WAEC SSCE - Commerce - 1996 (Essay)

Answer Details

Two uses of each business document

(i) Proforma invoice

• It is sent to a prospective buyer to quote the price and terms of goods before an order is placed.
• It is used when goods are sold on cash-with-order terms or to enable the buyer arrange import documents and foreign exchange.

(ii) Advice note

• It informs the buyer that goods ordered have been dispatched and are on the way.
• It enables the buyer to prepare to receive and check the goods on arrival.

(iii) Credit note

• It is issued by the seller to reduce the amount a buyer owes, for example when goods are returned or overcharged.
• It corrects an over-invoiced amount and adjusts the buyer's account in his favour.

(iv) Statement of account

• It summarises all transactions (invoices, credit notes and payments) between buyer and seller over a period.
• It reminds the buyer of the balance owed and serves as a request for payment.

(v) Receipt

• It serves as proof or acknowledgement that payment has been made and received.
• It is used as evidence in settling disputes and for keeping proper accounting records.

Answer Details

Five aids to trade and how each facilitates trade

Aids to trade are the ancillary services that support and make buying and selling easier.

1. Banking: Banks provide a safe place for keeping money, grant loans and overdrafts for business expansion, and offer means of payment such as cheques and transfers. This supplies traders with capital and a safe, convenient method of settling debts.
2. Insurance: Insurance spreads and reduces the risks of trade such as fire, theft, and loss at sea. By compensating for losses, it gives traders the confidence to invest and trade on a larger scale.
3. Transport: Transport carries goods from producers to consumers and moves raw materials to factories. It creates place utility, widens markets and makes goods available where they are needed.
4. Warehousing: Warehousing stores goods safely from the time of production until they are demanded. It creates time utility, stabilises prices by holding seasonal goods, and ensures continuous supply.
5. Advertising/Communication: Advertising informs and persuades buyers about goods and services, while communication (telephone, internet, postal services) links buyers and sellers. Together they create demand and speed up the exchange of business information.

Other acceptable aids: tourism and the services of middlemen (wholesalers and retailers).

Answer Details

(a) Examples of retail outlets

Two small-scale retail outlets

1. Single/small shops (kiosks).
2. Hawkers, peddlers and street traders (itinerant traders).

(Also acceptable: market stalls, mobile shops, roadside sellers.)

Three large-scale retail outlets

1. Supermarkets.
2. Department stores.
3. Chain (multiple) stores.

(Also acceptable: hypermarkets, mail order houses.)

(b) Five reasons for the survival of small-scale retailers

1. Nearness to customers. They are located close to consumers in neighbourhoods and villages, providing goods within easy reach.
2. Provision of credit. They know their regular customers personally and sell to them on credit, which large stores rarely do.
3. Personal and friendly service. They give individual attention, advice and after-sales service that build customer loyalty.
4. Sale in small (broken bulk) quantities. They sell goods in very small units that suit low-income customers who cannot afford bulk buying.
5. Convenient opening hours. They open early, close late and often operate on weekends and holidays, serving customers when large stores are shut.

(Also acceptable: they need little capital to start and run; they can quickly adjust their stock to local tastes; and they sell goods not stocked by big stores.)

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(a) Five reasons why road transport would be preferred to rail transport

1. Door-to-door service: Road vehicles can move goods directly from the seller's premises to the buyer's premises without transhipment, whereas rail is confined to fixed stations and lines.
2. Flexibility of routes: Roads reach nearly every town, village and market, so vehicles can be re-routed easily, while trains can only travel where rails are laid.
3. Lower capital outlay: Buying and operating a lorry is far cheaper than constructing railway tracks, locomotives and terminals, making road transport accessible to small traders.
4. Suitability for short distances and small loads: Road transport is economical for carrying small quantities over short distances, where running a whole train would be wasteful.
5. Speed and frequency for perishables: A trader can dispatch a vehicle at any time without waiting for a scheduled train, allowing quicker delivery of perishable and urgent goods.

Other acceptable points: easier loading and unloading, availability of vehicles for hire, and prompt personal supervision of goods in transit.

(b) Five functions of the Nigerian Airports Authority (now FAAN)

1. Development and maintenance of airports: It builds, equips and maintains airport buildings, runways, terminals and other facilities.
2. Provision of navigational and landing aids: It supplies control towers, lighting and communication equipment to guide aircraft in landing and take-off.
3. Ensuring safety and security: It provides security, fire-fighting and rescue services within the airports to protect passengers, aircraft and cargo.
4. Passenger and cargo handling facilities: It provides lounges, baggage-handling systems and cargo sheds for the smooth movement of passengers and goods.
5. Regulation and collection of charges: It regulates the use of airports and collects landing, parking and other charges from airlines as revenue.

Other acceptable points: providing weather (meteorological) information and coordinating ground services for airlines.

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(a) What is public relations?

Public relations (PR) is the deliberate, planned and sustained effort by an organisation to create, establish and maintain mutual understanding and goodwill between itself and its various publics, such as customers, employees, shareholders, government and the general community. Its aim is to build and protect a favourable image and reputation for the organisation.

(b) Five media of public relations

1. Press/News releases: The organisation issues statements to newspapers, radio and television to inform the public of its activities and achievements and to correct wrong impressions.
2. Exhibitions and trade fairs: Displaying products and services at fairs allows the public to see and appreciate the organisation and interact with its staff.
3. House journals and magazines: In-house publications distributed to staff and customers pass on information about the organisation and foster a sense of belonging.
4. Sponsorship and donations: Supporting sports, education, health and community projects wins public goodwill and presents the organisation as caring.
5. Conferences, seminars and open days: Meetings and factory visits give the public direct contact with the organisation, allowing questions to be answered and confidence to be built.

Other acceptable media: advertising, social media/websites, and courtesy visits.

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Social responsibilities of a business

(a) To the community

• Providing employment for members of the community.
• Supporting social amenities such as roads, water, schools and hospitals.
• Avoiding pollution and protecting the environment.
• Producing goods and services needed by the community.

(b) To the employee

• Paying fair and prompt wages and salaries.
• Providing safe and healthy working conditions.
• Offering training, promotion and job security.
• Recognising workers' right to join trade unions and to fair treatment.

(c) To the shareholders

• Making adequate profit and paying reasonable dividends.
• Safeguarding and making efficient use of the capital invested.
• Giving accurate and timely reports on the company's performance.

(d) To the government

• Paying taxes and other statutory dues promptly and honestly.
• Obeying the laws and regulations of the country.
• Assisting government efforts in providing employment and developing the economy.

(e) To the consumers

• Supplying goods of good quality at fair prices.
• Giving true information through honest advertising and correct labelling.
• Ensuring regular supply and providing after-sales service.
• Avoiding hoarding, adulteration and cheating on weights and measures.

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(a) Five features common to cooperative societies and private limited companies

1. Both are corporate/registered bodies: Each must be registered and formed under the relevant law, giving it a legal existence separate from its members.
2. Limited liability: In both, the liability of members is limited to the amount of their shares or contribution.
3. Separate legal entity: Both can own property, sue and be sued, and enter contracts in their own name.
4. Perpetual succession: The death, retirement or bankruptcy of a member does not dissolve the organisation; it continues to exist.
5. Capital from members: Both raise their capital from the contributions or shares of their members.

Other acceptable points: both are managed by elected officials/directors, and both keep and audit proper books of account.

(b) Five differences between cooperative societies and private limited companies

Answer Details

(a) Hire purchase and deferred payment

Three similarities

1. Both allow the buyer to take possession and use the goods before completing full payment.
2. In both, payment is spread over an agreed period by instalments.
3. Both are forms of credit that enable buyers to obtain goods without paying the full price at once.

Three differences

(b) Four reasons a trader would prefer cheque to cash for large payments

1. Safety: A cheque, especially a crossed cheque, is safer than carrying large sums of cash which may be lost or stolen.
2. Proof of payment: The paid cheque and counterfoil serve as documentary evidence that payment was made.
3. Convenience: It is easier and less bulky to write one cheque for a large amount than to count and carry a large quantity of notes.
4. Payment can be stopped: The drawer can stop payment on a cheque if goods are not delivered or a fraud is discovered, which is impossible once cash is handed over.

Other acceptable point: a crossed cheque must pass through a bank account, providing a traceable record.

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(a) Marine insurance

Marine insurance covers losses or damage connected with ships and their cargo while at sea. It protects the ship (hull), the cargo (goods), and freight (carriage charges) against perils such as sinking, collision, storm, fire and piracy. It is important to importers, exporters and ship owners who face heavy risks on the high seas.

(b) Accident insurance

Accident insurance provides compensation for injury, disability or death arising from accidents, and may also cover damage to property such as motor vehicles. It includes personal accident, motor and employer's liability cover, giving the insured financial protection against sudden mishaps.

(c) Group insurance

Group insurance is a single policy that covers a number of people, usually the employees of one organisation, under one contract. The premium is often paid by the employer, and it commonly provides life or health cover for the whole group at a lower cost than individual policies.

(d) Export Credit Guarantee insurance

This policy protects an exporter against the risk of non-payment by a foreign buyer. If the overseas customer fails to pay because of insolvency, war, or currency restrictions, the insurer indemnifies the exporter, thereby encouraging international trade.

(e) Fire insurance

Fire insurance indemnifies the insured against loss or damage to property caused by fire, lightning and, by extension, related perils. On payment of a premium, the insurer restores the insured to the financial position held before the fire, up to the sum insured.

Answer Details

(a) Four uses of an organisation chart

1. It shows the formal lines of authority and responsibility within the organisation.
2. It shows the relationship between different departments and positions.
3. It helps each worker to know his position, superiors and subordinates.
4. It reveals the channels of communication and the chain of command.

Other acceptable use: it helps management to identify gaps, overlaps or over-staffing in the structure.

(b) Three reasons managers may refuse to delegate

1. Fear of losing control or importance: A manager may feel that delegating will reduce his authority or make subordinates too powerful.
2. Lack of confidence in subordinates: The manager may believe that subordinates lack the skill or experience to perform the task well.
3. Fear of being blamed for mistakes: Since the manager remains accountable, he may refuse to delegate for fear that errors by subordinates will damage his reputation.

Other acceptable reason: the desire to do everything himself (belief that he can do it better).

(c) Three advantages of delegation of authority

1. It relieves the manager of routine duties so he can concentrate on important matters.
2. It trains subordinates and prepares them for higher responsibility.
3. It speeds up decision-making because decisions can be taken at lower levels.

Other acceptable advantage: it motivates subordinates by giving them a sense of importance and involvement.