59 questions. Try each one, then open the answer to check yourself and read the explanation.
Commerce can be defined as the
Answer: B (distribution and exchange of goods and services)
Commerce covers both the distribution and the exchange of goods and services.
Which of the following is not a function of commerce?
Answer: C (Creates goods and services)
Creating goods is production (industry); commerce distributes them.
Production is defined as
Answer: B (creation of utilities)
Production is the creation of utilities (usefulness) to satisfy wants.
Babou Penn, a fisherman, says he has all necessary materials to go to sea today, except the captain of his boat. Captain here as a factor of production, refers to
Answer: C (labour)
The captain provides human effort, so he is labour.
Farmers and all other workers concerned with getting raw materials from the earth are engaged in
Answer: D (extractive occupation.)
Getting raw materials from nature is extractive occupation.
The process of making goods attractive and easy to handle is
Answer: C (packaging)
Packaging makes goods attractive and easy to handle.
The charges imposed by the government on locally manufactured goods is called
Answer: B (excise duties)
Excise duty is levied on locally made goods.
A grocer invoiced a carton of fish valued at N2,500 for N2,000 only. To correct the error, which of the following documents would be sent to the buyer?
Answer: B (Debit note for N500.00)
The buyer was undercharged by N500, so a debit note for N500 is sent.
The exchange of goods and services among many countries is
Answer: A (multilateral trade)
Trade among many countries is multilateral.
If a ship overstays its stipulated time at a port, it pays a charge known as
Answer: B (demurrage)
Demurrage is charged for overstaying.
A transaction where the buyer of a commodity becomes its legal owner after the payment of the last instalment is
Answer: C (hire purchase)
Under hire purchase ownership passes after the last instalment.
An agreement whereby the seller transfers or agrees to transfer the property in goods for a monetary consideration is a
Answer: A (contract of sale)
This is the legal definition of a contract of sale.
The main purpose of sending delivery notes along with goods is to
Answer: A (enable the goods to be checked on arrival)
The buyer checks the goods received against the delivery note.
A shop that sells only the products of a particular manufacturer is known as
Answer: C (tied shop)
A tied shop sells only one manufacturer's products.
Which of the following statements cannot be found in a partnership deed?
Answer: C (Payment of tax)
Tax is fixed by law, not by the partnership deed.
Product differentiation is achieved by
Answer: A (packaging and branding)
Branding and distinctive packaging make a product look different from rivals.
Which of the following services is not offered to retailers by wholesalers?
Answer: A (Keeping them informed of the demands of consumers)
Retailers, who meet consumers, tell wholesalers about consumers' demands, not the other way round.
The buying and selling of goods and services within a country is called
Answer: D (home trade.)
Trade within a country is home trade.
The relationship between partners is stipulated in the
Answer: C (Partnership Deed)
The partnership deed sets out the partners' relationship.
Which of the following cannot be used to regulate importation?
Answer: D (Increase of excise duty.)
Excise duty falls on local goods, so it does not control imports.
A firm that accepts, sells and delivers goods by post is a
Answer: D (mail order business.)
Mail order firms sell and deliver by post.
Okoni & Co. law chamber is an example of a
Answer: B (partnership)
Professional firms such as law chambers named '& Co.' are usually partnerships.
A refund of the duty collected on goods imported into a country which are later re-exported is called
Answer: C (customs drawback)
Customs drawback refunds import duty on re-exported goods.
Which of the following is mostly used by a mail order business to sell goods?
Answer: B (Catalogues)
Mail order firms sell mainly through catalogues.
Information requested from a bank concerning the credit worthiness of a new customer to a business is
Answer: B (status enquiry)
A status enquiry asks a bank about a customer's creditworthiness.
The document which gives legal authority to a company to operate as a legal entity is
Answer: D (Certificate of Incorporation.)
The certificate of incorporation gives a company legal existence.
A business that is independent of its owners is a
Answer: C (limited liability company)
A limited company is a separate legal entity from its owners.
The amount paid regularly by the assured to the insurer is
Answer: B (premium)
The regular payment for insurance cover is the premium.
Net profit is calculated as
Answer: C (gross profit less expenses)
Net profit = gross profit − expenses.
Which of the following carries specialized goods?
Answer: D (Tanker.)
Tankers are built for special cargoes such as oil.
In sea transport, vessels that operate on fixed routes and schedules are called
Answer: C (liners)
Liners run on fixed routes and timetables.
Which of the following advertising media combines the advantages of both sight and sound?
Answer: A (Television)
Television gives both pictures and sound.
One disadvantage of advertising to the consumer is that it
Answer: A (brings confusion on the choice of goods)
Many competing adverts can confuse consumers about which product to choose.
Which of the following is not a sales promotion method?
Answer: D (Newspaper.)
A newspaper is an advertising medium, not a sales promotion method.
Working capital is
Answer: D (current assets less current liabilities.)
Working capital = current assets − current liabilities.
A cheque dated 30th July, 2004 but presented for payment on 28th February, 2005 is
Answer: D (stale)
It was presented more than six months after its date, so it is stale.
Use the following information: This extract is from Eniola 'Computer Services, Aba' (₦): Sales 200,000.00; Stock 1/1/2004 25,000.00; Stock 31/12/2004 35,000.00; Purchases 145,000.00; Returns inwards 20,000.00; Sales and distribution expenses 13,000.00; Wages and salaries 8,000.00.
The average stock is
Answer: C (N30,000.00)
Average stock = (25,000 + 35,000) ÷ 2 = N30,000.
Use the following information: This extract is from Eniola 'Computer Services, Aba' (₦): Sales 200,000.00; Stock 1/1/2004 25,000.00; Stock 31/12/2004 35,000.00; Purchases 145,000.00; Returns inwards 20,000.00; Sales and distribution expenses 13,000.00; Wages and salaries 8,000.00.
The cost of goods sold is
Answer: A (N135,000.00)
Cost of goods sold = 25,000 + 145,000 − 35,000 = N135,000 (returns inwards are deducted from sales, not purchases).
Which of the following receives dividend based on patronage?
Answer: B (Co-operative society member)
Co-operative members share surplus according to how much they bought (patronage).
If a customer opens a deposit account with a bank, he will
Answer: D (receive interest.)
Deposit (savings/time) accounts earn interest.
A chamber of commerce normally consist of
Answer: D (the people who represent a cross-section of business interests in a town.)
A chamber of commerce represents a cross-section of business interests in an area.
A group of musicians can come together to form a
Answer: C (trade association)
Musicians in the same line of work can form a trade association to protect their interests.
Which of the following is not an advantage of marketing?
Answer: C (Implementing government regulations)
Implementing government regulations is not a marketing benefit.
One disadvantage of indigenization is that it
Answer: D (discourages foreign investment.)
Forcing foreigners to give up ownership can scare away foreign investors.
The takeover by government of Sanking Sillah and Sons Ltd is referred to as
Answer: D (nationalization.)
Government taking over a private firm is nationalisation.
Which of the following economic unions is made up of countries in West Africa only?
Answer: B (ECOWAS)
ECOWAS is made up of West African states only.
People who sell shares in anticipation of a fall in their value are called
Answer: A (bears)
Bears sell expecting prices to fall.
Which of the following is not a favourable condition under which personal selling can be practised?
Answer: C (When the market is dispersed)
Personal selling is costly when buyers are widely scattered, so a dispersed market does not favour it.
A shareholder who holds 100,000 shares of 50 butts each is given a dividend of 10 per cent less 2 per cent tax. What is his net return?
Answer: D (D4,900.00.)
Share value = 100,000 × 50 butts = D50,000; dividend 10% = D5,000; less 2% tax (D100) = D4,900.
Commerce 2 (essay)
Compare a partnership and a public limited company as business units under the following headings:
(a) formation;
(b) ownership;
(c) raising of capital;
(d) liability
(e) transfer of shares.
(a) Formation: partnership – simple and cheap, by agreement or deed of 2–20 partners; PLC – registration with memorandum, articles and other documents, certificates of incorporation and trading; costly and slow.
(b) Ownership: partnership – owned and usually managed by the partners; PLC – owned by shareholders, managed by a board of directors (ownership separate from management).
(c) Raising of capital: partnership – partners' contributions and loans; PLC – sale of shares and debentures to the public.
(d) Liability: partnership – unlimited (except limited partners); PLC – limited to the shares held.
(e) Transfer of shares: partnership – a partner cannot transfer his share without the others' consent; PLC – shares freely transferable on the stock exchange.
Give both sides under each heading.
Commerce 2 (essay)
Write short notes on the following types of retail outlets:
(a) supermarket;
(b) mobile shops;
(c) department stores;
(d) chain stores
(e) hawking.
(a) Supermarket – large self-service shop selling mainly food and household goods, price-marked, with check-out points; usually in towns.
(b) Mobile shops – vans fitted as shops that carry goods to customers in different areas; limited range of goods.
(c) Department stores – large shops with many departments under one roof and one management, each with its own manager; offer one-stop shopping and extra services.
(d) Chain stores – many branches of one firm in different towns, with similar shop fronts, the same line of goods, uniform prices and central buying.
(e) Hawking – a trader carries goods about, moving from place to place looking for buyers; needs little capital and sells mostly consumable goods.
Two or three features for each outlet is enough.
Commerce 2 (essay)
Explain the following insurance terms:
(a) proximate cause;
(b) contribution;
(c) utmost good faith;
(d) re-insurance;
(e) contract of non-indemnity (compensation).
(a) Proximate cause – the insured is paid only if the main (dominant) cause of the loss is a risk covered by the policy.
(b) Contribution – where the same property is insured with several insurers, each pays its share of the loss, so the insured cannot recover more than the loss.
(c) Utmost good faith – both parties must disclose all material facts truthfully; failure makes the contract voidable.
(d) Re-insurance – an insurer passes part of a big risk to another insurer to spread it.
(e) Contract of non-indemnity – where loss cannot be measured in money (life, personal accident), an agreed sum is paid as compensation instead of restoring an actual loss.
Define each term in one or two sentences.
Commerce 2 (essay)
List and explain four documents involved in the formation of a public limited company.
Any four, explained: memorandum of association (external relations: name, office, objects, liability, capital); articles of association (internal rules: shares, meetings, directors' powers); statutory declaration of compliance (that legal requirements are met); list/consent of directors; prospectus (invites the public to buy shares); certificate of incorporation (gives legal existence); certificate of trading (allows the company to start business).
Say what each document contains or does.
Commerce 2 (essay)
(a) Explain the following:
(i) counter trade;
(ii) entrepôt trade;
(iii) import trade
(iv) invisible trade.
(b) State four barriers to international trade.
(a)(i) Counter trade – international trade in which goods are exchanged for goods instead of money.
(ii) Entrepôt trade – importing goods in order to re-export them.
(iii) Import trade – buying goods and services from other countries for use at home.
(iv) Invisible trade – trade in services such as shipping, banking, insurance and tourism.
(b) Any four: different currencies/exchange problems; language differences; different laws and customs; tariffs, quotas and other restrictions; long distances and high transport costs; many documents and formalities; political instability; risks of goods in transit.
Barriers are the problems that make foreign trade harder than home trade.
Commerce 2 (essay)
(a) What is transportation?
(b) Explain dead freight
(c) List and explain five factors that will determine a seller's mode of transportation.
(a) Transportation is the movement of goods and people from one place to another.
(b) Dead freight is the charge paid to a shipowner for cargo space booked but not used.
(c) Any five, explained: nature of goods (perishable, fragile, bulky); cost of transport; speed/urgency; distance; safety and security; availability of the means; value of goods; reliability; quantity of goods; door-to-door needs.
Explain how each factor affects the choice.
Commerce 2 (essay)
(a) What is hire purchase?
(b) Give two advantages and two disadvantages each of hire purchase to
(i) the buyer;
(ii) the seller.
(a) Hire purchase is a credit arrangement where the buyer pays a deposit, takes possession of the goods and pays the balance in instalments; ownership passes after the last instalment.
(b)(i) Buyer – advantages (any two): enjoys use of goods at once; pays from income; no large capital needed. Disadvantages (any two): pays more than the cash price; goods may be repossessed if he defaults; may overspend/burden of instalments.
(ii) Seller – advantages (any two): increased sales; extra income from interest; can repossess goods if buyer defaults. Disadvantages (any two): risk of bad debts; capital tied up; cost of collecting instalments; repossessed goods may be damaged/lose value.
Give two points in each of the four groups.
Commerce 2 (essay)
(a) Explain four functions of the stock exchange
(b) Explain four ways by which the Central Bank regulates the activities of commercial banks.
(a) Any four, explained: market for buying and selling securities; helps raise long-term capital; publishes share prices; protects investors; encourages saving and investment; barometer of the economy.
(b) Any four, explained: bank rate; open market operations; cash/liquidity ratio; special deposits; selective credit control/directives; moral suasion.
Each method in (b) should say how it raises or lowers bank lending.
Commerce 2 (essay)
(a) State five factors that can affect the rate of turnover of a company.
(b) What is working capital?
(c) Explain four importance of working capital.
(a) Any five: price of goods; nature of goods (perishable/durable); advertising and sales promotion; location; competition; consumers' income; credit facilities; quality; season/fashion; efficiency of staff.
(b) Working capital is current assets minus current liabilities – the funds available for day-to-day running.
(c) Any four, explained: pays daily expenses (wages, rent); buys stock; enables the firm to pay debts as they fall due (solvency); allows credit to customers and discounts for prompt payment; helps in emergencies; shows financial strength to creditors.
State the formula for working capital in (b).
Commerce 2 (essay)
(a) Write the following abbreviations in full:
(i) C.O.D;
(ii) C.I.F;
(iii) F.O.B,
(iv) E. and O.E.
(b) The sale of a consumer good costing N100,000 attracts a cash discount of 5% and a quantity discount of 5%. You are required to calculate
(i) quantity discount value;
(ii) cash discount value;
(iii) net amount of money payable by the customer.
(a)(i) Cash on Delivery; (ii) Cost, Insurance and Freight; (iii) Free on Board; (iv) Errors and Omissions Excepted.
(b)(i) Quantity discount = 5% × 100,000 = N5,000.
(ii) Balance 95,000; cash discount = 5% × 95,000 = N4,750.
(iii) Net payable = 100,000 − 5,000 − 4,750 = N90,250.
Take the quantity discount first, then the cash discount on the balance.