WAEC SSCE - Commerce - 2013

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The process of winding up a public limited company by a court order is known as compulsory liquidation. It is a legal process that is initiated when the court orders the winding up of a company due to various reasons such as failure to pay debts or inability to operate as a going concern. During the process of compulsory liquidation, the assets of the company are sold, and the proceeds are used to pay off the company's debts. The process is managed by a liquidator who is appointed by the court to oversee the process and ensure that it is conducted in accordance with the law. Once the process is complete, the company ceases to exist, and its name is removed from the register of companies.

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A tariff is a tax imposed on imported goods by the government of the importing country. The purpose of a tariff is to make the imported goods more expensive and less competitive compared to similar domestic goods. The goal of a tariff is to protect domestic industries from foreign competition, increase revenue for the government, and promote the consumption of domestic goods. Tariffs can be specific, meaning they are a fixed amount per unit of goods, or ad valorem, meaning they are a percentage of the value of the goods being imported.

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The difference between current assets and current liabilities is known as working capital. Current assets are those assets that can be easily converted into cash within a year or less, such as cash, inventory, and accounts receivable. Current liabilities, on the other hand, are obligations that are due within a year or less, such as accounts payable and short-term loans. Working capital is important because it represents the amount of funds available to a business to meet its day-to-day operational needs. It is the amount of money that a business can use to pay for its short-term liabilities, such as bills and expenses, without having to sell off its long-term assets or take out more loans. A positive working capital balance is generally considered healthy for a business as it shows that the business has enough funds to cover its short-term debts.

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A physical restriction placed on the amount or quantity of goods that can be imported is known as a "quota." Quotas are a type of trade restriction that limits the amount of a specific product that can be imported into a country during a certain period of time. This can be done to protect domestic industries from foreign competition or to prevent the influx of a product that is seen as harmful to public health or safety. In other words, "a quota" is the correct answer.

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The surrender value of a life assurance policy is the amount that would be paid to the policyholder, in this case Mr Biu, if he decides to discontinue the policy before the maturity date. It is the cash value that has accumulated in the policy, taking into account the premiums paid by Mr Biu and the interest earned over the years. Essentially, it represents the amount that Mr Biu would receive if he were to surrender the policy to the insurance company. Therefore, - would be paid to Mr Biu if he should discontinue with the policy - is the correct answer.

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The term which describes the value of business connections made by a company over the years is known as goodwill. Goodwill is the value that a business earns from its reputation and customer loyalty over time. It is an intangible asset that represents the value of the business beyond its tangible assets, such as equipment and property. Goodwill is often associated with a company's brand, customer relationships, and other intangible assets that contribute to its success. A company with strong goodwill is likely to have a positive reputation and customer loyalty, which can translate into increased profits and long-term success.

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Out of the given options, the most suitable item for hire purchase sale is a refrigerator. Hire purchase is a method of purchasing goods where the buyer pays a certain amount of money as a down payment and then pays the remaining amount in installments over an agreed period of time. The ownership of the goods remains with the seller until the buyer makes the final payment. A refrigerator is a durable good that is commonly sold through hire purchase agreements. This is because refrigerators are expensive and necessary household items that people may not be able to afford to pay for outright. By using hire purchase, people can pay for the refrigerator over time and still have use of it while making payments. Shares, shoes, and textiles are not suitable for hire purchase sale because they are not durable goods. Shares are a form of investment and not a physical good that can be purchased on hire purchase. Shoes and textiles are consumable goods that do not have a long lifespan, and it would not make sense to purchase them on hire purchase.

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A personal computer on sale in an office equipment shop is an example of stock. Stock refers to the goods or merchandise that a business holds for sale to its customers. In this case, the personal computer is not owned by the shop, but rather the shop is holding it in inventory to sell to a customer. Once the computer is sold, it will no longer be considered stock, but rather it will be considered a fixed asset for the customer who purchases it.

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When an individual decides to take an insurance policy, they must first complete a proposal form. This is a document that contains information about the individual and the risk they want to insure against. The proposal form is used by the insurance company to assess the risk and determine the premium to be paid by the applicant. The information provided in the proposal form is used by the insurance company to determine the terms and conditions of the insurance policy. It is important for the applicant to provide accurate and truthful information in the proposal form to avoid any issues in the future.

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The insurance principle that prevents a person from insuring what he does not stand to lose financially if the insured risk occurs is called "insurable interest." Insurable interest refers to the legal or equitable right of an individual to insure a particular asset or liability because he or she stands to benefit from its existence or suffer a loss from its destruction. In other words, a person must have a financial interest in the insured property or event to purchase insurance on it. Insurable interest is important in preventing insurance fraud and ensuring that insurance policies serve their intended purpose of providing financial protection to policyholders.

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To endorse a cheque means to write and sign one's name on the back of the cheque. This signifies that the payee, the person to whom the cheque is payable, has authorized the transfer of the cheque to another party. The endorsement creates a legal transfer of the cheque from the payee to the endorsee, the person to whom the cheque is being transferred. Endorsing a cheque is a common practice in business and personal transactions. It is usually done when the payee wants to transfer the cheque to a third party, such as a supplier or creditor. By endorsing the cheque, the payee is authorizing the transfer of funds from their account to the account of the endorsee. In summary, to endorse a cheque means to write and sign one's name on the back of the cheque, authorizing the transfer of the cheque to a third party.

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A country is said to achieve a trade surplus when total visible exports exceed total visible imports. This means that the country is exporting more goods than it is importing, resulting in a net inflow of foreign currency. This can be a positive sign for the economy, as it indicates that there is a demand for the country's products and can lead to increased production, employment and income. A trade surplus can also help a country build up its foreign reserves and increase its purchasing power in the global market.

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The various rights attached to different classes of shares are stated in the "articles of association". The articles of association is a document that outlines the internal regulations and rules governing the management of a company. It contains information about the rights, responsibilities, and powers of shareholders, as well as details on the issuance and transfer of shares. Therefore, it includes the different classes of shares and the rights associated with each class, such as voting rights, dividend entitlements, and rights to assets in the event of liquidation.

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The function of commerce refers to the activities involved in the exchange and distribution of goods and services. It includes the conversion of raw materials into finished products, the provision of services to customers, and the exchange of goods and services. Therefore, the option that is not a function of commerce is "the conversion of raw materials into semi-finished products." This is a function of manufacturing, which is a subset of commerce. Manufacturing involves the conversion of raw materials into finished or semi-finished products, while commerce involves the exchange and distribution of these products. In summary, while commerce involves the exchange and distribution of goods and services, the conversion of raw materials into semi-finished products is a function of manufacturing, not commerce.

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The price quotation that requires the buyer to take delivery at the manufacturer's warehouse is Ex-works. In an Ex-works agreement, the seller agrees to make the goods available at their premises, and the buyer is responsible for all transportation costs and risks involved in getting the goods from the seller's premises to their destination. This means that the buyer is responsible for arranging for the shipment, insurance, and all other aspects of the delivery process. The seller only has to make the goods available at their premises and is not responsible for any other aspect of the delivery.

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If a share is quoted ex-div, it means the new buyer would not get the next dividend. When a company pays a dividend to its shareholders, it typically sets a record date. This is the date on which the company checks its records to identify which shareholders are entitled to receive the dividend. The ex-dividend date is the date on or after which a share is traded without the right to receive the next dividend. This means that if an investor buys shares in a company on or after the ex-dividend date, they will not be entitled to receive the next dividend payment. For example, suppose a company pays a dividend of $1 per share, and the ex-dividend date is set as March 31st. If an investor buys shares in the company on March 30th, they will be entitled to receive the $1 dividend payment. However, if they buy shares on April 1st or later, they will not be entitled to receive the next dividend payment. Overall, the ex-dividend date is an important consideration for investors who are interested in receiving dividend payments from a company. If a share is quoted ex-div, it means that the new buyer would not get the next dividend.

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Trade fairs and exhibitions are primarily media of sales promotion. They provide a platform for businesses to showcase their products or services to potential customers and promote them through various marketing activities such as demonstrations, product launches, and presentations. The main goal of participating in trade fairs and exhibitions is to generate leads, close sales, and build relationships with customers and other industry players. While they can also serve as a means of customer service, market segmentation, and advertising, these functions are not the primary focus of trade fairs and exhibitions.

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Voyage policy insurance is associated with marine insurance. It is a type of insurance that covers a specific voyage or journey of a ship, cargo or both. It provides protection for the vessel and cargo against losses or damages that may occur during the voyage such as sinking, collision, piracy, or natural disasters. Voyage policy insurance is an important tool for managing the risks associated with shipping goods across the sea.

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A person who earns extra commission for guaranteeing debts is called a del-credere agent. A del-credere agent is a type of commission agent who guarantees the payment of the debts of buyers to sellers. In other words, when a seller sells goods to a buyer on credit, a del-credere agent guarantees that the buyer will pay the debt to the seller. If the buyer defaults on the payment, the del-credere agent will pay the debt to the seller and recover the amount from the buyer with an extra commission. This extra commission is the main characteristic that sets a del-credere agent apart from other types of commission agents like a factor or a broker. Factors and brokers do not guarantee the payment of debts and do not earn extra commission for doing so.

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The organization that protects consumers against poor quality foods is the Standards Organization. The Standards Organization is responsible for developing and enforcing standards for products, including food products, in order to protect consumers from poor quality or unsafe products. The Standards Organization sets minimum requirements for food products, including standards for quality, safety, and labeling. These standards ensure that food products meet certain quality and safety standards, and that consumers have access to accurate and complete information about the products they are purchasing. Chambers of Commerce, Trade Associations, and Manufacturers Associations do not have direct responsibility for protecting consumers against poor quality foods. Chambers of Commerce and Trade Associations are focused on promoting business interests and providing support to their members, while Manufacturers Associations are focused on representing the interests of manufacturers in a particular industry. In summary, the organization that protects consumers against poor quality foods is the Standards Organization, which is responsible for developing and enforcing standards for food products to ensure their quality, safety, and accurate labeling.

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The money issued by Ola Maro and Co Ltd. in running the day to day activities of the business is represented by working capital. Working capital refers to the amount of money a company has available to fund its daily operations. It includes cash, inventory, accounts receivable, and short-term investments. Working capital is a crucial component for a company's financial health as it ensures that the business can meet its short-term financial obligations such as paying salaries, buying raw materials, and paying rent.

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The use of a current account in business is convenient because it allows for withdrawals to be made at any time, without the need for prior notice. This provides businesses with the flexibility to access their funds as and when they need them, which is particularly important for day-to-day operations and managing cash flow. In addition, current accounts typically do not earn higher interest rates on deposits compared to other types of accounts, such as savings accounts. However, they do offer the convenience of being able to make deposits and withdrawals easily, which can help businesses to keep track of their finances more effectively. Finally, while loans may be available through a current account, this is not a guaranteed feature and will depend on the specific terms and conditions of the account. It is important to note that any loans taken out through a current account will likely come with interest and fees, which should be carefully considered before deciding to borrow money in this way. Overall, the main advantage of a current account for businesses is its flexibility and convenience in managing day-to-day financial transactions.

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The insurance principle of indemnity does not apply to life assurance. Indemnity means that the insurance company will compensate the policyholder for the actual loss suffered, up to the limit of the sum insured. However, in the case of life assurance, the loss cannot be quantified in monetary terms as it is related to human life. Therefore, the principle of indemnity is not applicable to life assurance policies. In the event of the policyholder's death, the insurance company pays out the sum assured to the beneficiaries, regardless of the actual financial loss suffered. Fire insurance, burglary insurance, and marine insurance are examples of insurance policies where the principle of indemnity applies.

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The issued capital of a company is the total amount of money that has been raised by issuing shares to shareholders. In this case, A Ltd. Company has an authorized capital of 2,000,000 shares of D5 each, which means that it can potentially raise up to D10,000,000 in total capital. However, if the company has only issued 1,200,000 shares, its issued capital would be D6,000,000 (1,200,000 shares x D5 per share). Therefore, "D6,000,000" is the correct answer.

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A contract made between a ship owner and a merchant for the carriage of cargo is known as a "charter party." A charter party is an agreement between the two parties that sets out the terms and conditions of the cargo transportation, including the type and quantity of goods to be transported, the route to be taken, the freight charges, and the responsibilities of each party. The ship owner agrees to provide the ship and crew to transport the cargo, while the merchant agrees to pay the agreed-upon freight charges and take responsibility for the cargo. In other words, "charter party" is the correct answer.

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The market which deals in the purchase and sale of second-hand securities is the Stock Exchange. A Stock Exchange is a platform where buyers and sellers come together to trade securities such as stocks, bonds, and other financial instruments. Second-hand securities are those securities that have already been issued and are being traded in the secondary market. The secondary market is the market where previously issued securities are traded between investors, as opposed to the primary market where new securities are issued. Second-hand securities are bought and sold by investors who are looking to profit from changes in their market value. The Stock Exchange provides a transparent and regulated environment for the trading of second-hand securities. It ensures that buyers and sellers are matched and that transactions are conducted in a fair and efficient manner. The prices of securities on the Stock Exchange are determined by supply and demand, with the market setting the prices. In summary, the market that deals in the purchase and sale of second-hand securities is the Stock Exchange.

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The ancillary to trade which ensures that people have access to information pertaining to goods is advertising. Advertising is a communication tool used by businesses to promote their products and services to potential customers. It provides information about the features, benefits, and prices of goods and services to potential customers, and helps to create demand for those products. Advertising can take many forms, including print ads, television commercials, online ads, billboards, and more. Through advertising, businesses can reach a large audience of potential customers, inform them about their products, and persuade them to make a purchase. Insurance, warehousing, and banking are other ancillaries to trade, but they do not have a direct role in ensuring that people have access to information about goods. Insurance is a risk management tool that protects businesses and individuals from financial loss due to unexpected events, while warehousing provides storage facilities for goods and banking provides financial services such as loans and payments. In summary, advertising is the ancillary to trade that ensures people have access to information pertaining to goods by providing information about the features, benefits, and prices of products and services to potential customers, and creating demand for those products.

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The selling of goods in small units is normally performed by retailers. Retailers are businesses that sell goods or services directly to consumers for personal or household use. They typically purchase goods from wholesalers or manufacturers in bulk and then sell them in smaller units, such as individual items or smaller packages, to individual consumers. Retailers operate in a wide range of industries, including clothing, electronics, food, and home goods. They may operate physical stores, online stores, or a combination of both. Examples of retailers include supermarkets, department stores, specialty stores, and convenience stores. They are often located in high-traffic areas to make it convenient for consumers to shop. Overall, retailers play an essential role in the distribution of goods to individual consumers. They buy goods from wholesalers or manufacturers in bulk and then sell them in smaller units to individual consumers, making it easy for people to access the goods they need.

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When a person intentionally decides to reduce the value of their currency, this is known as "devaluation". This is often done by a country's government or central bank in order to make their goods and services cheaper when sold to other countries. By reducing the value of their currency, they can make their exports more competitive in the global market, while making imported goods more expensive for domestic consumers. In other words, "devaluation" is the correct answer.

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The advertising efforts geared towards a particular audience is known as direct advertising. This type of advertising is specifically targeted to a particular group of people based on their demographics, interests, and behaviors. Direct advertising can take many forms, such as email marketing, direct mail, telemarketing, and targeted social media advertising. Its main objective is to reach a specific audience and elicit a response or action from them, such as making a purchase or visiting a website. Direct advertising is often more effective than mass advertising because it is personalized and can directly speak to the needs and desires of the intended audience.

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The cost of a telephone conversation is determined by the duration of the call. This means that the longer the call lasts, the more you will be charged for it. The number of words spoken and the urgency of the message conveyed do not affect the cost of the call. However, the person sending the message can affect the cost if they are making an international call or calling a premium rate number, as these types of calls can be more expensive. Overall, the most important factor in determining the cost of a telephone conversation is the amount of time you spend on the call.

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The object clause of a limited liability company is stated in the Memorandum of Association. The Memorandum of Association is a legal document that outlines the company's purpose, objectives, and the activities it is authorized to carry out. The object clause is a specific part of the Memorandum of Association that sets out the main objectives of the company. This clause defines the nature and scope of the business activities that the company is allowed to undertake. For example, if a company's main objective is to provide IT services, the object clause in the Memorandum of Association will state that the company is authorized to provide IT services and related activities. It is important to note that any business activities that fall outside of the scope of the object clause are considered ultra vires (beyond the powers) of the company and are not legally binding. Therefore, it is essential to ensure that the object clause is carefully drafted and accurately reflects the company's intended business activities. Overall, the Memorandum of Association is a critical legal document for any limited liability company, and the object clause is a fundamental part of this document that outlines the company's main objectives and business activities.

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Direct sales to consumers by manufacturers is a means of eliminating middlemen. Middlemen are individuals or businesses who act as intermediaries between manufacturers and consumers. They may include wholesalers, retailers, agents, and other parties who add their markups to the products before selling them to the end consumers. By eliminating middlemen and selling directly to consumers, manufacturers can have more control over their product distribution and pricing. This can lead to cost savings for both the manufacturer and the consumer, as well as greater efficiency and faster product delivery. It can also allow manufacturers to establish closer relationships with their customers, obtain valuable feedback, and tailor their products and services to meet consumer needs more effectively.

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The last link in the production process is the "consumer". This is because the production process is a sequence of activities involved in creating a product, from the raw materials to the finished product. The product is ultimately created to satisfy a need or want of the consumer. The consumer is the person who purchases and uses the finished product. Once the product reaches the consumer, the production process is considered complete. Therefore, the correct answer is "consumer".

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Public enterprises are financed mainly by government grants. Public enterprises are organizations that are owned and operated by the government, and their primary goal is to provide public services. These enterprises are not primarily focused on generating profits for their shareholders. Instead, they are funded by government grants to ensure they have the necessary resources to provide the services they were established to provide. Although public enterprises may also receive funding from commercial banks and mortgage banks, government grants are the main source of funding for these organizations. The government provides these grants to ensure that public enterprises can continue to provide essential services to the public, such as healthcare, education, and transportation, among others.

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"Carriage forward" on an invoice means that the buyer is responsible for paying the shipping or delivery cost of the goods they have purchased. In other words, the seller is not including the cost of shipping in the price of the item, and the buyer will need to pay for it separately. So, "carriage will be paid by buyer" is the correct answer.

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The concept which says that a company's production policy should be centered on the ultimate user of the product is known as consumer sovereignty. Consumer sovereignty is a marketing concept that puts the customer at the center of a company's production policy. It emphasizes the importance of understanding and meeting the needs and wants of customers to achieve business success. The company should prioritize the satisfaction of its customers by producing high-quality products that meet their needs, and also by providing excellent customer service. The concept of consumer sovereignty recognizes that customers have the power to make or break a business, and that companies must listen to their customers and respond to their needs in order to stay competitive in the market. It encourages companies to conduct market research to understand their customers' needs, and to develop a marketing mix that focuses on delivering value to the customer. By putting the customer first, companies can build strong customer relationships, increase customer loyalty, and ultimately achieve business success.

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The type of transport a manufacturer will use will be influenced by the nature of the goods being transported. Different types of goods require different modes of transportation to ensure they are delivered safely and in good condition. For example, perishable goods such as fruits and vegetables may require refrigerated transport to maintain their quality during transit, while bulky goods such as machinery may require specialized vehicles with lifting equipment. The type of transport used may also depend on other factors such as the distance to be covered, the urgency of the delivery, and the cost of transportation. However, the nature of the goods is the primary consideration that influences the choice of transport. Manufacturers must ensure that the goods are transported in a manner that minimizes the risk of damage, loss, or theft, and also complies with any relevant laws or regulations.

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A feature of supermarkets is that goods are on display with price tags. Supermarkets are large self-service retail stores that offer a wide range of food, household, and personal care items. They are known for their large selection of goods and competitive prices. One of the key features of supermarkets is that goods are on display with price tags. This means that shoppers can easily see what items are available and how much they cost. Goods are typically organized by category, such as produce, meat, dairy, and bakery, to make it easy for shoppers to find what they need. Supermarkets also offer a range of other features, such as a wide selection of goods, competitive pricing, and convenience. Some supermarkets may offer loyalty programs or discounts to frequent shoppers, but they typically do not give credit to reliable customers. Overall, the feature of supermarkets is that goods are on display with price tags, making it easy for shoppers to see what items are available and how much they cost.

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Ad valorem duties are import taxes that are calculated as a percentage of the value of the goods being imported. In other words, the amount of duty charged is based on the declared or assessed value of the imported goods. The higher the value of the goods, the higher the amount of duty charged. Ad valorem duties are commonly used by governments as a way to raise revenue and to protect domestic industries by making imported goods more expensive compared to locally produced goods. Therefore, "value of the goods imported" is the correct answer.

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An insurance policy that covers the body of the ship only is called Hull insurance. The hull of the ship is the main body or frame of the vessel, which includes the decks, the engine room, and all the machinery on board. Hull insurance provides protection to shipowners against loss or damage to their vessels due to various risks, such as collision, grounding, fire, and piracy. This type of insurance does not cover any cargo on board the ship or any liability arising from the operation of the vessel. Haulage insurance, voyage insurance, and cargo insurance are different types of marine insurance policies that cover other aspects of the shipping industry.

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When a cheque is marked "Not Negotiable," it means that it cannot be transferred to another person by endorsement, and the person receiving the cheque does not gain a better title to the funds than the person who originally wrote the cheque. This designation is meant to prevent the cheque from being used as a form of currency and to ensure that the intended recipient receives the funds. In other words, "the holder has no better title than the person who transfers it" is the correct answer.

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One advantage of being a sole trader is "quick decision-making." As the sole owner and operator of the business, the sole trader has complete control over all aspects of the business, including decision-making. This means that they can make decisions quickly without having to consult with other partners or shareholders, which can help the business to be more agile and responsive to changes in the market. In other words, "Quick decision-making" is the correct answer.

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(a) What is mail order business?

Mail order business is a form of retail trade in which goods are sold and delivered to customers through the post office or courier without the buyer and seller meeting face to face. Customers select goods from catalogues, price lists or advertisements, place their orders by post or online, and the goods are then despatched to them. It requires no shop or showroom and is useful for reaching customers in distant and rural areas.

(b) Six trends in retailing

1. Growth of self-service: More stores now allow customers to pick goods from open shelves and pay at a checkout, reducing the number of sales assistants needed.
2. Rise of e-commerce (online retailing): Goods are increasingly bought and sold over the internet, with delivery to the customer's home.
3. Branch/chain-store expansion: Retailers open many branches under one name in different locations, buying in bulk and selling at competitive prices.
4. Use of electronic payment methods: Retailers now accept cards, mobile money and other cashless means of payment instead of only cash.
5. Increased use of automatic vending machines: Goods such as drinks and snacks are sold automatically through coin- or card-operated machines.
6. Emergence of large-scale outlets (supermarkets, hypermarkets and shopping malls): Retailing is moving towards large stores that sell a very wide range of goods under one roof.

(Growth of self-branding/own-label goods and after-sales services such as home delivery are also acceptable.)

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Insurance terms explained:

1. Proximate cause: This is the active, direct and effective cause that sets in motion a chain of events producing a loss, without the intervention of any new and independent force. The insurer is only liable for a loss whose proximate (nearest real) cause is a peril insured against. For example, if a fire causes a wall to collapse and damage goods, the proximate cause of the damage is the fire.
2. Surrender value: This is the cash amount the insurer pays to a life-policy holder who decides to discontinue and cancel the policy before it matures. It represents part of the premiums already paid, less the insurer's charges. It applies mainly to life assurance because such policies build up value over time.
3. Contribution: This is the principle under which, where the same risk is insured with more than one insurer (double insurance), each insurer bears only a rateable proportion of the loss. It prevents the insured from recovering more than the actual loss from the several insurers. It applies to indemnity policies.
4. Utmost good faith (uberrimae fidei): This is the principle that both parties to an insurance contract must fully and honestly disclose all material facts relating to the risk, whether asked or not. If the insured conceals or misrepresents a material fact, the insurer may repudiate the contract.
5. Premium: This is the consideration (money) paid by the insured to the insurer, usually periodically, in exchange for the insurer's promise to indemnify or pay a benefit on the happening of the insured event. It is calculated on the basis of the degree of risk involved.

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Two distinguishing features between each pair are given below.

(a) Tramp vessels and ocean liners

(b) A factor and a broker

(c) A commission agent and a del credere agent

(d) Consular invoice and pro-forma invoice

(e) Insurance and assurance

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(a) Distinction between Commerce and Industry

Commerce is that branch of production concerned with the distribution and exchange of goods and services and all the aids that facilitate this distribution, such as trade, banking, insurance, transport, warehousing and advertising. Industry is the branch of production concerned with the actual creation or production of goods and direct services, that is, the extraction of raw materials, their processing and manufacture, and construction. In short, industry makes the goods while commerce distributes them to where they are needed.

(b)(i) Three activities involved in industry

1. Extraction: Drawing raw materials from nature, for example mining, fishing, farming and quarrying.
2. Manufacturing: Converting raw materials into semi-finished or finished goods, for example turning cotton into cloth.
3. Construction: Assembling materials to build roads, bridges, dams and houses.

(b)(ii) Five activities involved in commerce

1. Trade: The buying and selling of goods, both home trade (wholesale and retail) and foreign trade (import and export).
2. Banking: Providing finance, accepting deposits, granting loans and aiding the settlement of debts.
3. Insurance: Providing protection against various business risks and losses.
4. Transportation: Moving goods and people from one place to another, creating place utility.
5. Warehousing: Storing goods safely until they are needed, creating time utility.

(Advertising and communication are also acceptable commercial activities.)

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(a) Meaning of market segmentation

Market segmentation is the process of dividing a large, heterogeneous market into smaller, distinct groups of buyers (segments) who share similar needs, characteristics or buying behaviour, so that the seller can design products and marketing programmes to suit each group. Each segment is made up of customers who are likely to respond in the same way to a given marketing effort, which allows resources to be used more effectively.

(b) Four factors considered in segmenting a market

1. Geographical factors: The market is divided according to location such as region, country, urban or rural areas and climate. Consumer needs differ from one area to another, for example demand for raincoats is higher in wet areas.
2. Demographic factors: Buyers are grouped by measurable population characteristics such as age, sex, family size, occupation and education. For example, products may be designed separately for children, adults, men or women.
3. Income (economic) factors: The market is divided according to the income or purchasing power of consumers into high, middle and low income groups, since ability to pay determines the goods and brands they can buy.
4. Psychographic and behavioural factors: Buyers are grouped by lifestyle, social class, taste, religion, attitudes and buying habits such as brand loyalty and rate of usage, because these influence the choice and quantity of goods bought.

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(a) Types of discount

1. Trade discount: This is a reduction in the catalogue or list price granted by a manufacturer or wholesaler to a retailer or another trader who buys goods for resale. It allows the trader to make a profit and covers the cost of distribution. It is deducted on the invoice and does not appear in the ledger accounts.
2. Quantity discount: This is an allowance given to a buyer for purchasing goods in large quantities at a time. It encourages bulk buying and helps the seller to clear stock quickly.
3. Cash discount: This is a reduction granted to a debtor for paying his account promptly or within an agreed period. It encourages prompt payment and reduces the risk of bad debts, for example "5% for payment within 7 days."
4. Seasonal discount: This is a price reduction given to buyers who purchase goods in the off-season or out of season, for example buying umbrellas in the dry season. It encourages sales throughout the year and helps the seller to keep production going.

(b) Five functions of a development bank

1. It provides medium and long-term loans to industry, agriculture and commerce for development purposes.
2. It provides equity (share) capital by taking part-ownership in new and expanding enterprises.
3. It gives technical and managerial advice to businesses to help them operate efficiently.
4. It promotes and finances new industries, especially in priority sectors, thereby encouraging industrialization.
5. It underwrites shares and helps enterprises to raise funds from the capital market and attracts foreign investment.

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Trading information (in Le)

(a) Turnover = Sales - Returns inwards = 850,000 - 25,000 = Le825,000

(b) Cost of goods sold = Opening stock + Purchases - Returns outwards - Closing stock. With opening and closing stock both nil:

= 0 + 400,000 - 15,000 - 0 = Le385,000

(c) Gross profit = Turnover - Cost of goods sold = 825,000 - 385,000 = Le440,000

(d) Rate of stock turn

\[ \text{Rate of stock turn} = \frac{\text{Cost of goods sold}}{\text{Average stock}}, \qquad \text{Average stock} = \frac{\text{Opening stock} + \text{Closing stock}}{2} \]

Since no opening or closing stock is given, average stock = \( \dfrac{0 + 0}{2} = \text{Le}0 \), so the rate of stock turn is indeterminate from the data provided (there is no stock held to turn over).

Antwoorddetails

(a) Five importance of personal selling to a business

1. Two-way communication: The salesperson interacts directly with the customer, answering questions and clearing doubts on the spot.
2. Persuasion and closing sales: The seller can persuade a hesitant customer and actually close the sale, converting interest into a purchase.
3. Product demonstration: Complex or technical goods can be physically demonstrated so the buyer understands how they work.
4. Building customer relationships: Regular personal contact creates goodwill and encourages repeat buying and customer loyalty.
5. Market feedback: The salesperson gathers first-hand information on customer needs, complaints and competitors, which guides the firm's decisions.

(b) Five reasons why communication is important to a business

1. Coordination of activities: It links the various departments so that their efforts work together towards common goals.
2. Effective decision-making: Managers need accurate information passed to them to make sound decisions.
3. Placing and receiving orders: Buying and selling depend on the exchange of enquiries, orders and confirmations between firms.
4. Motivation of staff: Clear instructions, feedback and encouragement raise the morale and performance of employees.
5. Building good relations: It maintains understanding and goodwill with customers, suppliers and the public, improving the firm's image.

Antwoorddetails

The following are terms used on the Stock Exchange, the organised market for buying and selling securities such as shares and stocks.

(a) Bull

(i) A bull is a speculator on the Stock Exchange who expects the prices of shares to rise.

(ii) He buys shares at the current price in the hope that their prices will rise before the end of the account period, so that he can sell them at a higher price and make a profit.

(b) Bear

(i) A bear is a speculator on the Stock Exchange who expects the prices of shares to fall.

(ii) He sells shares, sometimes shares he does not yet own, at the current high price. He hopes to buy them later at a lower price before delivery is due, thereby making a profit.

(c) Option

(i) An option is the right, obtained on payment of a premium, to buy or sell a specified quantity of shares at an agreed price within an agreed future period.

(ii) The holder is free to exercise the right or allow it to lapse if it is not profitable to do so.

(iii) An option to buy is called a call option, while an option to sell is called a put option.

(d) Backwardation

(i) Backwardation is a fee or premium paid by a seller, especially a bear, who is unable to deliver the shares sold on the agreed settlement date.

(ii) The fee is paid in order to postpone or carry forward the delivery of the shares to the next account or settlement date.

(e) Contango

(i) Contango is a Stock Exchange term meaning the postponement of payment for securities until the next account or settlement date.

(ii) It is the extra charge or interest paid by a buyer, especially a bull, for delaying payment and taking delivery of the securities purchased.

(iii) The day on which the postponed payment is made is called the contango day.

Antwoorddetails

(a) Five features of a public corporation

1. Owned by the government: A public corporation is established and owned by the state on behalf of the public.
2. Created by an Act of Parliament (statute): It is set up by a special law which states its aims, powers and duties.
3. Separate legal entity: It has a legal personality of its own; it can sue and be sued, own property and enter into contracts in its own name.
4. Capital provided by the government: Its funds come mainly from government grants, loans and its own internally generated revenue rather than from shareholders.
5. Service (rather than profit) motive: Its main aim is to provide essential services to the public, though it may also aim to break even or make a modest surplus.

(Management by a board appointed by the government and public accountability are also acceptable.)

(b) Five sources of capital available to a limited liability company

1. Issue of shares: The company raises capital by selling ordinary and preference shares to the public who become part-owners.
2. Issue of debentures: It borrows long-term funds from the public by issuing debentures on which fixed interest is paid.
3. Bank loans and overdrafts: It obtains short- and medium-term finance from commercial banks.
4. Ploughed-back (retained) profit: Part of the company's profit is kept in the business as reserves and used for expansion.
5. Trade credit: The company obtains goods and materials from suppliers on credit, paying at a later date.

(Leasing/hire purchase and loans from finance houses are also acceptable.)

Antwoorddetails

(a) Definition of terms

1. Nationalization: This is the act by which government takes over the ownership and control of privately owned business enterprises, with or without compensation, and runs them in the interest of the public.
2. Indigenization: This is a policy that transfers the ownership and control of businesses from foreigners to citizens (indigenes) of a country, so that nationals participate more fully in the economy.
3. Commercialization: This is the reorganization of a public enterprise so that it is run strictly on business (profit-making) lines to become self-financing, though government may still retain ownership.
4. Privatization: This is the transfer of ownership and control of a government-owned enterprise to private individuals or companies, wholly or partly, through the sale of shares.

(b) Four reasons why government should participate in business

1. To provide essential and social services such as water, electricity and health that private investors may neglect.
2. To undertake capital-intensive projects like railways and refineries which require huge capital beyond private means.
3. To prevent exploitation of consumers by private monopolists through high prices and poor quality.
4. To create employment and reduce unemployment in the economy.