiries, proforma invoices and consignment notes are used at home too.
Use the following information: The following information relates to Mallam Amidu Kachella for the year ended 31/12/2005 (₦): Opening stock 4,000; Purchases 16,000; Sales 30,000; Debtors 6,500; Creditors 4,200; Cash in hand 800; Closing stock 5,600; Bank overdraft 3,000.
The average stock is
Answer: B (₦4,800)
Average stock = (4,000 + 5,600) ÷ 2 = ₦4,800.
Use the following information: The following information relates to Mallam Amidu Kachella for the year ended 31/12/2005 (₦): Opening stock 4,000; Purchases 16,000; Sales 30,000; Debtors 6,500; Creditors 4,200; Cash in hand 800; Closing stock 5,600; Bank overdraft 3,000.
The current liability is
Answer: D (₦7,200)
Current liabilities = creditors 4,200 + bank overdraft 3,000 = ₦7,200.
Use the following information: The following information relates to Mallam Amidu Kachella for the year ended 31/12/2005 (₦): Opening stock 4,000; Purchases 16,000; Sales 30,000; Debtors 6,500; Creditors 4,200; Cash in hand 800; Closing stock 5,600; Bank overdraft 3,000.
The cost of goods sold is
Answer: B (₦14,400)
Cost of goods sold = 4,000 + 16,000 − 5,600 = ₦14,400.
When the public wants to buy more of a company's shares than has been offered for sale, the share is said to be
Answer: B (over subscribed)
Applications for more shares than offered make the issue over-subscribed.
Which of the following goods has the lowest rate of turnover?
Answer: C (Refrigerator)
Durable, costly goods such as refrigerators sell slowly; staple foods sell fastest.
Which of the following is not a duty of a credit union?
Answer: D (Confirming members' indebtedness)
Credit unions help members save and borrow; confirming members' debts to others is not their duty.
An association formed to protect the interests of buyers of various commodities is known as
Answer: C (Consumers Association)
A consumers' association protects buyers' interests.
An outright prohibition on the importation of goods to a country is referred to as
Answer: C (embargo)
An embargo is a total ban on imports.
Use the diagram (a Penny Bank PLC, Lagos Branch cheque dated 5th May 2006: 'Pay Udoka A. O. or Order the sum of Ten Thousand Naira Only', ₦10,000, signed John Uwa) to answer the question. The above document is
Answer: D (cheque)
It is a written order on a bank to pay a named person: a cheque.
Use the diagram (a Penny Bank PLC, Lagos Branch cheque dated 5th May 2006: 'Pay Udoka A. O. or Order the sum of Ten Thousand Naira Only', ₦10,000, signed John Uwa) to answer the question. Penny Bank Plc is the
Answer: A (drawee)
The bank on which the cheque is drawn is the drawee.
Which of the following assesses duties payable on imports and exports?
Answer: C (Customs and Excise Authority)
Customs and Excise assesses and collects duties.
Which of the following trends in retailing provides the convenience of shopping without cash?
Answer: C (Credit card)
A credit card lets a shopper buy without cash.
The place where dutiable goods are kept until the duties on them are paid is
Answer: C (bonded warehouse)
Dutiable goods are kept in a bonded warehouse.
The provision of dredging and dry dock facilities at any sea port is the responsibility of
Answer: A (Ports and Harbours Authority)
The ports authority dredges channels and provides dry docks.
The time allowed for unloading and loading a ship is referred to as
Answer: B (lay days)
Lay days are the days allowed for loading and unloading.
Which of the following institutions does not belong to the capital market?
Answer: A (Commercial banks)
Commercial banks deal mainly in short-term funds (money market).
The beneficiary of a cheque is called
Answer: D (payee)
The person to be paid is the payee.
A speculator who applies for a new issue of shares without the intention of keeping them is
Answer: B (stag)
A stag buys new issues to sell quickly at a profit.
Which of the following is not the duty of an agent to the principal?
Answer: D (Making secret profit)
An agent must not make secret profits.
The amount the assured receives if he decides to discontinue the life policy is known as
Answer: C (surrender value)
This is the surrender value.
A specialized market where stocks and shares are bought and sold is
Answer: D (stock exchange market)
Stocks and shares are traded on the stock exchange.
The principle where many insurance companies join to compensate one policy holder is called
Answer: A (contribution)
Insurers of the same risk share the claim under contribution.
Demurrage is paid by a vessel for
Answer: C (delaying at the port)
Demurrage is charged for delay beyond the allowed time.
In a limited partnership, one of the members must be
Answer: A (a general partner)
The law requires at least one general partner with unlimited liability.
It is safer and quicker to transport petrol and gas by
Answer: C (pipeline)
Pipelines carry petrol and gas safely and continuously.
The process of taking over the management and control of a privately owned business by government is
Answer: B (nationalization)
Government taking over private businesses is nationalisation.
Who among the following is a middleman?
Answer: B (Agent)
An agent stands between producer and buyer.
The monopoly right granted to an inventor is a
Answer: C (patent)
A patent protects an invention.
The process of putting goods in attractive packets to arouse the interest of customers is
Answer: D (packaging)
Putting goods in attractive packets is packaging.
Which of the following is not a reason for nationalization?
Answer: A (Encouraging foreign investors)
Nationalisation tends to discourage foreign investors.
Any activity aimed at finding out the wants of consumers and supplying them at a profit is referred to as
Answer: B (marketing)
This defines marketing.
The reduction in the value of a country's currency in relation to other countries' currencies is
Answer: A (devaluation)
This is devaluation.
Which of the following is the main purpose of a third party insurance? To
Answer: A (indemnify an injured outsider)
Third party insurance compensates other people (third parties) injured or whose property is damaged.
The term 'utmost good faith' in insurance requires that the insured must
Answer: C (disclose all relevant facts on what is being insured)
Utmost good faith requires full disclosure of material facts.
Commercial banks usually settle their interbank indebtedness through the
Answer: B (clearing house)
Banks settle with each other at the clearing house.
Which of the following retail outlets is described as selling without shops?
Answer: C (Mail order business)
Mail order firms sell by post without shops.
The difference between the cost of goods sold and the sales value is known as
Answer: C (gross profit or loss)
Sales minus cost of goods sold gives gross profit (or gross loss).
Which of the following is not a feature of a sole trader?
Answer: B (Guaranteed profits)
No business has guaranteed profits.
Commerce 2 (essay)
(a) What is foreign trade?
(b) Explain four ways by which foreign trade is different from home trade.
(c) State five reasons why countries restrict foreign trade.
(a) Foreign trade is the buying and selling of goods and services between countries.
(b) Any four, explained: different currencies are used; language differences; more complex documents; different laws, customs and weights and measures; higher transport costs and greater distance; goods face customs duties and restrictions; greater risks in transit.
(c) Any five: protect infant industries; prevent dumping; raise revenue; correct balance of payments deficits; conserve foreign exchange; prevent importation of harmful goods; create jobs at home; retaliation; political/strategic reasons.
Contrast foreign and home trade point by point.
Commerce 2 (essay)
(a) State three differences between:
(i) Shareholders and debenture holders.
(ii) Ordinary shares and Preference shares.
(b) Explain four reasons for winding up a public limited company.
(a)(i) Any three: shareholders are owners, debenture holders are creditors; shareholders get dividends, debenture holders get fixed interest; shareholders vote, debenture holders do not; debenture interest is paid before dividends and whether or not there is profit; debentures are usually secured and repaid on winding up before shareholders.
(ii) Any three: ordinary shares earn variable dividends, preference shares a fixed rate; preference shares are paid dividends (and capital on winding up) first; ordinary shareholders vote, preference shareholders usually do not; ordinary shares carry the greatest risk; preference shares may be cumulative or redeemable.
(b) Any four, explained: members pass a special resolution to wind up; insolvency – inability to pay debts; court order on a creditor's petition; objects achieved or becomes illegal; fraud or illegal operations; members fall below the legal minimum; failure to start business within a year of incorporation; continued losses.
Owners versus creditors is the key difference in (a)(i).
Commerce 2 (essay)
(a) What is non-indemnity insurance?
(b) List and explain three types of life assurance policies.
(c) Explain the term surrender value.
(a) Non-indemnity insurance is insurance where the loss cannot be measured in money, such as life or personal accident, so an agreed sum is paid rather than restoring an actual loss.
(b) Any three, explained: whole life assurance – pays the sum assured only on death, whenever it occurs; endowment policy – pays on a fixed date or on earlier death; term assurance – pays only if death occurs within a stated period; group life – covers a group of employees under one policy.
(c) Surrender value is the amount the insurer pays the assured if he discontinues (cashes in) a life policy before it matures.
Life assurance is the main example of non-indemnity insurance.
Commerce 2 (essay)
(a) Who is a common carrier?
(b) State three functions of each of the following communication agents:
(i) Post Office;
(ii) Telecommunication;
(iii) Courier companies
(a) A common carrier is a person or firm that carries goods or passengers for anyone who pays the fee, e.g. transport companies and railways.
(b)(i) Post Office (any three): carries letters and parcels; registered and recorded delivery; sells stamps, postal and money orders; post office boxes; poste restante; express mail.
(ii) Telecommunication (any three): telephone and mobile services; internet and e-mail; SMS/text messaging; fax/telex; video conferencing; mobile money.
(iii) Courier companies (any three): fast door-to-door delivery; collection of parcels and documents; tracking of items; local and international delivery; proof of delivery.
Three points for each communication agent.
Commerce 2 (essay)
(a) What is turnover?
(b) The following information relates to Mrs. Lulu, a trader (₦):
Buckets – selling price 4,000; cost price 3,500; selling expenses 400
Boxes – selling price 5,000; cost price 4,000; selling expenses 250
Bournvita – selling price 6,000; cost price 5,500; selling expenses 300
Lace Materials – selling price 12,000; cost price 10,500; selling expenses 1,000
(i) Calculate the gross profit percentage on each item.
(ii) Calculate the net profit on each item.
(a) Turnover is the total value of sales (net sales) made by a business in a period.
(b)(i) Gross profit percentage (on selling price): buckets 500 ÷ 4,000 = 12.5%; boxes 1,000 ÷ 5,000 = 20%; Bournvita 500 ÷ 6,000 ≈ 8.3%; lace materials 1,500 ÷ 12,000 = 12.5%. (On cost price: 14.3%, 25%, 9.1%, 14.3%.)
(ii) Net profit = gross profit − selling expenses: buckets 500 − 400 = ₦100; boxes 1,000 − 250 = ₦750; Bournvita 500 − 300 = ₦200; lace materials 1,500 − 1,000 = ₦500.
Gross profit = selling price − cost price; state whether the percentage is on sales or cost.
Commerce 2 (essay)
(a) Explain seven functions of a commercial bank.
(b) Explain three types of accounts that are operated in a commercial bank.
(a) Any seven, explained: accepts deposits; grants loans and overdrafts; provides means of payment (cheques, transfers, cards); safe custody of valuables; foreign exchange services; discounting bills; financial advice; agency services (paying bills, buying shares); executor/trustee services; electronic banking; issues bank drafts and letters of credit.
(b) Current account – for businesses; cheques used; no or little interest; overdraft possible. Savings account – for small savers; earns interest; withdrawals by withdrawal slip/ATM. Fixed (time) deposit account – money kept for a fixed period; higher interest; notice needed for early withdrawal.
In (b) give a feature of each account.
Commerce 2 (essay)
(a) Define marketing mix.
(b) Explain the term Marketing Concept.
(c) List and describe the four elements of marketing mix.
(a) The marketing mix is the combination of product, price, place and promotion decisions a firm uses to satisfy its target market.
(b) The marketing concept is the idea that a firm should first find out what customers want and then produce and deliver it to satisfy them better than competitors, at a profit; the customer is king.
(c) Product – the good or service, its quality, design, brand and packaging; Price – the amount charged, discounts and terms; Place – distribution channels and locations through which goods reach customers; Promotion – advertising, personal selling, sales promotion and publicity used to inform and persuade customers.
The four Ps: product, price, place, promotion.
Commerce 2 (essay)
(a) List four types each of:
(i) small scale retailers;
(ii) large scale retailers;
(b) Explain four reasons why small scale retailers survive despite the dominance of large scale retail outlets.
(a)(i) Any four: hawkers/itinerant traders; market traders/stall holders; kiosks; mobile shops; roadside traders; tied shops; unit shops.
(ii) Any four: department stores; supermarkets/hypermarkets; chain (multiple) stores; mail order firms; co-operative retail societies; discount stores.
(b) Any four, explained: personal attention to customers; sell on credit to known customers; sell in very small quantities; convenient location close to homes; long, flexible opening hours; low capital needed and low costs; customers can bargain; deliver to customers' homes.
Survival reasons are mainly about personal service and convenience.
Commerce 2 (essay)
(a) State five functions of a chamber of commerce.
(b) Explain five functions of a trade association.
(a) Any five: promotes trade and industry in its area; organises trade fairs and exhibitions; gives business information to members; represents members' views to government; settles disputes among members; issues certificates of origin; promotes international trade links; publishes journals.
(b) Any five, explained: protects members' interests; fixes standards and quality of products; researches and shares technical information; trains members; represents the trade before government; settles disputes; may fix common prices/discourage unfair competition; advertises the industry's products collectively.
A chamber covers many trades in an area; a trade association covers one trade.
Commerce 2 (essay)
(a) State one use of each of the following:
(i) letter of enquiry;
(ii) invoice;
(iii) advice note;
(iv) credit note;
(v) statement of account;
(vi) debit note.
(b) Identify two advantages and two disadvantages of automatic vending.
(a)(i) Letter of enquiry – sent by a buyer to ask about prices, terms and availability of goods.
(ii) Invoice – the seller's bill telling the buyer the goods supplied and the amount owed.
(iii) Advice note – tells the buyer that goods have been despatched.
(iv) Credit note – reduces the amount the buyer owes, e.g. for returned goods or overcharge.
(v) Statement of account – summary of transactions for a period showing the balance the buyer owes.
(vi) Debit note – increases the amount owed when the buyer was undercharged.
(b) Advantages (any two): sells 24 hours; saves labour cost; convenient and quick; no shoplifting by assistants. Disadvantages (any two): limited range of goods; machines break down/need power; vandalism and theft; costly to buy and maintain; no personal service.
One use per document is enough in (a).