WAEC SSCE - Commerce - 2018 (Essay)

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Differences between a public enterprise and a public company

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(a) Five types of cooperative societies

1. Consumer (retail) cooperative society - buys goods in bulk and sells to members at fair prices.
2. Producer cooperative society - formed by producers or farmers to pool resources and market their output jointly.
3. Wholesale cooperative society - buys in bulk from manufacturers and supplies to retail cooperatives.
4. Credit (thrift) cooperative society - mobilises members' savings and grants them loans at low interest.
5. Producer/Marketing cooperative society - handles the storage, grading and sale of members' produce.

(Others acceptable: housing cooperative, transport cooperative, multipurpose cooperative.)

(b) Business objectives explained

• Survival: the basic aim of remaining in business by covering costs and withstanding competition, especially in the early years or during difficult trading conditions.
• Profit maximization: the goal of earning the largest possible surplus of revenue over costs, so as to reward the owners and finance further expansion.
• Growth: the objective of expanding the size of the firm, measured by increased sales, output, assets, market share or number of branches.
• Innovation: the aim of introducing new products, methods, technology or ideas in order to stay ahead of rivals and satisfy changing customer needs.
• Social responsibility: the duty of the firm to act in the interest of the wider society by protecting the environment, treating workers and customers fairly and supporting the community.

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Means of payment in international trade

• Bill of exchange: a written, unconditional order drawn by the exporter (drawer) on the importer (drawee) requiring him to pay a stated sum of money on demand or on a fixed future date to the exporter or to a named person. Once the importer accepts it by signing, it becomes a binding promise and can be discounted at a bank before maturity.
• International bank draft: a cheque drawn by one bank on another bank abroad, bought by the importer and sent to the exporter. Because it is guaranteed by a bank, the exporter is assured of payment; the exporter presents it to the foreign bank to collect the amount.
• Travellers' cheque: a printed cheque of fixed denomination issued by a bank to a traveller who pays for it in advance. It is signed once when bought and again in the presence of the payee, and can be cashed at banks and hotels abroad. It is a safe way of carrying money because a lost cheque can be refunded.
• Electronic transfer: the movement of money between banks in different countries through electronic means such as SWIFT, telegraphic transfer or online banking. The importer instructs his bank to credit the exporter's account directly. It is fast, safe and convenient for settling foreign debts.

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(a) Five problems of barter trade

1. Lack of double coincidence of wants: Each party must want exactly what the other has to offer at the same time, which is difficult to achieve.
2. Lack of a common measure of value: There is no standard unit for expressing the value of goods, making fair exchange hard.
3. Indivisibility of some goods: Some goods, such as a cow, cannot be divided into small parts to match the value of what is wanted.
4. Difficulty in storing value: Wealth held as goods, especially perishable ones, cannot be stored for long without loss of value.
5. Problem of deferred payments: It is difficult to make future or credit arrangements because the goods may change in value or quality over time.

(b) Five benefits of using computers in business

1. Fast processing of work: Computers process large volumes of data quickly, saving time.
2. Accuracy: They perform calculations and records with a high degree of accuracy, reducing errors.
3. Efficient storage and retrieval of information: Large amounts of business records can be stored and recalled easily when needed.
4. Improved communication: Through email and the internet, Domingo can communicate quickly with customers and suppliers worldwide.
5. Cost saving and better decision-making: Computers reduce paperwork and labour costs and provide timely information that aids sound business decisions.

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(a) Four ways marketing is important to a business

1. Identifying customer needs: Through market research, marketing finds out what customers want, so the firm produces goods that will sell.
2. Increasing sales and profit: By promoting and distributing goods effectively, marketing raises the volume of sales and the firm's profit.
3. Creating and satisfying demand: Advertising and promotion create awareness and desire for products, and ensure goods reach consumers to satisfy that demand.
4. Giving a competitive edge: Good marketing (branding, packaging, pricing) helps the firm stand out from rivals and win customer loyalty.

(b) Four promotional tools Jones Ltd could use

1. Advertising: Using media such as radio, television and newspapers to inform and persuade customers about the product.
2. Personal selling: Employing salespersons to contact customers directly, persuade them and close sales.
3. Sales promotion: Offering short-term incentives such as discounts, free samples, coupons and gifts to boost sales.
4. Publicity/public relations: Gaining favourable free mention in the media and creating goodwill through sponsorship and community activities.

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(a) Two factors that limit the application of division of labour

1. Size of the market: Division of labour can only be extensive where the market is large; a small market cannot absorb the large output, so specialisation is limited.
2. Nature of the work or product: Some tasks, such as artistic or professional work, cannot be split into separate stages, which limits how far labour can be divided.

(b) Two disadvantages of division of labour

1. Monotony (boredom): Repeating the same task all day makes work dull and reduces the worker's interest and initiative.
2. Risk of unemployment: An over-specialised worker finds it hard to change jobs if his particular task is no longer needed.

(c) Five advantages of division of labour

1. Increased output: Concentration on one task raises the total quantity produced.
2. Greater skill: Constant repetition makes the worker highly skilled and efficient at his task.
3. Saving of time: Time is not wasted moving from one job to another, so work is faster.
4. Better quality of goods: Specialised, skilled workers produce work of higher and more uniform quality.
5. Encourages use of machinery: Breaking work into simple stages makes it easy to introduce machines, lowering costs.

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(a) What is a second-tier security market?

The second-tier security market (SSM) is a section of the stock exchange created to enable small and medium-sized companies, which cannot meet the strict listing requirements of the main (first-tier) market, to raise long-term capital by having their shares quoted and traded under less stringent conditions.

(b) Four advantages of the second-tier security market

1. It enables small and medium-sized companies to raise long-term capital for expansion.
2. Its listing requirements are less strict and less costly than those of the main market.
3. It allows the owners of such companies to retain a large degree of control while still raising funds.
4. It widens share ownership, deepens the capital market and encourages the growth of indigenous enterprises.

(c) Five requirements for trading in a second-tier security market

1. The company must be a public limited liability company registered under the Companies Act.
2. It must offer a minimum stated percentage of its shares to the public.
3. It must have operated and published audited accounts for a minimum number of years.
4. It must submit audited financial statements to the stock exchange regularly.
5. It must appoint stockbrokers and pay the prescribed listing fees, and satisfy the minimum number-of-shareholders requirement.

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(a) Organisational chart of Adama's Pure Water Production Ltd.

(b) Functions of the departments

1. Accounts Department
   1. It keeps books of account and prepares the company's final accounts.
   2. It handles cash receipts and payments, including the payment of staff salaries.
2. Administration Department
   1. It recruits, trains, appraises and attends to the welfare and discipline of staff.
   2. It handles the company's correspondence and keeps office records.
3. Marketing Department
   1. It sells, advertises and promotes the company's pure water.
   2. It conducts market research and assists in the distribution of the product to customers.
4. Production Department
   1. It is responsible for the actual production and packaging of the pure water.
   2. It maintains quality-control standards and ensures the maintenance of production equipment.

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Teesan Enterprises as at 31/10/2010

Current assets = Debtor + Cash + Stock = 30,000 + 6,750 + 12,000 = Le48,750

Liquid (quick) assets = Current assets - Stock = 48,750 - 12,000 = Le36,750

Current liabilities = Trade creditors = Le43,000 (the loan is long-term)

(a) Liquid capital = Liquid assets - Current liabilities

= 36,750 - 43,000 = (Le6,250), a liquid-capital deficit. The quick assets (Le36,750) fall short of the current liabilities, so the firm cannot meet its short-term debts from its most liquid resources.

(b) Fixed assets = Plant and machinery + Motor van = 72,000 + 31,000 = Le103,000

(c) Capital (statement of affairs) as at 31/10/2010

Capital = Total assets - Total liabilities

Total assets = Fixed assets + Current assets = 103,000 + 48,750 = Le151,750

Total liabilities = Loan + Trade creditors = 50,000 + 43,000 = Le93,000

Capital = 151,750 - 93,000 = Le58,750

(d) Working capital = Current assets - Current liabilities

= 48,750 - 43,000 = Le5,750

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(a) Five factors Mr. Touray should consider in locating his shop

1. Nearness to customers: The shop should be sited where there are enough people to buy his goods.
2. Availability of transport and good roads: Easy access allows customers to reach the shop and goods to be delivered.
3. Nearness to source of supply: Being close to suppliers reduces transport costs and delays in restocking.
4. Cost of rent and land: The rent or price of the premises must be affordable and match the expected profit.
5. Security and provision of infrastructure: A safe area with electricity, water and other facilities protects goods and supports business operations. Competition from other shops nearby should also be considered.

(b) Five ways a wholesaler can aid Mr. Touray's business

1. Breaking bulk: The wholesaler buys in large quantities and sells to Mr. Touray in smaller quantities he can afford and handle.
2. Granting credit: The wholesaler may supply goods on credit, easing Mr. Touray's shortage of capital.
3. Storage: The wholesaler holds stocks, so Mr. Touray need not tie up money and space storing large quantities.
4. Steady supply and variety: The wholesaler provides a regular supply of a wide range of goods, so the shop is never short of stock.
5. Provision of information and advice: The wholesaler advises the retailer on new products, prices and market conditions, and may deliver goods to the shop.

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(a) Define a contract

A contract is a legally binding agreement between two or more persons which the law will enforce. It arises when one party makes an offer that is accepted by another, supported by consideration, with the intention to create legal relations and the capacity of the parties to contract.

(b) Four reasons for consumer protection

1. Protection against dangerous and substandard goods: Consumers need to be shielded from fake, expired, adulterated or unsafe products that can harm their health.
2. Protection against false advertising: Consumers must be guarded against misleading and exaggerated advertisements that deceive them into buying goods.
3. Protection against exploitation through high prices: Consumers, especially where sellers have a monopoly, need protection from being overcharged for essential goods.
4. Protection against short weights and measures: Consumers should be protected from traders who use faulty scales to give less than the correct quantity, so that they get value for their money.