WAEC Commerce 2018 past questions and answers

Good roads make transport of goods cheaper and faster, and transport is an aid to trade, so improving road networks facilitates commerce.

A public company issues a prospectus to invite the public to buy its shares.

In WAEC Commerce the construction industry covers assembling manufactured materials into usable forms, including building, road works and furniture making, so a chair is its product; cement, cloth and televisions come from manufacturing.

When a company is wound up, a liquidator is appointed to sell its assets, pay its debts and share what remains among members.

Industry, commerce and direct services are the three branches of occupation, so the top box A is occupation.

Occupation divides into industry, commerce and direct services; X sits beside commerce and direct services, so it is industry.

Commerce is made up of trade and aids to trade; M sits beside aids to trade, so it is trade.

Buying and selling over the internet or other electronic systems is called e-commerce.

A sole trader can lose personal property to pay business debts because his liability is unlimited.

A bank overdraft lets a business draw more than it has in its current account for a short period.

Multilateral trade is trade among many countries at the same time; trade between two countries is bilateral.

A chamber of commerce brings together businesses from trade, industry and other sectors in an area.

A debenture is a loan to the company, so its holders are creditors who receive fixed interest, not owners.

The channel of distribution is the route goods take from producer to consumer, e.g. through wholesalers and retailers.

Average stock = (40,000 + 24,000) ÷ 2 = N32,000. Rate of turnover = cost of goods sold ÷ average stock = 48,000 ÷ 32,000 = 1.5 times.

A public company must obtain a certificate of trading (to commence business) before it starts trading.

Counter trade is international trade in which goods are exchanged for goods instead of money.

A chamber of commerce is open to businesses of all kinds in trade, industry and services, not only to entrepreneurs.

Fidelity guarantee insurance protects an employer against loss caused by the dishonesty of employees who handle money.

A consignment note goes with goods handed to a carrier and gives details of the goods and the receiver.

A put option gives the holder the right to sell shares at a fixed price within a period; a call option is the right to buy.

Double coincidence of wants is a problem of barter that money solves; it is not a function of money.

A bill of lading is issued by the shipowner as a receipt for goods shipped and a document of title to them.

Informative advertising gives information about a product, such as how to use it, rather than persuading.

Rail carries heavy, bulky goods over long distances at a low cost per unit.

When an event beyond the parties' control makes a contract impossible to perform, the contract is discharged by frustration.

An agent acts for another person (the principal) within the authority the principal gives.

The marketing mix is the four Ps: product, price, place and promotion; population is not one of them.

Speculation is buying or selling in expectation of a change in price in order to make a profit.

A freight note is the shipowner's bill showing the charges (freight) for carrying the cargo.

A factor is given possession of the goods and sells them in his own name; a broker does not hold the goods.

Persuasive advertising tries to convince people to buy a product.

The Standards Organisation Act sets and enforces quality standards for goods and services.

A bank draft is a cheque a bank draws on itself, so payment is guaranteed.

A quoted company is one whose shares are listed and traded on the stock exchange.

The export promotion council helps exporters; stopping harmful imports is the work of customs and standards agencies.

Free samples and gifts are sales promotion methods used to make a product known and boost sales.

Private owners seek profit, so a privatised firm is usually run more efficiently.

Delegation is when a superior gives a subordinate the authority to carry out a task.

Helping the community, e.g. with scholarships, is part of a firm's social responsibility.

At the time of this paper ECOWAS had 15 member countries (16 at its founding, before Mauritania left in 2000).

E-mail is sent electronically over the internet; the others are traditional means.

In a private placement, new shares are sold directly to a few selected investors rather than offered to the public.

The European Union removes trade barriers so goods move freely among its member countries.

Commercialisation makes government-owned firms run on business lines so they become efficient and self-financing.

Lay days are the days allowed for loading and unloading; demurrage is the charge for going beyond them.

Banks settle the cheques drawn on one another at the clearing house.

(a) Any two, explained: size of the market (a small market cannot absorb large output); nature of the product/production process (some goods or direct services cannot be split into stages); shortage of capital for machines and wages; shortage of skilled labour; poor transport and communication.
(b) Any three: monotony and boredom from repeating one task; loss of craftsmanship; workers become interdependent, so one absence can stop production; risk of unemployment when a worker's single skill is no longer needed; workers become less mobile between jobs; over-production.
(c) Any five: workers become more skilled through repetition; more output (mass production); saves time as workers do not move from job to job; encourages use of machinery; each worker does the job he is best at; leads to inventions; creates more jobs; better quality goods; lower cost per unit.

Limits (a) are conditions that stop work being split up; keep them separate from disadvantages (b).

(a) Any five: capital available (rent, fittings, stock); nearness to customers/demand; nearness to sources of supply; nature of the goods; level of competition in the area; accessibility (good roads, parking); security; government policy/zoning; availability of infrastructure (water, electricity); cost of rent/land.
(b) Any five, explained: breaks bulk – sells in small quantities he can afford; grants credit so he can trade with little capital; stores goods so he need not keep large stock; gives information and advice about new products and prices; offers a variety of goods from many producers in one place; delivers goods to his shop (transport); advertises and promotes the goods; may pre-pack and label goods; helps keep prices steady.

In (b) each point should say how the wholesaler's service helps the retailer.

(i) Formation: public enterprise – set up by an Act/decree of government (or by government decision); public company – formed by promoters registering a memorandum and articles of association with the Registrar (Corporate Affairs Commission).
(ii) Ownership: public enterprise – owned by government on behalf of the people; public company – owned by shareholders (minimum of 7, no maximum).
(iii) Purpose: public enterprise – mainly to provide essential services/welfare; public company – mainly to make profit for shareholders.
(iv) Management: public enterprise – board of directors/corporation board appointed by government (minister); public company – board of directors elected by shareholders at the AGM.
(v) Sources of funds: public enterprise – government grants and subsidies, loans, revenue from its services; public company – sale of shares and debentures to the public, retained profits, bank loans.

Set out each heading with the two contrasting statements side by side.

(a) Chart: General Manager at the top; below him, on one level, the five managers – Marketing, Administration, Purchasing, Production and Accounts managers; under each manager his officers: Marketing manager → Marketing officers; Administration manager → Administration officers; Purchasing manager → Purchasing officers; Production manager → Production supervisors; Accounts manager → Accounts officers. Lines show authority flowing downward.
(b) Any two each:
(i) Accounts: keeps financial records; prepares final accounts/budgets; pays salaries and bills; controls cash and credit.
(ii) Administration: recruits, trains and keeps records of staff; handles welfare and discipline; coordinates office services, correspondence and security.
(iii) Marketing: carries out market research; advertises and promotes sales; fixes prices; distributes the products/after-sales service.
(iv) Production: turns raw materials into finished water products; plans production schedules; ensures quality control; maintains machines.

The chart must show the General manager at the top and each manager directly above his own officers.

(a) Any four: increases sales and profit; helps the firm find out and satisfy customers' needs (market research); creates awareness of products; links production with consumption; helps the firm face competition; guides product design and pricing; helps expand the market/introduce new products; creates employment.
(b) Any four, explained: free samples – small pieces of fabric given out to let people try it; discounts/price reductions for a period; gifts/premiums with purchases; trade fairs and exhibitions where the fabrics are displayed; demonstrations/fashion shows; competitions and lotteries with prizes; window and shop displays; coupons; after-sales services; packaging/branding.

Each tool in (b) needs a short explanation, ideally linked to textiles.

(a) A section of the stock exchange set up for small and medium-sized (and new) companies that cannot meet the strict requirements of the main (first-tier) market, so they can raise capital by selling shares to the public.
(b) Any four: lets small/medium firms raise long-term capital from the public; less strict, cheaper listing requirements; improves the firm's public image and creditworthiness; shares become easily transferable (marketable); helps the firm grow into a big company and later move to the main market; spreads ownership.
(c) Any five (Nigerian rules): must be a public limited company; must have at least 3 years' trading record (instead of 5); at least 10% of share capital offered to the public; at least 100 shareholders; must file audited accounts and keep the exchange informed (half-yearly reports); must be sponsored by a stockbroker/issuing house; must pay the listing fees; memorandum and articles must comply with the exchange's rules.

In (c) give the actual listing conditions, e.g. public company, short trading record, fixed percentage of shares to the public.

(a) A contract is a legally binding agreement between two or more parties, enforceable in a court of law.
(b) Any four, each with a law: to protect consumers against fake and sub-standard goods – Standards Organisation Act; against harmful/expired foods and drugs – Food and Drugs Act (NAFDAC Act); against exploitative prices/hoarding – Price Control Act; against false or misleading advertisements – Advertising Practitioners Act / Trade Descriptions Act; against short weights and measures – Weights and Measures Act; against unfair hire-purchase terms – Hire Purchase Act; against unfair business practices generally – Consumer Protection Council Act / Federal Competition and Consumer Protection Act; to ensure goods sold match their description – Sale of Goods Act.

Pair each reason with a law that tackles that particular problem.

(a) Liquid capital (liquid assets) = cash + debtors = 6,750 + 30,000 = Le 36,750.
(b) Fixed assets = plant and machinery + motor van = 72,000 + 31,000 = Le 103,000.
(c) Total assets = 103,000 + 12,000 + 30,000 + 6,750 = Le 151,750; total liabilities = loan 50,000 + creditors 43,000 = Le 93,000; capital = 151,750 − 93,000 = Le 58,750.
(d) Current assets = 12,000 + 30,000 + 6,750 = Le 48,750; working capital = 48,750 − 43,000 = Le 5,750.

Liquid capital counts only cash and debtors (stock is left out); show each formula before the figures.