WAEC SSCE - Commerce - 2020 (Essay)

Bayanin Amsa

(a) Four functions of a Stock Exchange

1. It provides a ready and organised market where existing (second-hand) shares, stocks and bonds can be bought and sold.
2. It helps governments and companies to raise long-term capital by providing a market for new securities.
3. It provides a means of valuing securities, since the daily quoted prices show the current worth of shares.
4. It protects investors by regulating dealings and ensuring that only genuine, approved companies are listed, and it provides an avenue for safe investment of savings.

(b) Types of securities traded

• i. Debentures: these are acknowledgements of a loan to a company. A debenture holder is a creditor, not an owner, who is paid a fixed rate of interest whether or not the company makes a profit, and is repaid on maturity.
• ii. Bonds: these are long-term loan instruments issued by governments or large corporations to borrow money from the public. The holder is a creditor who receives fixed interest and is repaid the principal at maturity.
• iii. Shares: these are units into which the capital of a company is divided. A shareholder is a part-owner of the company and is entitled to a share of profits called dividend, which varies with the company's performance.
• iv. Stock: this is the consolidated bundle of a member's fully paid-up shares merged into one lump that can be transferred and sold in any fractional amount, rather than in whole units like shares.

Bayanin Amsa

(a) Five functions of an Export Promotion Council

1. It formulates and implements policies and programmes that promote and diversify the country's exports, especially non-oil exports.
2. It provides exporters with information on foreign markets, prices and opportunities abroad.
3. It advises the government on export matters and assists in developing export incentives and grants.
4. It organises trade fairs, exhibitions and training to expose local products and educate exporters.
5. It helps to improve the quality and standard of exportable goods so that they can compete in the international market, and assists exporters with documentation.

(b) Five roles of the Customs and Excise Authority towards the growth of commerce

1. Collection of revenue: it collects import and export duties and excise taxes, providing funds the government uses to develop infrastructure that supports commerce.
2. Protection of local industries: by levying tariffs on imports, it shields infant home industries from unfair foreign competition, encouraging local production.
3. Prevention of smuggling and prohibited goods: it checks smuggling and stops the entry of harmful or banned goods, protecting the economy and consumers.
4. Compilation of trade statistics: it records imports and exports, providing data used for planning and trade policy.
5. Facilitation of trade: it clears goods at the ports and borders and enforces trade regulations, ensuring the orderly movement of goods in and out of the country.

Bayanin Amsa

(a) Four functions of a cartel

1. It fixes and regulates the prices of the members' products to avoid harmful price competition.
2. It fixes production/output quotas for each member so as to control total supply.
3. It shares or allocates markets among the members to prevent them competing in the same areas.
4. It regulates the terms and conditions of sale, and may jointly market members' output and share profits.

(b) Public enterprises

Three advantages:

1. Provision of essential services: they supply vital services such as water, electricity and transport that private firms may neglect.
2. Prevention of exploitation: being state-owned, they can charge fair prices and avoid the profiteering associated with private monopolies.
3. Large capital and economies of scale: government funding enables them to undertake huge projects and enjoy the benefits of large-scale operation, while creating employment.

Three disadvantages:

1. Inefficiency and bureaucracy: they are often poorly managed, with red tape and delays in decision-making.
2. Political interference: government control leads to appointments and decisions based on politics rather than sound business judgement.
3. Frequent losses: many run at a loss and depend on government subsidies, wasting public funds, partly because of lack of profit motive.

Bayanin Amsa

(a) i. Four advertising media she could use

1. Radio
2. Television
3. Newspapers/magazines (print)
4. Posters/handbills (or the internet/social media)

(a) ii. Four factors she would consider in choosing a medium

1. Cost of the medium: she must choose a medium she can afford relative to her budget.
2. Nature of the product: some goods are better shown by demonstration (television), others by description (radio or print).
3. The target audience: the medium chosen must reach the class, location and literacy level of her intended customers.
4. Coverage/reach of the medium: she considers how wide an area and how many people the medium can reach.

(b) Four advantages of advertising to her business

1. It increases sales: advertising attracts more customers and raises the volume of goods sold.
2. It creates awareness: it informs people about her business and the goods she offers.
3. It builds goodwill and customer loyalty: steady advertising creates a good image and keeps customers returning.
4. It helps her compete: advertising enables her small business to hold its own against rival sellers and to introduce new products.

Bayanin Amsa

Raisa's grocery store: Trading, Profit and Loss Account for the year ended 31st December 2018

(a) Cost of goods sold

= Opening stock + Purchases + Carriage inwards - Closing stock

= 20,000 + 150,000 + 4,000 - 35,000 = N139,000

(b) Gross profit

= Sales - Cost of goods sold = 230,000 - 139,000 = N91,000

(c) Net profit

In the Profit and Loss Account the gross profit is brought down, other income (rent received) is added and the running expense (salaries) is deducted:

= Gross profit + Rent received - Salaries

= 91,000 + 80,000 - 29,000 = N142,000

(d) Percentage of gross profit (on sales)

\[ \frac{\text{Gross profit}}{\text{Sales}} \times 100 = \frac{91,000}{230,000} \times 100 = 39.57\% \]

Bayanin Amsa

(a) Four factors to be considered in setting up a retail business

1. Location: the shop should be sited close to customers, in an accessible place with good transport and enough passing trade.
2. Capital available: the amount of money on hand determines the size of the shop, the stock to be carried and the type of goods to sell.
3. Type of goods to sell: the trader must consider the nature and demand for the goods (perishable or durable) and the needs of the people in the area.
4. Nearness to source of supply and competition: the ease of obtaining goods from wholesalers and the level of competition from other retailers in the area must be weighed.

(b) How government uses the following to regulate business

• i. Registration of business name: the law requires every business to register its name with the Corporate Affairs Commission before operating; this controls who goes into business, prevents duplication of names and enables the government to monitor and identify businesses.
• ii. Patent: government grants an inventor the exclusive right to make and sell his invention for a period; this protects inventors, prevents others from copying and encourages innovation.
• iii. Trade mark: government registers and protects the special mark or symbol that identifies a firm's goods, preventing rival firms from using or imitating it and protecting consumers from fake products.
• iv. Copyright: government protects the works of authors, artists and musicians so that others cannot reproduce or sell them without permission, thereby rewarding and encouraging creative effort.

Bayanin Amsa

(a) Five reasons that could account for Emeka's inability to meet his target

1. Poor product knowledge: he may not know enough about the goods to convince customers to buy.
2. Unrealistic/high target: the target set may be too high for the size and demand of his territory.
3. Strong competition: rival firms selling similar or cheaper products may be taking away his customers.
4. Poor selling skills and attitude: weak persuasion, poor communication or an unfriendly manner may drive customers away.
5. High price or poor quality of the product: if the company's goods are overpriced or of low quality, customers will resist buying (poor advertising and inadequate incentives may also be responsible).

(b) Five promotional tools he could use to stimulate sales

1. Advertising: using radio, television and posters to inform and persuade customers about the products.
2. Sales promotion: offering discounts, free samples, coupons, gifts and "buy-one-get-one" offers to attract buyers.
3. Personal selling: making direct, face-to-face contact with customers to explain, demonstrate and persuade them to buy.
4. Publicity/public relations: gaining favourable mention through sponsorships and community activities to build a good image for the products.
5. After-sales service: providing delivery, installation, guarantees and credit facilities to encourage and retain customers.

Bayanin Amsa

(a) Six credit instruments used in business transactions

1. Cheque
2. Bill of exchange
3. Promissory note
4. Bank draft
5. Credit card
6. Letter of credit (also acceptable: money order/postal order)

(b) Hire purchase as a source of finance

Four advantages:

1. It enables Mr. Sylva to acquire and use expensive assets without paying the full price at once.
2. Payment is spread over an agreed period in convenient instalments, easing the burden on his cash flow.
3. He can put the asset to productive use immediately and use the income earned to pay the instalments.
4. It frees his working capital for other day-to-day business needs since the asset is not fully paid for upfront.

Three disadvantages:

1. The total cost is higher than the cash price because of the interest added to the instalments.
2. He does not own the asset until the last instalment is paid, so it can be repossessed if he defaults, and any earlier payments may be lost.
3. The fixed instalments are a continuing liability that can strain the business, especially in periods of low sales.