WAEC SSCE - Commerce - 2009

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The feature of a sole proprietorship from the given options is unlimited liability. Unlimited liability refers to the legal obligation of the owner of the business (the sole proprietor) to be personally responsible for all the debts and financial obligations incurred by the business. In other words, the owner's personal assets, such as their home, car, or personal savings, can be used to pay off the business debts. This is in contrast to limited liability, where the owners' personal assets are protected from being used to pay off business debts. Therefore, in a sole proprietorship, the owner has unlimited liability and is personally responsible for all the business's debts and obligations.

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Public enterprises are established to provide essential services to the public that the private sector may not be able to provide. These enterprises are owned by the government and are expected to operate in the interest of the public, and not necessarily to make profits. Examples of public enterprises include public transport companies, power generation and distribution companies, and health care institutions. The existence of public enterprises is justified by the need to ensure that these essential services are available to all members of the society, regardless of their ability to pay, and to ensure that they are run efficiently and effectively for the benefit of the public.

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Debenture holders have no voting right. Debentures are a form of long-term borrowing where the issuer (the company) agrees to pay a fixed rate of interest to the debenture holder for a specified period of time. Unlike shareholders, who have an ownership stake in the company and therefore have voting rights, debenture holders are creditors of the company and do not have any ownership or voting rights.

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A ship that travels without a fixed schedule and carries cargo from one port to another as per requirement is called a "tramp" or "tramp steamer". Tramp ships do not have a fixed route or a set timetable, but instead operate on a voyage basis, carrying cargo wherever it is needed. They are commonly used for transporting bulk commodities such as coal, grain, and ore, and are often chartered by companies that need to move cargo between different ports. The term "tramp" is believed to have originated from the fact that these ships "tramp" from one port to another without any fixed schedule or route.

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Carts are not a means of transportation by water, as they are usually used on land. Canoes, launches, and tramps are all examples of vessels or boats that can be used for transportation on water. Canoes are small and often powered by paddles, while launches are motorized boats that can be used for pleasure or transportation. Tramps, also known as tramp steamers, are cargo ships that do not have a fixed schedule or route and are available for hire for various transportation needs.

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The option that is not an example of Marine insurance is "Fidelity". Marine insurance provides coverage for risks associated with marine transport, such as damage or loss to cargo, ships, or terminals during the shipping process. Hull, cargo, and freight are all types of marine insurance that protect against different types of risks, such as damage to the ship or goods during transport, or liability for the cost of goods lost during transport. Fidelity insurance, on the other hand, is a type of insurance that covers losses arising from employee theft or dishonesty. Therefore, fidelity insurance is not related to marine transport and is not an example of marine insurance.

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The function of an entrepreneur is to identify and pursue business opportunities by bringing together the necessary resources such as capital, labor, and materials. Entrepreneurs make decisions, coordinate the factors of production, and bear risks associated with their business ventures. Therefore, "Entertaining" is not a function of an entrepreneur. While entrepreneurs may engage in various activities to promote their businesses, such as marketing and networking, entertaining is not a key function of entrepreneurship.

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The cost of advertising is ultimately borne by the consumer. When a manufacturer advertises a product, they include the cost of advertising in the price of the product. Therefore, the consumer pays for the advertising through a higher price for the product. This is because manufacturers try to recoup their advertising costs and make a profit by charging a higher price. Additionally, advertising costs may also be passed on to the retailer and wholesaler, who may also charge a higher price to the consumer to make up for these costs. However, in the end, it is the consumer who ultimately pays for the advertising through higher prices.

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The post office service that allows a traveler without a fixed address to collect his letter is known as "poste restante". This service is used by people who do not have a permanent address or are traveling, and allows them to have their mail addressed to a post office. The recipient can then collect the mail from the post office by providing identification and proof of address. The term "poste restante" is derived from French, meaning "remaining post".

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Establishing and maintaining mutual understanding between an organization and its customers is known as public relations. Public relations involve managing and building the reputation of an organization and maintaining a positive image of the organization with the public. This is usually done through communication strategies, such as press releases, media events, social media, and other public-facing activities. The ultimate goal of public relations is to establish and maintain a positive relationship between an organization and its customers, which can lead to increased brand loyalty and ultimately, increased sales.

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The nominal value of a share is the original value assigned to a share by a company when it is issued. On the other hand, the market value is the current value of the share in the stock market. In the given scenario, the nominal value of kC Ltd's share is 50k while the market value is 70k. This means that the shares of the company are selling at a higher value than their nominal value, indicating that they are in high demand. When the market value of a share is higher than its nominal value, the share is said to be trading at a premium. Therefore, the correct answer is "at premium".

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The owners of a public limited company are the shareholders. Shareholders are individuals or institutions that own shares or stocks of a company. They are the ones who provide the initial capital for the company and in return, they receive ownership rights, which includes the right to vote on company policies, elect board members, and receive a share of the company's profits in the form of dividends. Unlike private limited companies, shares of public limited companies are traded on the stock exchange and can be bought and sold by anyone.

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Life assurance premium is determined by the assured's age. This is because the risk of death increases as one grows older, and thus the premium for life assurance increases with age. Other factors that may influence the premium include the amount of coverage, the term of the policy, and the individual's health and lifestyle habits. However, the age of the assured is one of the most significant factors that insurance companies use to calculate the premium for a life assurance policy.

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The document that would be used when goods are sent through independent carriers is a consignment note. A consignment note is a document that contains information about the goods being shipped, the sender, the receiver, and the carrier responsible for transporting the goods. It serves as evidence of the contract between the sender and the carrier, as well as proof of ownership of the goods. The consignment note is usually completed by the sender and accompanies the goods throughout their journey until they are delivered to the receiver.

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Life assurance is not a contract of indemnity. Life assurance provides a sum of money to the beneficiary on the death of the life assured or at the end of the stipulated period, whichever is earlier. It is not compensating for any loss suffered by the insured but is rather a form of investment or savings. On the other hand, contracts of indemnity, such as marine insurance, fire insurance, and burglary insurance, are designed to compensate the insured against any losses suffered due to the occurrence of the insured event.

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The correct answer is: "Buying, pricing, selling, and promotion". These four activities are the core functions of marketing. Buying refers to the process of selecting products and suppliers, while pricing involves setting the right price for the product to ensure profitability and competitiveness. Selling is the process of persuading customers to buy the product, and promotion involves communicating the benefits of the product to potential customers through advertising, public relations, and other promotional activities. While activities such as risk-bearing, storage, production, transporting, and recruiting are important to the overall success of a business, they are not exclusive functions of marketing.

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Life assurance premium is determined by the assured's age. This is because life assurance policies are designed to provide financial protection for the family or dependents of the assured in the event of the assured's death. The younger the assured is when they purchase the policy, the lower the risk of death and the lower the premium. Conversely, the older the assured, the higher the risk of death and the higher the premium. Age is therefore a key factor that is taken into consideration when determining the premium for a life assurance policy. Other factors, such as the assured's health, lifestyle, and occupation, may also be taken into account, but age is generally the most significant factor.

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Stocks, shares and debentures traded in the stock exchange are called securities. The term "securities" refers to financial instruments that represent ownership in a publicly traded corporation or a creditor relationship with a government body or corporation. These securities are bought and sold in the stock exchange, where investors trade them with the expectation of earning a profit. Some examples of securities include stocks, bonds, and options.

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The document which helps to determine the country from where goods were imported is called the "certificate of origin." This document provides information about the country in which the goods were produced or manufactured, and it is used by customs officials to determine the correct tariffs and duties to be charged on imported goods. The certificate of origin is an important document in international trade as it helps to ensure that the correct amount of taxes and duties are paid on goods being imported into a country.

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Nationalization is the taking over of privately owned businesses by the government. This means that the government takes control of the ownership, management and operations of the business, and it becomes state-owned. This is often done in industries that are considered to be of national importance, such as utilities or strategic resources, where the government wants to ensure that they are run in the public interest. The government can also nationalize businesses to prevent monopolies or to address social or economic inequalities.

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The main objective of the International Bank for Reconstruction and Development (IBRD), which is a part of the World Bank Group, is to lend funds to middle-income and creditworthy low-income countries for the purpose of financing development projects. Therefore, the correct option is: "lend to poor countries." The IBRD's goal is to promote economic development, reduce poverty, and improve living standards in member countries by providing loans, guarantees, and advisory services.

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The tax paid on goods produced within a country is known as excise duty. Excise duty is a tax on specific goods produced and sold within a country, such as alcohol, tobacco, and fuel. The amount of excise duty is usually included in the price of the goods, and it is paid by the manufacturer or producer of the goods. The purpose of excise duty is to raise revenue for the government and to discourage the consumption of certain goods.

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The internal regulations of a limited company are stated in the "Articles of Association." These are the rules and regulations that govern the management and operation of the company's internal affairs, such as the appointment of directors and officers, the issuance and transfer of shares, and the conduct of meetings. The Articles of Association are a crucial document for a company's smooth operation and help to ensure that everyone involved in the company understands their rights and obligations.

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A prospectus is a document that a company issues to the public inviting them to subscribe to its shares. It provides detailed information about the company's operations, financial performance, and the terms and conditions of the offer. The prospectus is intended to help potential investors make informed decisions about whether to invest in the company. Therefore, option (C) is the correct answer. The other options mentioned are different types of legal documents that are associated with the formation and management of a company.

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The feature that is common to all retailers is selling to the final consumers. A retailer is a business or person that sells goods or services directly to the end-users, who are the final consumers. Retailers operate at the end of the supply chain, buying products from wholesalers or manufacturers and selling them in small quantities to consumers at a higher price. Retailers may operate as sole proprietors or as part of larger retail chains, and they may sell on a cash or credit basis. However, selling to the final consumers is a universal characteristic of all retailers.

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If a country devalues its currency, there would be an increase in exports and a reduction in imports. This is because the devalued currency means that the country's exports become cheaper for foreign buyers, making them more competitive and attractive. At the same time, imports become more expensive, which may lead to a reduction in their demand. The increase in exports can help boost the country's economy, as it creates jobs and generates income. However, the increase in local standard of living cannot be directly attributed to currency devaluation, as it depends on many other factors such as the country's economic policies, social programs, and overall economic conditions.

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When a person invents a new machine for making beverages, they can protect their exclusive right by obtaining a patent. A patent is a legal document that gives the inventor the exclusive right to produce, use, and sell the invention for a certain period of time, usually 20 years. It gives the inventor legal protection against anyone else making, using, or selling the same invention without permission. The patent owner can also license the invention to others for a fee. Obtaining a patent is important because it ensures that the inventor can benefit from their creation and prevents others from copying their idea without permission.

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The letters R/D on a cheque stand for "Refer to Drawer". This means that the bank cannot honor the payment of the cheque because there is a problem with the account, such as insufficient funds or a mismatched signature. The bank sends the cheque back to the drawer's (the person who wrote the cheque) bank, asking them to clarify or resolve the issue before the cheque can be processed. Therefore, the correct option is (b) dishonoured.

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The rate of turnover refers to the number of times within a given period that stock is sold and replaced. In other words, it measures how many times a company has sold and replaced its inventory during a specific period, such as a month or a year. This metric is used to assess how efficiently a company is managing its inventory and generating sales, as a high rate of turnover indicates that a company is selling its products quickly and efficiently, while a low rate of turnover may suggest that a company is struggling to sell its products or manage its inventory effectively.

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A type of policy where the assured or his dependents will not get anything if he dies within the period of the policy is known as a term policy. Term policies provide coverage for a specific term or period of time and if the policyholder dies during that period, the beneficiaries receive a death benefit. If the policyholder outlives the term of the policy, there is no payout. Term policies are generally cheaper than other types of life insurance policies because they provide coverage for a limited period of time and do not build up cash value.

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A place where dutiable goods are kept until duties on them are paid is known as a "bonded warehouse". This type of warehouse is often used in international trade, where goods may need to be stored for a period of time before they are cleared through customs and duties are paid. The bonded warehouse allows for the storage of goods without the payment of duties until the goods are ready to be released for sale or distribution. This can be beneficial to importers as it allows them to delay payment of duties until they are ready to sell or use the goods, which can help to improve cash flow.

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When an order cheque is endorsed, it becomes a bearer cheque. A bearer cheque is a cheque that is payable to whoever holds the cheque, without the need for identification. Endorsing an order cheque means that the payee (the person named on the cheque) signs the back of the cheque, which transfers the right to receive payment to another person. The cheque then becomes payable to the bearer, meaning that whoever holds the cheque can receive payment.

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The fine charged for a ship that overstays in a port is called demurrage. This fine is imposed to compensate for the delay caused by the ship's prolonged stay, which can disrupt the port's operations and cause financial losses for other ships waiting to dock. The demurrage fee is usually calculated based on the number of days that the ship has exceeded its allotted time in the port and can be a significant cost for shipping companies.

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Those who are engaged in exploiting natural resources are in extractive occupation. Extractive occupation involves the extraction of natural resources such as minerals, oil, gas, timber, and other resources from the earth, forests, and water bodies. This type of occupation usually involves the use of heavy machinery and equipment, and it often requires specialized skills and expertise. The extracted resources are then processed and sold to manufacturers who use them to produce goods and services that are used by people in their daily lives.

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A reduction in the catalogue price is referred to as a trade discount. A trade discount is a percentage deduction given by a seller to a buyer for purchasing goods in bulk or reaching a certain sales volume. It is a form of price reduction intended to promote sales by attracting customers to buy more of a product. Unlike a cash discount, which is a deduction given for early payment of a bill, a trade discount is deducted directly from the list or catalogue price of the goods.

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A Pro forma invoice is sent by a supplier who does not want to sell on credit. A pro forma invoice is a preliminary invoice sent to a buyer that outlines the goods or services to be provided, their cost, and other important details. It serves as a quotation that specifies the terms of sale, including the price, quantity, and shipping details. Unlike a regular invoice, a pro forma invoice is not a demand for payment, and it does not constitute a binding agreement between the seller and the buyer. Rather, it is a document that provides a preview of the financial transaction to come.

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The mode of conveying liquids and gases through an underground channel is called a pipeline. Pipelines are used to transport various substances, such as oil, gas, water, and sewage, over long distances. They are typically made of metal or plastic, and are buried underground to protect them from damage and to minimize the impact on the environment. Pipelines are an efficient and cost-effective way to transport large quantities of liquids and gases over long distances.

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Exchange is facilitated by specialization. When individuals, businesses or countries specialize in the production of a certain good or service, they become more efficient at producing it. This increased efficiency leads to lower costs, which makes it possible to offer the good or service at a lower price. As a result, people are able to trade the goods or services they produce for the goods or services produced by others, leading to an increase in overall economic activity and growth. Specialization is therefore a key driver of trade, which facilitates exchange between individuals, businesses and countries.

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The authority given to a bank to make regular payments on behalf of a customer is called a standing order. This is an arrangement between a bank account holder and their bank, where the account holder authorizes the bank to make regular payments to a specified recipient on their behalf. Standing orders can be set up for a variety of payments such as rent, mortgage, utility bills, or loan repayments. Once set up, the bank will automatically transfer the specified amount of money at regular intervals, typically monthly, from the account of the customer to the recipient.

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(a) Personal selling

Personal selling is a method of promotion in which a salesman meets prospective buyers face to face to present, explain and persuade them to buy goods or services. It involves direct, personal communication between the seller and the customer with the aim of making a sale.

(b) Media available to an advertiser

1. Television: It combines sound, colour and motion to reach a very large audience, making it powerful for demonstrating and creating strong impressions of products, though it is expensive.
2. Radio: It passes advertising messages by sound and reaches a wide audience, including those in rural areas and non-literate people, at a relatively low cost, but it lacks visual appeal.
3. Newspapers: They carry advertisements in print to a wide readership and can give detailed information, and they can be kept for future reference, but they reach mainly literate people.
4. Magazines: They target particular groups of readers with quality, coloured advertisements that last long, making them suitable for special or luxury products.
5. Posters and billboards (hoardings): These are large printed advertisements placed in public places and along roads to catch the attention of passers-by with brief, striking messages.
6. The internet and social media: These carry advertisements online to a very wide and global audience at relatively low cost, and they allow interaction and quick response from customers.

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(a) Explanation of terms

• (i) Goodwill: Goodwill is an intangible asset representing the good reputation, established customer base and business connections that a firm has built over time. It is the extra value a buyer is willing to pay for a business above the value of its net tangible assets, because the business already enjoys a steady flow of customers and earning capacity.
• (ii) Patents: A patent is a legal right granted by the government to an inventor giving him the exclusive right to make, use and sell his invention for a fixed number of years. It prevents other people from copying or exploiting the invention without the inventor's permission.
• (iii) Trade mark: A trade mark is a distinctive name, symbol, logo or sign registered and legally protected, which a manufacturer uses to identify and distinguish his products from those of competitors. It helps customers recognise the origin and quality of goods.
• (iv) Copyright: Copyright is the exclusive legal right given to the author or creator of an original literary, artistic, musical or intellectual work to reproduce, publish, sell or perform the work for a stated period. It protects the work from being copied without permission.

(b) Four factors that could lead to the dissolution of a limited liability company

1. Court order (winding up by the court): The court may order the company to be wound up where it is unable to pay its debts, or where it is just and equitable to do so.
2. Insolvency or persistent losses: When the company becomes insolvent and can no longer meet its financial obligations to creditors, it may be dissolved.
3. Special resolution by members: The shareholders may voluntarily pass a special resolution to wind up the company, for example when the objective for which it was formed has been achieved or is no longer profitable.
4. Completion of purpose or expiry of period: Where the company was formed for a specific purpose or for a fixed period stated in its articles, it is dissolved once that purpose is completed or the period expires.

Other acceptable factors include reduction of members below the legal minimum, and merger or amalgamation with another company.

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Explanation of terms

• (a) Fixed assets: These are assets of a permanent or long-term nature that a business acquires not for resale but for use in running the business over a long period, for example land, buildings, machinery, motor vehicles and furniture.
• (b) Certificate of trading (certificate to commence business): This is a document issued by the Registrar of Companies to a public limited company, after it has met the required conditions such as raising the minimum subscription, which entitles it to begin business and to borrow. A private company does not need it.
• (c) Dividend: This is the portion of a company's profit that is distributed to its shareholders as a reward for investing in the company, usually expressed as an amount per share or as a percentage of the nominal value of the shares.
• (d) Authorized capital (registered or nominal capital): This is the maximum amount of capital that a company is permitted by its memorandum of association to raise through the issue of shares. The company cannot issue shares beyond this amount unless it is legally increased.
• (e) Promoters: These are the persons who conceive the idea of forming a company and take all the necessary steps to bring it into existence, such as preparing the formation documents, raising initial capital and registering the company.

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(a) Five functions of the Customs Authority

1. Assessment and collection of duties: The authority computes and collects import and export duties, excise duties and other tariffs on goods crossing the national frontier, thereby raising revenue for the government.
2. Prevention of smuggling: It patrols the borders, ports and airports to detect and seize goods brought in or taken out illegally so as to protect government revenue and local industries.
3. Control of prohibited and restricted goods: It enforces bans on dangerous or illegal items such as hard drugs, arms and counterfeit goods, and controls the movement of restricted goods that require licences.
4. Compilation of trade statistics: By recording the quantity and value of goods imported and exported, the authority provides data used for planning the balance of payments and national economic policy.
5. Enforcement of trade agreements and quotas: It ensures that import quotas, embargoes and international trade agreements entered into by the government are observed by traders.

(b) Five advantages of international trade

1. Access to goods not produced locally: A country can obtain raw materials, machinery and products that its climate or resources cannot provide.
2. International specialisation: Countries concentrate on producing what they make best and most cheaply, raising world output and efficiency.
3. Wider market for surplus: Producers can sell surplus output abroad, encouraging large-scale production and higher incomes.
4. Source of government revenue: Import and export duties provide funds for the government.
5. Promotes friendship and cooperation: Trading relations foster peace, understanding and technical cooperation among nations.

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Auntie Justie - year ended 31/12/15

(a) Gross profit

Cost of goods sold = Opening stock + Purchases - Closing stock

= 60,000 + 180,000 - 70,000 = Le170,000

Gross profit = Sales - Cost of goods sold = 220,000 - 170,000 = Le50,000

(b) Average stock

= (Opening stock + Closing stock) / 2 = (60,000 + 70,000) / 2 = Le65,000

(c) Net profit

Total expenses = Salaries and wages + Transport + Rent = 8,000 + 6,000 + 5,000 = Le19,000

(Debtors of 16,000 is an asset, not an expense, so it is excluded.)

Net profit = Gross profit - Total expenses = 50,000 - 19,000 = Le31,000

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None

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Stock exchange terms explained

1. Backwardation: This is a charge or premium paid by a bear (a seller of shares he does not yet own) to the buyer for permission to postpone the delivery of the securities to a later settlement date. It is the penalty for deferring delivery.
2. Bear: A bear is a speculator on the stock exchange who expects the price of shares to fall. He sells shares he does not own, hoping to buy them back later at a lower price and profit from the difference.
3. Jobber: A jobber (or dealer) is a member of the stock exchange who buys and sells securities in his own name and on his own account. He deals with brokers rather than the public and makes his living from the difference between his buying and selling prices.
4. Jobber's turn: This is the profit made by a jobber, being the difference between the lower price at which he buys a security and the higher price at which he sells it. It is the margin between his bid price and offer price.
5. Brokerage: This is the commission or fee charged by a stockbroker for buying or selling securities on behalf of a client. It is usually calculated as a percentage of the value of the transaction.

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Effects of a sole trader admitting other partners

When a sole trader admits partners, the business becomes a partnership. This brings both benefits and losses to the former sole trader.

Benefits derived

• More capital: The new partners bring in additional capital, enabling the business to expand its operations.
• Sharing of risks and losses: Business risks and losses are now borne by all the partners instead of one person.
• Combined skills and ideas: The partners bring different talents, experience and ideas that improve decision-making and management.
• More time and division of labour: The work and responsibilities are shared, reducing the burden on the original owner and allowing specialisation.
• Continuity and easier borrowing: The larger business can raise loans more easily and is more likely to continue if the original owner is ill or absent.

Losses suffered

• Sharing of profit: The profit that the sole trader formerly enjoyed alone must now be shared among the partners.
• Loss of sole control: The owner can no longer take decisions alone; he must consult and agree with the other partners.
• Delay in decision-making: Disagreement among partners can slow down decisions and cause quarrels.
• Loss of business secrets and privacy: Trade secrets and financial affairs must now be shared with the partners.
• Liability for partners' actions: Each partner is bound by the actions of the others, so the former owner may suffer for a partner's mistakes or misconduct.

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Documents used in international trade and their uses

• (a) Consular invoice: This is an invoice certified and stamped by the consul of the importing country resident in the exporting country, showing the true value, quantity and description of the goods. Use: It enables the importing country to assess the correct import duty and to guard against under-invoicing and dumping.
• (b) Bill of lading: This is a document issued by a shipping company acknowledging the receipt of goods on board a ship for carriage, and it is a document of title to the goods. Use: It is used by the holder to claim the goods at the port of destination, and it serves as a receipt and evidence of the contract of carriage.
• (c) Certificate of origin: This is a document that states the country in which the goods were produced or manufactured. Use: It is used by the importing country to determine the rate of import duty to charge and to enforce trade agreements or restrictions on goods from certain countries.
• (d) Bill of sight: This is a document that an importer presents to the customs authorities when he does not have full particulars of the goods and cannot make a complete declaration. Use: It allows the importer to inspect the goods in the presence of a customs officer so as to obtain the details needed to complete the proper entry and pay the correct duty.

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(a) Difference between industry and commerce

Industry is the branch of production concerned with the extraction of raw materials from nature and the conversion of those materials into finished or semi-finished goods. It covers extractive, manufacturing and constructive activities that actually create goods.

Commerce is the branch of production concerned with the distribution and exchange of goods and services, together with the aids that make such distribution possible. It covers trade (buying and selling) and the aids to trade such as banking, insurance, transport, warehousing, advertising and communication. In short, industry makes goods while commerce distributes them.

(b) Activities of those engaged in commercial occupations

• Trade (buying and selling): Wholesalers and retailers buy goods from producers and sell them to consumers, thereby moving goods from where they are produced to where they are needed.
• Banking: Bankers keep customers' money safe, lend money, and provide a means of making and receiving payments, thus financing and easing trade.
• Insurance: Insurers accept the risks of trade such as fire, theft and accident in return for a premium, giving traders confidence to operate.
• Transportation: Transporters carry goods and people from the place of production to the place of consumption, bridging the distance between producers and consumers.