WAEC SSCE - Commerce - 2004

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The correct answer is: industry, commerce, and services. Explanation: The divisions of production refer to the three broad sectors of the economy that are involved in the production of goods and services. These sectors are industry, commerce, and services. Industry is concerned with the production of goods, including manufacturing and construction. Commerce is concerned with the distribution of goods, including wholesale and retail trade. Services are concerned with the provision of intangible goods such as healthcare, education, and transportation. Understanding these divisions is important for analyzing the economy and identifying opportunities for growth and development.

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Manufacturing is any activity that changes raw materials into consumer or industrial goods. This involves using raw materials, machines, and labor to create finished products that can be sold to consumers or other businesses. Examples of manufacturing activities include producing cars, electronics, clothing, and food products.

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The most acceptable means of payment in foreign transactions is irrevocable letters of credit. This is because when buying or selling goods internationally, there are risks involved for both parties, such as non-delivery, non-payment, or fraud. Therefore, a letter of credit is a secure payment method that involves a bank acting as an intermediary between the buyer and seller. The buyer's bank issues a letter of credit to the seller's bank, guaranteeing payment if the terms and conditions of the sale are met. This way, the seller has the assurance of payment and the buyer has the assurance of receiving the goods they paid for. Other payment methods, such as personal cheques or bank drafts, may not be accepted due to their higher risk of fraud or non-payment. Central bank cheques may also not be accepted as they are specific to one country and may not be recognized or accepted internationally.

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An increase in the volume of sales is an increase in turnover. Turnover is the total amount of money a business generates from selling its goods or services over a specific period. When a business sells more goods or services, its turnover increases. This means that the business has generated more revenue, but it does not necessarily mean that the business has made a profit. Profit is the difference between the revenue generated from sales and the costs incurred to produce or provide those goods or services.

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Profits shared on the basis of membership patronage in a co-operative society. A co-operative society is a type of business unit owned and operated by its members, who share profits based on their level of patronage. The members have a say in the decision-making process and receive dividends based on the amount of business they do with the co-operative. The purpose of a co-operative society is to provide goods and services to members at affordable prices and to promote their economic interests.

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When a business is incorporated, it becomes a separate legal entity, meaning it is treated as a separate entity apart from its owners. This means that the business can enter into contracts, sue or be sued, own property, and conduct other legal activities in its own name. The incorporation process involves registering the business with the appropriate government authority, which creates a new legal entity separate from the owners of the business. Therefore, the correct option is "been incorporated".

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The main advantage of sea transport over air transport is its capacity. Sea transport allows for the transportation of large quantities of goods and materials, including heavy and bulky items that may not be feasible to transport by air. Cargo ships have the ability to carry thousands of containers and other goods, making sea transport a cost-effective option for businesses that require large-scale transportation. In contrast, air transport has limited capacity due to the size and weight restrictions of aircraft. Airplanes can only carry a limited amount of cargo, which makes it less suitable for transporting large quantities of goods. Furthermore, sea transport is generally more affordable than air transport, making it a more accessible option for many businesses. While air transport may be faster, it is often more expensive, and businesses may need to weigh the benefits of speed against the higher costs. In summary, the main advantage of sea transport over air transport is its capacity to transport large quantities of goods and materials, making it a cost-effective option for businesses that require large-scale transportation.

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Terms of trade refer to the relationship between the prices of a country's exports and imports. Specifically, it is the ratio of the price index of a country's exports to the price index of its imports. When a country's terms of trade are favorable, it means that the prices of its exports are higher than the prices of its imports, allowing it to buy more imports for a given amount of exports. Conversely, when a country's terms of trade are unfavorable, it means that the prices of its imports are higher than the prices of its exports, making it more difficult to buy the same amount of imports with a given amount of exports. Therefore, a country with favorable terms of trade will be able to improve its standard of living and economic growth, while a country with unfavorable terms of trade may face challenges in sustaining its economic development.

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Working capital refers to the amount of money that a company has available to fund its daily operations. It is calculated by subtracting a company's current liabilities from its current assets. Current assets include items such as cash, inventory, and accounts receivable, while current liabilities include accounts payable, taxes owed, and other short-term debts that are due within a year. The formula for working capital is as follows: Working Capital = Current Assets - Current Liabilities Therefore, the correct option is (a) current assets minus current liabilities.

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The main aim of credit and thrift societies is to encourage savings among members. These societies are formed to help individuals save their money and access affordable loans. Members of these societies pool their resources together and save their money with the aim of earning interest on their savings. The society then offers loans to its members at a low interest rate. By encouraging savings, credit and thrift societies help their members to achieve their financial goals and improve their financial security.

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The duty of the Employers Association is: - establishing a uniform wage scale Employers Associations are organizations formed by employers to protect and promote their interests. One of the duties of such an association is to negotiate with employees' unions on various issues, including wages. In this regard, the association seeks to establish a uniform wage scale that would apply to all employers in a particular industry or geographic location. This helps to avoid wage disparities and promotes a level playing field for businesses.

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Risks in business are borne by the entrepreneur. An entrepreneur is someone who starts and operates a business venture in order to make a profit. In the process of running a business, entrepreneurs face various risks such as financial risks, operational risks, legal risks, and reputational risks. These risks may arise from factors such as changes in market demand, supply chain disruptions, changes in regulations, natural disasters, or unexpected economic events. Entrepreneurs must take on these risks and make decisions that minimize the likelihood of failure and maximize the chances of success. Therefore, entrepreneurs must be willing to take risks in order to achieve their business objectives.

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The aid to trade responsible for the preservation of perishable items is warehousing. Warehousing involves the storage of goods and materials for a specific period until they are needed. It provides a safe and secure environment for goods to be stored, protecting them from damage and theft. Perishable items, such as fruits, vegetables, and other food products, require specific storage conditions to maintain their freshness and quality. Warehousing facilities equipped with refrigeration and other temperature control systems can help to preserve perishable items by maintaining the appropriate storage conditions. In addition to preserving perishable items, warehousing also helps to facilitate trade by providing a central location for the storage and distribution of goods. This allows businesses to store large quantities of goods and materials, reducing the need for frequent transportation and making it easier to meet customer demand. In summary, warehousing is the aid to trade responsible for the preservation of perishable items. It provides a safe and secure environment for the storage of goods and materials, including perishable items, and helps to facilitate trade by providing a central location for the storage and distribution of goods.

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The stock exchange gives businessmen the opportunity to buy shares of public limited companies. A stock exchange is a platform where stocks, bonds, and other securities are traded between buyers and sellers. Public limited companies issue shares that are listed on the stock exchange. By buying shares in these companies, businessmen become part owners and can benefit from any increase in the value of the shares or from receiving dividends, which are a portion of the company's profits distributed to shareholders.

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The West African Clearing House (WACH) was established to promote the use of currencies of all members for inter regional trade. It serves as a platform for member countries to exchange their currencies and settle payments for cross-border transactions. This helps to eliminate the need for foreign exchange transactions, reducing the associated costs and risks. WACH facilitates the growth of trade and economic integration among its member countries.

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The function of the central bank that inspires confidence in the banking system in case of emergency is the "lender of last resort." This means that the central bank serves as a source of funds for banks and financial institutions that are experiencing financial difficulties and are unable to obtain funds from other sources. By providing this function, the central bank helps to prevent bank failures and the potential collapse of the banking system, which could have serious economic consequences.

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Rail transport is the mode of transport that conveys goods at a low cost per unit. This is because railways can carry a large quantity of goods over long distances at a relatively low cost. Rail transport is also energy-efficient compared to other modes of transport, making it an economical and environmentally-friendly option. Additionally, rail transport is reliable and can handle large volumes of goods, which makes it a preferred choice for businesses that require efficient and cost-effective transportation of goods.

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The insurance policy that covers damages to the body of a ship is called "hull insurance". It is a type of marine insurance that covers the physical damage to the ship's hull and machinery, as well as any attached equipment. This insurance policy provides coverage against perils such as collision, fire, explosion, and piracy. The hull insurance is usually taken out by ship owners to protect their vessels against these perils and ensure that they are compensated for any damages that may occur during the course of their operations.

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ECOWAS (Economic Community of West African States) is a regional economic union made up of West African countries. One of the main objectives of ECOWAS is to promote trade within the region. This means that member countries are encouraged to trade with each other in order to increase economic growth and development in the region. This objective is achieved through the removal of trade barriers, the establishment of a common market, and the implementation of policies that encourage the free movement of goods, services, and people within the region. By promoting trade within the region, ECOWAS aims to reduce reliance on external trade partners and enhance economic cooperation among member countries.

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The choice of medium used in advertising is not determined by the nationality of people using the medium. The choice of advertising medium is typically determined by factors such as the cost of using a particular medium, the age group to which the medium appeals, and the number of people reached by the medium. Advertisers seek to reach their target audience in the most efficient and cost-effective way possible, and may use a variety of media such as television, radio, newspapers, magazines, billboards, and digital platforms to achieve this goal. The nationality of the people using the medium is not a relevant factor in this decision-making process, as advertisers are typically more concerned with demographic factors such as age, gender, income, and location.

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A vending machine makes sales possible without a sales attendant. Vending machines are automated machines that dispense items such as snacks, beverages, cigarettes, and even tickets without the need for a sales attendant. Customers can use cash or a credit/debit card to purchase items from the vending machine, which then dispenses the product. The other options listed, such as telex machine, fax machine, and franking machine, are not used for sales transactions but for communication or postage purposes.

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The Money Market is the market for short-term loans. It is a financial market where short-term borrowing and lending of funds take place, typically for a period of up to one year. The money market is also characterized by the buying and selling of highly liquid and low-risk financial instruments such as treasury bills, commercial papers, certificates of deposit, and other short-term securities. The money market is important because it provides a source of short-term funding for businesses, banks, and governments to finance their day-to-day operations and investments.

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The service rendered by the Central Bank among the options provided is "issuing currency notes." A Central Bank is responsible for issuing and regulating the circulation of currency notes and coins in a country's economy. It also controls the supply of money and credit to ensure stable economic growth and prevent inflation. The Central Bank is the only authority that has the power to print and issue currency notes, which are legal tender for making transactions in the economy.

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The amalgamation of firms engaged in cotton processing and the manufacturing of textiles is an example of vertical integration. Vertical integration occurs when a company expands its operations by integrating with companies involved in different stages of the supply chain for a particular product. In this case, the cotton processing firm and the textile manufacturing firm are both involved in the production of textiles, but they operate in different stages of the supply chain. By integrating vertically, the cotton processing firm and the textile manufacturing firm can work together to increase efficiency, reduce costs, and improve the quality of their products. The cotton processing firm can supply high-quality cotton to the textile manufacturing firm, which can then use it to produce high-quality textiles. In addition, vertical integration allows the firms to have greater control over the entire production process, from raw materials to finished products, which can help them to respond more quickly to changes in the market and to customer demand. In summary, the amalgamation of firms engaged in cotton processing and the manufacturing of textiles is an example of vertical integration, which is when a company expands its operations by integrating with companies involved in different stages of the supply chain for a particular product. This can help to increase efficiency, reduce costs, and improve the quality of products, as well as give the firms greater control over the production process.

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The term C % F as a price quotation in foreign trade means that the buyer is responsible for paying for cost and freight. Cost refers to the cost of the goods, while freight refers to the cost of transporting the goods from the seller's location to the buyer's location. The seller is responsible for arranging and paying for the transportation of the goods to the port of shipment, while the buyer is responsible for arranging and paying for the transportation of the goods from the port of arrival to the final destination. Therefore, C % F indicates that the seller is responsible for the cost of the goods and the cost of transporting them to the port of shipment, while the buyer is responsible for the cost of transporting the goods from the port of arrival to the final destination. The buyer is not responsible for clearing and forwarding the goods or paying for insurance in this case.

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Abuse and monopoly of power by industrialists could lead to the need for nationalization. Nationalization refers to the process of transferring ownership and control of industries from private individuals or entities to the state. This can occur when industrialists abuse their power and engage in anti-competitive behavior, which can harm consumers, employees, and the economy as a whole. When industries are nationalized, the government takes control of the industry and may restructure it in a way that benefits society as a whole. For example, the government may invest in the industry to improve efficiency, provide better working conditions for employees, and ensure that goods and services are produced at a fair price for consumers. Nationalization can also occur for political reasons, such as to promote self-sufficiency or to reduce the influence of foreign companies. However, it is generally seen as a last resort, as it can lead to a lack of innovation, decreased competition, and inefficiencies due to government bureaucracy. Therefore, abuse and monopoly of power by industrialists could lead to the need for nationalization, which involves the transfer of ownership and control of industries from private individuals or entities to the state.

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Two advantages of each advertising medium:

(a) Newspaper

• It reaches a wide readership quickly and can carry detailed information about the product.
• It is relatively cheap and can be kept and re-read, and adverts can be placed at short notice.

(b) Radio

• It reaches both literate and illiterate people and covers a very wide area, including rural communities.
• Messages can be broadcast in local languages, making them understandable to many.

(c) Television

• It combines sound, motion and pictures, allowing products to be demonstrated attractively.
• It has a strong impact and appeals to a large audience, encouraging quick response.

(d) Posters

• They are cheap and, when placed at busy points, are seen repeatedly by many passers-by.
• Their bold pictures and few words attract attention even from those in a hurry.

(e) Direct mail

• It is selective, reaching the particular customers the advertiser targets.
• It can carry a personal and detailed message, and results can be measured by responses received.

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Five problems associated with international trade

1. Differences in currencies: Each country has its own currency, so payment involves converting one currency into another, which creates exchange-rate difficulties.
2. Language barriers: Traders from different countries speak different languages, which makes negotiation, correspondence and understanding of terms difficult.
3. Trade restrictions: Tariffs, quotas, import licences and embargoes imposed by governments hinder the free flow of goods between countries.
4. Long distance and transport risks: Goods travel over long distances, exposing them to delay, damage, loss and high transport and insurance costs.
5. Differences in weights, measures and laws: Countries use different systems of weights and measures and different commercial laws, causing confusion and disputes.
6. Problems of payment and debt recovery: Distance and different legal systems make it difficult to obtain prompt payment and to recover debts from foreign buyers.

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(a) Five benefits Adama and Awa are likely to derive from a partnership

1. More capital: Two or more partners can pool larger capital than a sole trader, allowing the business to expand.
2. Sharing of risks and losses: Losses and business risks are borne by the partners jointly, reducing the burden on any one person.
3. Combined skills and ideas: The partners bring different abilities, experience and ideas, leading to better decisions.
4. Division of labour: Duties can be shared according to each partner's ability, improving efficiency.
5. Greater continuity and easier borrowing: The business can continue with the remaining partners, and lenders are more willing to grant credit to a partnership than to a sole trader.

(b) Five provisions in the Partnership Deed

1. The name of the firm and the names of the partners.
2. The amount of capital to be contributed by each partner.
3. The ratio in which profits and losses are to be shared.
4. The rights, duties and powers of each partner.
5. The rules for admitting new partners and for dissolving the partnership, and the treatment of interest on capital and drawings.

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Five ways by which the post office aids business

1. Delivery of mail: The post office conveys letters, invoices, orders and documents between businesses and their customers, enabling communication and trade.
2. Parcel post: It delivers goods and parcels to customers, helping traders to distribute their products, especially to distant buyers.
3. Money transfer services: Through postal orders and money orders, the post office enables businesses and customers to send and receive payments safely.
4. Savings and banking facilities: Post office savings banks allow small savers and traders to keep their money safely and earn interest.
5. Registered and insured mail: The post office provides secure carriage of valuable documents and items, with compensation if they are lost, giving businesses confidence.
6. Provision of post office boxes and telecommunication services: P.O. boxes give firms a secure address for mail, while telephone and telegram services aid quick communication.

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(a) Five reasons why consumers need protection

1. Sale of adulterated or substandard goods: Some traders sell fake, expired or poor-quality products harmful to consumers.
2. Ignorance of consumers: Many consumers lack full knowledge of products and prices and can easily be cheated.
3. False or misleading advertising: Exaggerated claims deceive consumers into buying goods that do not perform as promised.
4. Under-measurement and short weight: Some sellers use faulty scales and measures to give less than the correct quantity.
5. Overpricing and exploitation: Traders, especially monopolists, may charge unfairly high prices, taking advantage of consumers.

(b) Five means by which consumers can be protected

1. Government legislation: Laws on weights and measures, food and drugs, and standards protect consumers against malpractice.
2. Standards organisations: Bodies such as a national standards organisation set and enforce quality standards for goods.
3. Consumer protection agencies/councils: Government-established councils receive and settle consumer complaints.
4. Consumer associations: Voluntary bodies educate consumers and press for their rights.
5. Price control: Government fixes maximum prices for essential goods to prevent exploitation.

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(a) Authorized Capital vs Called-up Capital

Authorized capital (also called nominal or registered capital) is the maximum amount of share capital that a company is allowed to raise, as stated in its Memorandum of Association. Called-up capital is that part of the issued capital which the company has actually demanded (called up) from shareholders to be paid. Authorized capital sets the legal ceiling, while called-up capital is the amount shareholders are presently required to pay.

(b) Calculations

Cost of purchases:

• Suitcases: 32 × N3,500 = N112,000
• Shirts: 42 × N800 = N33,600
• Total purchases = 112,000 + 33,600 = N145,600

Add carriage inwards (transport to premises) = N2,500

Cost of goods sold = 145,600 + 2,500 = N148,100

(a) Gross profit

Gross profit = Sales - Cost of goods sold = 180,000 - 148,100 = N31,900

(b) Net profit

Wages and salaries = 2 workers × N4,500 = N9,000

Net profit = Gross profit - Expenses = 31,900 - 9,000 = N22,900

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(a) What is a Capital Market?

A capital market is the market where long-term funds are borrowed and lent, that is, where medium and long-term securities such as shares, stocks, debentures and government bonds are bought and sold. It is made up of institutions like the stock exchange, development banks, insurance companies and issuing houses that channel long-term savings into investment.

(b) Eight reasons why a bank may dishonour a cheque

1. Insufficient funds: The drawer does not have enough money in the account to cover the cheque.
2. Post-dated cheque: The cheque bears a future date and is presented before that date.
3. Stale cheque: The cheque is presented after it has expired (usually more than six months old).
4. Words and figures differ: The amount written in words does not agree with the amount in figures.
5. Irregular or missing signature: The drawer's signature is absent or differs from the specimen held by the bank.
6. Stop payment order: The drawer has instructed the bank not to pay the cheque.
7. Death, insanity or bankruptcy of the drawer: The bank receives notice of the drawer's death, insanity or bankruptcy.
8. Alterations not countersigned: There is an unauthorised alteration on the cheque that the drawer has not countersigned.

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(a) Five effects of hire purchase on the buyer

1. The buyer takes possession of and uses the goods immediately while paying by instalments.
2. The buyer pays more than the cash price because of the interest added, so the goods cost more in the end.
3. The buyer becomes the legal owner only after paying the last instalment.
4. The buyer may lose the goods and the instalments already paid if he defaults before completing payment.
5. Hire purchase enables the buyer to acquire expensive assets that he could not pay for at once, but it may tempt him to overspend and fall into debt.

(b) Five effects of hire purchase on the seller

1. The seller enjoys higher total returns because interest is charged on the instalments.
2. The seller increases sales volume by attracting buyers who cannot pay cash.
3. The seller remains the legal owner of the goods until the final instalment is paid, giving him security.
4. The seller can repossess the goods if the buyer defaults on payment.
5. The seller has his capital tied up over the payment period and bears the risk of bad debts and the cost of collecting instalments.

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(a) Difference between Privatization and Nationalization

Privatization is the transfer of ownership and control of a business or enterprise from the government (public sector) to private individuals or organisations. Nationalization is the opposite: the transfer of ownership and control of a private business or enterprise to the government or state.

In short, privatization moves an enterprise from public to private hands, while nationalization moves it from private to public (government) hands.

(b) Four reasons why a country may privatize state-owned enterprises

1. To improve efficiency: Private ownership introduces the profit motive and better management, which raise productivity and reduce waste.
2. To reduce the financial burden on government: Loss-making public enterprises drain public funds; selling them relieves the government of subsidies.
3. To raise revenue: The government earns money from the sale of the enterprises, which can be used for other projects.
4. To encourage private investment and wider share ownership: Privatization attracts private capital and spreads ownership among many citizens, deepening the capital market.

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Explanation of terms:

1. Prospectus: A formal document or invitation issued by a public company to the general public inviting them to subscribe for (buy) its shares or debentures. It contains details of the company's activities, prospects and terms of the offer.
2. Share certificate: A document issued by a company under its seal as evidence that the named person is the registered owner of the stated number of shares. It shows ownership and the amount paid on the shares.
3. Underwriting of shares: An arrangement whereby an underwriter (usually a bank or issuing house), for a commission, agrees to buy up any shares of a new issue that are not taken up by the public, thereby guaranteeing the company that its shares will be fully subscribed.
4. Ordinary shares: These are the equity shares of a company whose holders are the real owners and risk-bearers. They receive dividends only after preference shareholders have been paid, the rate varying with profit, and they carry voting rights.
5. Dividend warrants: A document, similar to a cheque, sent by a company to a shareholder authorising the shareholder to receive the dividend due on the shares from the company's bank.