58 questions. Try each one, then open the answer to check yourself and read the explanation.
Which of the following was not used as a medium of exchange by the early Europeans that came to West Africa?
Answer: A (Pounds and shillings)
Early European traders used manillas, iron bars and cowries as money; pounds and shillings came only with colonial currency later.
The ancillary to trade which ensures that people gain access to facts pertaining to goods is
Answer: B (advertising)
Advertising gives people information about goods.
Which of the following is classified as an extractive industry?
Answer: A (Digging for minerals)
Mining minerals takes resources from nature.
Who among the following does not render direct service?
Answer: D (Retailers.)
Retailers are in commerce; the others give direct personal services.
A partnership cannot raise its capital by
Answer: A (selling shares to the public)
Only public companies can sell shares to the public.
Which of the following is not required in the Mail Order business?
Answer: C (Display room)
Mail order firms sell by catalogue and post, so they need no display room.
The staff responsible for the calculations of probability of losses in insurance is the
Answer: A (Actuary)
An actuary calculates the probability of losses.
The rate at which the country's import exchanges for its export is known as
Answer: A (Terms of trade)
Terms of trade is the rate at which exports exchange for imports.
Where a limited partner exists in a partnership,
Answer: C (at least one ordinary partner must be there.)
A limited partnership must have at least one general (ordinary) partner with unlimited liability.
Which of the following is best organized as a partnership?
Answer: C (Designing and building of houses)
Professional services such as architecture and building suit partnerships; the others need huge capital.
Public enterprises are financed mainly by
Answer: C (government grants)
Government grants mainly finance public enterprises.
Contributing money to buy equipment for making and marketing a product is a feature of
Answer: D (producers' cooperatives.)
Producers' co-operatives pool money for equipment to produce and market their goods.
The various rights attached to different classes of shares are stated in the
Answer: A (articles of association)
The articles set out the rights of each class of shares.
Which of the following gets extra dividend after its due fixed rate of dividend?
Answer: D (Participating preference shares.)
Participating preference shares share in extra profits after their fixed dividend.
A company may be wound up when
Answer: A (there is a disagreement among the directors)
A deadlock among directors that stops the company working is a ground for winding up by the court.
If the opening stock is Le200, cost of goods sold Le2,400, and closing stock Le120, then the rate of turnover is
Answer: B (15 times)
Average stock = (200 + 120) ÷ 2 = Le160; 2,400 ÷ 160 = 15 times.
The money used by Njie & Co. Ltd in running the day-to-day activities of the business is represented by
Answer: D (current assets less current liabilities.)
Working capital = current assets − current liabilities.
A limited company has an authorized capital of 20,000,000 shares. If each share capital costs 50k and the company sold 12,000,000 shares. Its issued capital is
Answer: C (₦6,000,000)
Issued capital = 12,000,000 × ₦0.50 = ₦6,000,000.
A document used to advertise shares for sale is
Answer: A (prospectus)
A prospectus advertises shares to the public.
Which of the following refers to a voluntary association that represents a cross-section of business interests in an area?
Answer: B (Chamber of Commerce)
A chamber of commerce represents a cross-section of business interests in an area.
Which of the following is used to show that goods imported were produced in an ECOWAS member country?
Answer: C (Certificate of origin)
The certificate of origin shows where goods were produced.
Importing goods into a country for re-exporting is known as
Answer: C (entrepôt trade)
Importing to re-export is entrepôt trade.
Which of the following is a function of the small retailer?
Answer: D (Selling to consumers.)
Retailers sell to consumers.
The content of a bill of lading does not include the
Answer: D (demurrage payable.)
Demurrage is a later charge for delay, not part of the bill of lading.
Who is responsible for the payment of the bill in a documentary credit?
Answer: B (Importer)
The importer (buyer) must finally pay for the goods.
A popular product priced low to attract a larger number of buyers to a shop is called
Answer: A (loss leader)
A loss leader is priced low to draw customers.
Centralized buying and decentralized selling are features of
Answer: D (multiple stores.)
Multiple stores buy centrally at head office and sell through many branches.
Which of the following is not a feature of a self-service store?
Answer: B (It offers steady employment opportunities)
Self-service stores need few staff, so steady employment is not their feature.
If a share is sold at a price below its face value, it is sold
Answer: B (at a discount)
Below face value means at a discount.
Mr. Ojo buys a book from a bookseller and pays cash. The bookseller will issue him a
Answer: D (receipt.)
A receipt is given for cash paid.
A limited company can raise long term capital through the
Answer: B (stock exchange market)
Companies raise long-term capital through the stock exchange.
Which of the following is not a reason for dishonouring a cheque?
Answer: D (Poor handwriting.)
Poor handwriting alone is not a reason to refuse a cheque.
Which of the following is not a function of the Central Bank?
Answer: D (Granting loans to the public.)
The central bank does not lend to the general public.
Treasury bills are bought and sold in the
Answer: D (Money market.)
Treasury bills are short-term securities traded on the money market.
Which of the following is a legal tender?
Answer: A (Bank notes)
Bank notes must be accepted in payment by law.
Which of the following is referred to as the oldest form of insurance?
Answer: A (Marine insurance)
Marine insurance is the oldest form of insurance.
An open cheque is one
Answer: C (which can be cashed over the counter)
An open (uncrossed) cheque can be cashed over the counter.
Use the following information: Madam Tope insured her shop premises for the sum of D60,000, when insuring the shop, she did not tell the Insurance Company that she cooks in the shop, but told the Insurance Company that she sells second hand clothes. Hence she insured her store against natural causes. Tope's shop got burnt yesterday by fire from the cooking pot.
Which of the following insurance principles was breached by Madam Tope?
Answer: C (Utmost good faith)
She hid the fact that she cooks in the shop, breaking utmost good faith.
Use the following information: Madam Tope insured her shop premises for the sum of D60,000, when insuring the shop, she did not tell the Insurance Company that she cooks in the shop, but told the Insurance Company that she sells second hand clothes. Hence she insured her store against natural causes. Tope's shop got burnt yesterday by fire from the cooking pot.
Which of the following insurance principles will prevent her from claiming compensation?
Answer: C (Proximate cause)
The shop was insured against natural causes, but the fire came from cooking, which was not an insured cause.
Use the following information: Madam Tope insured her shop premises for the sum of D60,000, when insuring the shop, she did not tell the Insurance Company that she cooks in the shop, but told the Insurance Company that she sells second hand clothes. Hence she insured her store against natural causes. Tope's shop got burnt yesterday by fire from the cooking pot.
The amount of D60,000 quoted represents
Answer: B (sum insured)
D60,000 is the value for which the shop was insured: the sum insured.
If the charterer delayed the ship beyond the lay days, he is asked to pay
Answer: B (demurrage)
Delay beyond lay days attracts demurrage.
Which of the following involves the delivery of mails to a traveller without fixed address?
Answer: D (Poste restante.)
Poste restante holds mail for travellers to collect.
A document showing full details of the goods and passengers carried in a ship or aircraft is
Answer: C (Manifest)
A manifest lists all cargo and passengers on board.
Which of the following provides evidence of receipt of an important document sent through the post?
Answer: A (Recorded delivery service)
Recorded delivery gives proof that the item was received.
Which of the following is an advantage of transportation by sea?
Answer: B (It is a cheaper means of transporting goods)
Sea transport is cheap for bulky goods over long distances.
Which of the following refers to the division of a market into identifiable sub-markets?
Answer: B (Market segmentation)
Market segmentation divides a market into sub-groups.
A specialist on the stock exchange who buys and sells securities in his own name is a
Answer: D (Jobber.)
A jobber deals in securities on his own account.
A document showing that a person has shipped certain goods through a named ship is
Answer: A (bill of lading)
The bill of lading shows goods shipped on a named ship.
Commerce 2 (essay)
(a) Explain six functions of wholesalers to manufacturers.
(b) State four problems that a cooperative society may likely face.
(a) Any six, explained: buys in bulk, so the manufacturer can mass-produce; provides storage, saving the manufacturer warehouse space; finances manufacturers by paying promptly or in advance; gives market information on consumers' tastes; bears risks of price changes and damage; advertises and promotes the goods; distributes goods to many retailers; may grade, pack and brand goods.
(b) Any four: shortage of capital; embezzlement/mismanagement by officials; members failing to repay loans; lack of education/expertise of members and officials; poor record keeping; disagreements and favouritism among leaders; competition from big businesses.
In (a) say how each service helps the manufacturer.
Commerce 2 (essay)
(a) Explain five advantages of large scale retailing
(b) State five characteristics of each of the following:
(i) Department Stores;
(ii) Supermarkets.
(a) Any five, explained: economies of scale/bulk buying lowers costs; can afford wide advertising; risk spread over many branches or departments; can employ specialist staff; access to large capital; one-stop shopping/variety of goods; after-sales services; cash sales reduce bad debts.
(b)(i) Department stores (any five): many departments under one roof; each department under a manager; located in city centres; wide variety of goods; customer facilities (restaurants, car parks); one-stop shopping; large premises; usually high prices and quality goods.
(ii) Supermarkets (any five): self-service; goods price-tagged on open shelves; check-out points at exit; trolleys and baskets; mainly food and household goods; cash-and-carry; in towns/populated areas; few sales staff.
Give five points for each store type in (b).
Commerce 2 (essay)
(a) What is balance of payments?
(b) List and explain six methods used in correcting an adverse balance of payment.
(a) Balance of payments is a record of all a country's receipts from and payments to other countries (visible and invisible trade and capital flows) over a period, usually a year.
(b) Any six, explained: import restrictions (tariffs, quotas, bans); export promotion; devaluation; exchange control; import substitution industries; foreign loans/IMF assistance; attracting foreign investment; reducing government spending abroad; encouraging tourism; deflationary policies.
Each method should reduce payments or raise receipts.
Commerce 2 (essay)
Differentiate between the following paired terms:
(a) Trade discount and cash discount;
(b) Branding and packaging;
(c) Indemnity and compensation;
(d) Cash receipt and invoice;
(e) Credit sales and hire purchase.
(a) Trade discount is a reduction off the list price given to traders to enable them to make profit; cash discount is a reduction given for prompt payment.
(b) Branding gives a product a distinctive name or mark to identify it; packaging wraps it to protect it and make it attractive.
(c) Indemnity restores the insured to his position before an insured loss (property insurance); compensation is an agreed sum paid where loss cannot be measured in money (life, personal accident).
(d) A cash receipt acknowledges money received for goods; an invoice is a bill from the seller stating goods supplied and the amount owed.
(e) In a credit sale ownership passes to the buyer at once and goods cannot be repossessed; in hire purchase ownership passes only after the last instalment and goods can be repossessed.
Give one clear contrast for each pair.
Commerce 2 (essay)
(a) List and explain four elements of a valid contract.
(b) Explain four duties of an agent to the principal.
(a) Any four, explained: offer; acceptance (unconditional); consideration (something of value each side gives); capacity of the parties; intention to create legal relations; legality of the object; genuine consent.
(b) Any four, explained: obey the principal's lawful instructions; act with care and skill; act in good faith/avoid conflict of interest; not make secret profits or take bribes; render proper accounts and pay over money received; not delegate his duties without consent; keep the principal's information confidential.
Explain each element and duty briefly.
Commerce 2 (essay)
(a) Amatco Ltd has an authorized capital of 6,000,000 ordinary shares of D5.00 per share. It issued 3,000,000 ordinary shares and all such shares were bought and paid for at D2.00 a share except 1,000 shares taken by Mr. Jones.
Calculate the value of the:
(i) authorized capital;
(ii) issued capital;
(iii) called-up capital;
(iv) paid-up capital.
(b) The following are the assets and liabilities of Morgan's Ltd:
Cash – ₦8,000
Building – ₦81,000
Creditors – ₦6,500
Sales returns – ₦12,000
Debtors – ₦18,000
Capital – ₦122,500
Overdraft – ₦11,000
Motor vehicle – ₦20,000
Sales – ₦50,000
Net profit – ₦20,000
Calculate the value of:
(i) working capital;
(ii) net sales;
(iii) net profit percentage;
(iv) fixed assets
(a)(i) Authorised capital = 6,000,000 × D5 = D30,000,000.
(ii) Issued capital = 3,000,000 × D5 = D15,000,000 (nominal value of shares issued).
(iii) Called-up capital = 3,000,000 × D2 = D6,000,000.
(iv) Paid-up capital = 2,999,000 × D2 = D5,998,000 (Mr. Jones's 1,000 shares unpaid).
(b)(i) Current assets = cash 8,000 + debtors 18,000 = ₦26,000; current liabilities = creditors 6,500 + overdraft 11,000 = ₦17,500; working capital = ₦8,500.
(ii) Net sales = 50,000 − 12,000 = ₦38,000.
(iii) Net profit percentage = 20,000 ÷ 38,000 × 100 ≈ 52.6%.
(iv) Fixed assets = building 81,000 + motor vehicle 20,000 = ₦101,000.
Called-up capital uses the amount called per share (D2), not the nominal value.
Commerce 2 (essay)
Outline five objectives of each of the following:
(a) International Monetary Fund (IMF).
(b) European Economic Community (EEC).
(a) IMF (any five): promote international monetary co-operation; promote exchange-rate stability; help members correct balance of payments deficits with short-term loans; encourage growth of world trade; help remove foreign exchange restrictions; set up a multilateral system of payments; give technical advice on economic policy.
(b) EEC (any five): remove tariffs and quotas among members; common external tariff on non-members; free movement of people, goods, services and capital; common agricultural policy; common transport and competition policies; raise living standards of members; promote closer economic and political co-operation.
Five objectives for each body.
Commerce 2 (essay)
On June 17, 2006, Mr. Cham wrote an order cheque for M. Sumarch for D500 drawn on Standard Chartered Bank, Bakau.
(a) State the drawer, the payee and the drawee from the above information
(b) The cheque is crossed "Account Payee only" and "Not Negotiable". Explain four effects of the crossing.
(c) State three advantages of payment by cheque.
(a) Drawer – Mr. Cham; payee – M. Sumarch; drawee – Standard Chartered Bank (Bakau).
(b) Any four: it cannot be cashed over the counter; it must be paid into the payee's (M. Sumarch's) bank account; the collecting bank must make sure it is credited only to the named payee; anyone to whom it is transferred gets no better title than the transferor; it protects against theft and fraud; payment can be traced.
(c) Any three: safer than carrying cash; convenient for large or distant payments; serves as evidence/record of payment; payment can be stopped if lost; saves time counting cash.
The bank on which a cheque is drawn is the drawee.
Commerce 2 (essay)
(a) State six facilities a good seaport should have.
(b) In what four ways is transport important to commerce?
(a) Any six: deep water/safe harbour; berths/quays; cranes and cargo-handling equipment; warehouses and bonded stores; good road and rail links; dry docks/repair facilities; customs and port offices; security; lighthouses/navigation aids; fuel and water supply; container terminals.
(b) Any four: moves goods from producers to consumers (place utility); widens the market; encourages specialisation and mass production; moves raw materials to factories; creates employment; helps keep prices stable by moving goods to scarce areas; aids foreign trade.
Seaport facilities cover ships, cargo and links inland.
Commerce 2 (essay)
(a) Explain five functions of advertising.
(b) Explain three merits and two demerits of newspaper advertising.
(a) Any five, explained: informs consumers about products; persuades people to buy; introduces new products; increases sales; meets competition; builds brand image; educates on uses; reminds customers.
(b) Merits (any three): newspaper can be kept for reference; pictures and details can be given; wide circulation; relatively cheap per reader; can target regions/readers; can be in local languages; quick to place.
Demerits (any two): reaches only literate people; short life (read once and discarded); poor colour/picture quality may misrepresent goods; limited coverage in remote areas; no sound or movement.
Newspaper merits centre on permanence and detail; demerits on literacy and reach.