WAEC Commerce 2020 past questions and answers

Commerce covers trade and all the aids to trade that help distribute and exchange goods and services.

A broker brings buyers and sellers together, which is a commercial occupation.

Early trade used commodity money such as cowries, tobacco and metal bars; minted coins came later.

Weaving turns yarn into cloth, which is manufacturing; the others take things directly from nature.

The entrepreneur organises the other factors and bears the risks of the business.

Production is not complete until goods reach the final consumers (users).

A nominal partner lends only his name and reputation, without contributing capital.

A sole trader decides alone, so decisions are made quickly.

A thrift and credit society collects members' savings and lends them to members.

A consumer association is voluntary and has no legal power to punish anyone; penalising offenders is for government agencies.

Firms in the same line of trade form a trade association to protect their common interests.

A prospectus invites the public to buy (subscribe for) the company's shares.

Cash and debtors are current assets; creditors are current liabilities.

Rate of stock turnover = cost of sales ÷ average stock.

Called-up capital is the part of issued capital the company has asked shareholders to pay; paid-up capital is what has actually been paid.

The balance of trade compares a country's visible (goods) exports and imports.

Physical goods bought from abroad are visible imports.

Supermarkets sell mainly food and household goods on a self-service basis; selling one line of products is typical of specialty shops.

Small shops know their customers and give them personal attention.

Trade discount is an allowance off the list price given to traders so they can resell at a profit.

A delivery note goes with goods delivered by the seller's own vehicle and is signed by the buyer as proof of receipt.

An indent is an order sent by an importer to a foreign supplier or an indent house.

An option is the right to buy or sell shares at an agreed price within a fixed period.

The face value printed on a share certificate is the nominal (par) value.

The central bank lends to commercial banks when they cannot get funds elsewhere: the lender of last resort.

A rights issue offers existing shareholders new shares at a price below the market price; bonus shares are given free.

Existing (second-hand) shares and bonds are traded on the stock market.

A life cannot be valued in money, so life assurance pays an agreed sum rather than restoring a loss; it is not indemnity.

Covering all employees under one policy is group (life) insurance.

An open (uncrossed) cheque can be cashed at the bank counter; a crossed cheque must be paid into an account.

Tankers are built to carry liquids and gases such as oil.

Warehousing stores goods safely until they are needed.

The Niger Basin Authority promotes co-operation in using the River Niger, including regulating navigation and movement of goods on it.

Advertising is a paid, non-personal message by an identified sponsor; publicity is unpaid.

Personal selling is face-to-face contact between seller and buyer to make a sale.

Packaging wraps a product to protect it and make it look attractive.

The marketing concept puts the consumer at the centre: satisfy the customer to make profit.

Acceptance creates a contract; contracts are ended by performance, agreement, breach, frustration or operation of law.

An agent acts for a principal to make contracts with third parties.

A del credere commission is the extra commission an agent earns for guaranteeing that buyers will pay.

Privatisation is selling government-owned enterprises to private individuals or firms.

Controlling compares actual results with plans and corrects any shortfall.

A subordinate given authority must account to the superior who delegated it.

An intercom links offices within the same building or department for quick internal talk.

ECOWAS aims at trade, free movement and development; it does not aim to promote a common language.

(a)(i) Any four: newspapers; magazines; radio; television; billboards/posters; handbills/fliers; window display; internet/social media; cinema; neon signs; catalogues.
(ii) Any four: cost of the medium; coverage/circulation (how many people it reaches); type of target audience; nature of the goods; frequency of exposure; medium used by competitors; flexibility; media available in her area.
(b) Any four: creates awareness of her products; informs/educates customers about uses; increases sales; helps her business expand; builds customer loyalty and demand; helps her face competition; introduces new products.

In (ii) think of what makes a medium suitable: cost, reach and audience.

(a) Any four: fixes common prices for members' products; sets output/production quotas for members; shares out markets (sales territories) among members; may take over selling for all members; reduces competition among members; fights competition from non-members.
(b) Advantages (any three, explained): provide essential services (water, electricity) at low cost; provide infrastructure; create employment; prevent exploitation by private monopolies; have large capital for big projects; promote balanced development.
Disadvantages (any three, explained): inefficiency and bureaucracy (red tape); political interference/appointment of unqualified people; corruption, waste and embezzlement; monopoly power may be abused; heavy burden on government funds/losses; lack of competition leads to poor service.

Explain each advantage or disadvantage in a sentence, not just a word.

(a) Any six: cheque; bill of exchange; promissory note; credit card; letter of credit; bank draft; hire purchase agreement; trade credit/credit note; acceptance credit; treasury bill; debenture.
(b) Advantages (any four): he gets the equipment at once and pays from income; no need for large capital; working capital is kept free; no collateral needed as with a bank loan; easier to obtain than a bank loan; helps the business expand/raise output.
Disadvantages (any three): total cost is higher because of interest; goods can be repossessed if he defaults; he is not the owner until the last instalment; temptation to over-commit; strict terms of the agreement.

Hire purchase lets him use the asset at once but costs more overall.

(a) Any four, explained: capital available; location/nearness to customers; nature of goods to sell; level of competition; sources of supply; government regulations and licences; availability of infrastructure and security; size of the market/demand; personal skills and experience.
(b)(i) Registration of business name – every business must register its name, so government knows who owns it, prevents two firms using the same name, and can hold owners responsible.
(ii) Patent – government grants an inventor the sole right to make and sell an invention for a period, preventing others from copying it.
(iii) Trade mark – registered marks/symbols protect a firm's brand from imitation and protect consumers from fakes.
(iv) Copyright – protects authors, musicians and artists from unauthorised copying of their works, so only the owner can reproduce them.

In (b) say what each one protects and who it protects.

(a) Any four: provides a market for buying and selling existing securities; helps companies and government raise long-term capital; gives information on share prices; protects investors through its rules; encourages saving and investment; serves as a barometer of the economy; helps value companies; encourages foreign investment.
(b)(i) Debentures – long-term loans to a company, usually secured on its assets, earning a fixed rate of interest; holders are creditors.
(ii) Bonds – long-term loan certificates issued by government or companies that pay fixed interest and are repaid on a set date.
(iii) Shares – units of a company's capital; holders are part-owners and receive dividends (ordinary or preference).
(iv) Stock – fully paid-up shares converted into a block that can be bought and sold in any amount; also government securities.

Show the owner/creditor difference: shareholders own, debenture and bond holders lend.

(a) Any five: encourages export of non-oil/local products; gives exporters information on foreign markets; organises trade fairs and exhibitions abroad; provides export incentives/grants and credit facilities; advises exporters on quality, packaging and documentation; trains exporters; helps set up export processing zones; advises government on export policy.
(b) Any five: collects import and export duties and excise duties (revenue); prevents smuggling; stops importation of prohibited/harmful goods; protects local industries by enforcing tariffs and bans; compiles trade statistics; runs bonded warehouses; clears goods at ports and borders; enforces trade agreements/quotas.

Customs roles centre on collecting duties and controlling what enters and leaves the country.

(a) Any five: poor product knowledge; poor communication/persuasion skills; poor attitude to customers; laziness/few customer visits; unrealistic targets; poor quality or high price of the product; strong competition; little advertising support; poor transport/territory; lack of training or motivation.
(b) Any five, explained: free samples; discounts/price reductions; gifts/premiums; trade fairs and exhibitions; demonstrations; competitions and lotteries; coupons; displays (window/point of sale); after-sales services; credit facilities.

Each tool in (b) needs a short explanation of how it attracts buyers.

(a) Cost of goods sold = opening stock + purchases + carriage inwards − closing stock = 20,000 + 150,000 + 4,000 − 35,000 = Le 139,000.
(b) Gross profit = sales − cost of goods sold = 230,000 − 139,000 = Le 91,000.
(c) Net profit = gross profit + rent received − salaries = 91,000 + 80,000 − 29,000 = Le 142,000.
(d) Gross profit percentage (on sales) = 91,000 ÷ 230,000 × 100 ≈ 39.6%.

Carriage inwards goes into cost of goods sold; rent received is added in the profit and loss part.