WAEC SSCE - Commerce - 2020

Maelezo ya Majibu

Maelezo ya Majibu

The term you are referring to is called Warehousing. Warehousing refers to the storage of goods in a safe and secure place until they are needed. This could be a large commercial facility or a smaller storage unit. The purpose of warehousing is to keep goods in a safe and organized place, so they can be easily retrieved when they are needed. This helps to ensure that goods are protected from damage and are readily available for sale or distribution when required. Warehousing also helps to improve supply chain management and inventory control.

Maelezo ya Majibu

Maelezo ya Majibu

Maelezo ya Majibu

A person engaged for the purpose of bringing his or her principal and a third party into a contractual relationship is called an "agent." An agent is a person who represents another person, known as the principal, in dealings with third parties. The agent has the authority to act on behalf of the principal and make agreements with third parties, such as buying or selling goods or services. The agent is typically paid a commission for their services. In this sense, an agent acts as a mediator between the principal and the third party, facilitating the formation of a contract.

Maelezo ya Majibu

Maelezo ya Majibu

Maelezo ya Majibu

Maelezo ya Majibu

Maelezo ya Majibu

The objective of ECOWAS that is not listed among the options is the promotion of a common language. ECOWAS is the Economic Community of West African States, a regional intergovernmental organization that aims to promote economic integration among its member states in West Africa. ECOWAS has several objectives, including the improvement of infrastructure, the encouragement of free movement of people, and the promotion of trade among member countries. However, the promotion of a common language is not listed as an objective of ECOWAS. While some member states share a common language, such as English or French, there is no official language of the organization. Therefore, the objective of promoting a common language is not a priority of ECOWAS.

Maelezo ya Majibu

Maelezo ya Majibu

The additional commission paid to agents for guaranteeing payment is called "del credere". Del credere is a type of commission that is paid by the seller to the agent for guaranteeing payment by the buyer. This commission is usually paid by the seller to the agent when the buyer is new or is not considered financially stable. The del credere commission is an additional fee that the seller pays to the agent in exchange for assuming the risk of non-payment by the buyer. Therefore, is the correct answer.

Maelezo ya Majibu

Maelezo ya Majibu

The management function that involves measuring outcomes and taking corrective action to reduce error is called "Controlling." Controlling is a process where the manager compares actual results to the desired results, and then takes steps to correct any deviations. This helps ensure that the organization is moving in the right direction and achieving its goals. For example, if a company's goal is to increase sales, the manager would regularly check the sales figures to see if they are meeting the target. If the sales are lower than expected, the manager might take corrective actions such as increasing marketing efforts, improving product quality, or adjusting pricing. Controlling is an ongoing process that helps organizations stay on track and make necessary changes to achieve their goals.

Maelezo ya Majibu

One advantage of sole proprietorship is that decisions are made promptly. This is because the sole proprietor has full control over the business and can make decisions without needing to consult with other owners or shareholders. This allows for quick decision-making, which is essential in a fast-paced business environment. Additionally, the sole proprietor can make decisions that are aligned with their personal values and goals, without needing to consider the interests of other owners or shareholders. This can lead to a greater sense of autonomy and flexibility in running the business. However, it's important to note that this advantage comes with the potential downside of having no one to bounce ideas off of or share the workload with.

Maelezo ya Majibu

Maelezo ya Majibu

Maelezo ya Majibu

A credit and thrift society is a business unit in which savings of members are lent to others. In this type of society, individuals come together to pool their savings and then make loans to each other. Members of the society act as both borrowers and lenders, and the interest earned on loans is shared among all members. This type of society allows individuals to access credit at favorable terms and also provides a way for members to save and earn interest on their savings.

Maelezo ya Majibu

Maelezo ya Majibu

An agreement that is enforceable in law is called a Contract. A contract is a legally binding agreement between two or more parties that contains the essential elements of an offer, acceptance, and consideration. It means that the parties have voluntarily agreed to the terms of the contract and have entered into an agreement that is recognized and enforceable by law. A contract can be formed orally or in writing, and it must include certain elements, such as the parties' identities, the subject matter of the agreement, the consideration exchanged, and the terms and conditions of the agreement. When a party fails to perform their obligations under the contract, the other party may seek legal remedies to enforce the terms of the contract.

Maelezo ya Majibu

The part of issued share capital that the company has asked the subscribers to pay for is called-up capital. When a company issues shares to the public, it is essentially selling ownership stakes in the company to investors. The total value of these shares is known as the issued share capital. However, not all of this capital may be immediately paid for by the investors. The portion of the issued share capital that the company has called upon the investors to pay for is called the called-up capital. For example, if a company issues 1,000 shares at a par value of $10 per share, the total issued share capital would be $10,000. However, the company may initially only ask investors to pay for half of the shares, or 500 shares, which would make the called-up capital $5,000. The remaining 500 shares would be considered uncalled capital, as the company has not yet asked investors to pay for them. Once investors have paid for their called-up shares, this portion of the issued share capital becomes the paid-up capital. The paid-up capital represents the actual amount of capital that the company has received from investors and can use for its operations and growth. Overall, the called-up capital represents the portion of the issued share capital that the company has requested payment for, while the paid-up capital represents the amount of capital that has actually been paid by investors.

Maelezo ya Majibu

The last link in a channel of distribution is the "consumer". A channel of distribution is the path that a product takes from the producer or manufacturer to the final customer or consumer. This channel typically includes various intermediaries, such as wholesalers, retailers, and agents, who help to get the product from the manufacturer to the end customer. The final link in this channel is the consumer, who is the ultimate recipient of the product. The consumer is the person or organization that actually uses or consumes the product for its intended purpose. For example, let's say a manufacturer produces a smartphone. The smartphone will typically go through various intermediaries before reaching the end consumer. The manufacturer may sell the smartphones to a wholesaler, who then sells them to a retailer. The retailer then sells the smartphones to the consumer, who will use the smartphone for personal or business purposes. Therefore, the consumer is the final link in the channel of distribution as they are the ultimate recipient and user of the product.

Maelezo ya Majibu

The document you are referring to is called a Delivery Note. A Delivery Note is a document that is issued by the seller's own courier (or delivery person) and is signed by the customer. The purpose of this document is to acknowledge that the customer has received the goods that were sent by the seller. This document serves as proof of delivery and shows that the goods were received by the customer in good condition. It is an important document for both the seller and the customer, as it helps to avoid disputes about whether or not the goods were received.

Maelezo ya Majibu

Maelezo ya Majibu

The factor of production that bears all the risk of the business is entrepreneurship. Entrepreneurship refers to the act of starting and running a business. The entrepreneur is the one who takes the risk of starting a new venture, investing time, money, and effort into it with the hope of making a profit. They are responsible for making decisions, finding and managing resources, and making the tough calls that can determine the success or failure of the business. In short, entrepreneurs bear the risk of the business because they are the ones who have the most to lose or gain from their decisions and actions. They are the ones who are ultimately responsible for the success or failure of the enterprise.

Maelezo ya Majibu

The issue of shares that allows existing shareholders to buy additional shares at a special price is called a "rights issue". This means that the company offers its current shareholders the right to purchase new shares at a discount, typically for a limited time period. For example, a company might announce a rights issue of 1 for every 10 shares held, meaning that for every 10 shares owned, a shareholder has the right to buy 1 additional share at a discounted price. The discounted price is usually lower than the market price at the time of the offer, which gives existing shareholders an incentive to take up the offer. The purpose of a rights issue is to raise capital for the company and give existing shareholders the opportunity to maintain their proportionate ownership in the company without dilution. It also allows the company to avoid the cost of underwriting and listing the shares on the stock exchange, which can be expensive. Overall, a rights issue is a way for a company to raise capital while providing an opportunity for its current shareholders to participate in the offering on favorable terms.

Maelezo ya Majibu

A feature of supermarkets which distinguishes it from other large scale retail outlets is that items sold are mainly household goods. Supermarkets are retail stores that offer a wide variety of food, beverages, and household items to customers. Unlike other large scale retail outlets, such as hardware stores or car dealerships, supermarkets specialize in selling consumer goods that are primarily intended for use in households. Household goods refer to products that are used for domestic purposes, such as food, cleaning supplies, personal care products, and other everyday essentials. These goods are generally purchased by consumers on a regular basis and are an essential part of their daily lives. Supermarkets typically offer a broad range of household goods, including fresh produce, packaged foods, household cleaning supplies, personal care products, and other items that consumers use regularly. They also offer a convenient one-stop-shop experience, which allows customers to purchase all of their household goods in one location. Overall, the range of household goods sold in supermarkets is one of the key features that distinguish them from other large scale retail outlets. This specialization allows supermarkets to cater to the everyday needs of consumers and offer a unique shopping experience that is tailored to their daily lives.

Maelezo ya Majibu

The activity which improves the appearance of a product and also aimed at protecting it is packaging. Packaging refers to the process of enclosing or wrapping a product in a protective material, such as a box, bottle, or plastic wrap, to keep it safe during storage, transportation, and handling. Packaging not only protects the product from damage but also makes it look more appealing and attractive to potential customers. This is why packaging is an important aspect of product design and marketing.

Maelezo ya Majibu

When goods are brought into a country for sale, they are considered as "visible imports". This means that physical goods, such as clothing or electronics, are being imported from another country and can be seen and touched. These goods are typically purchased by businesses or consumers within the importing country, which generates revenue for the foreign seller. Visible imports are important because they can impact the economy of the importing country. If there are a lot of visible imports coming in, it can be a sign that the domestic economy is not producing enough goods to meet demand. This can lead to a trade deficit, which means that the value of imports exceeds the value of exports. Overall, visible imports play a significant role in international trade and can have important implications for a country's economy.

Maelezo ya Majibu

Maelezo ya Majibu

A specially-designed mode of transport for conveying liquid and gas is a tanker. A tanker is a ship or a truck that is designed to transport large amounts of liquid or gas cargo. Tankers are specially built with large, cylindrical tanks to store and transport these materials safely. They are used to transport a wide range of liquids and gases, including crude oil, gasoline, chemicals, liquefied natural gas (LNG), and more. Tankers are an essential component of the global transportation network, as they allow for the efficient and safe transport of large quantities of liquids and gases across long distances.

Maelezo ya Majibu

Maelezo ya Majibu

The bank that acts as the lender of last resort is the central bank. The central bank is a government institution that is responsible for implementing monetary policy and regulating the country's financial system. One of the critical functions of the central bank is to act as the lender of last resort, which means it provides emergency funding to commercial banks when they cannot obtain funds from other sources. In times of financial crisis, commercial banks may experience a shortage of liquidity and struggle to meet the withdrawal demands of their depositors. If left unchecked, this situation can lead to bank runs and even the collapse of the banking system. To prevent such a scenario, the central bank steps in and lends money to the commercial banks, usually at a high-interest rate. The lender of last resort function is an essential tool that central banks use to maintain financial stability and prevent systemic risks to the economy. By acting as the ultimate source of liquidity, the central bank helps to instill confidence in the banking system and prevent the contagion of financial crises.

Maelezo ya Majibu

Maelezo ya Majibu

The term you are referring to is "Production." Production is not a component of the marketing mix. The marketing mix is a concept used to describe the four main elements that make up a successful marketing strategy. These four elements are known as the "4 Ps": 1. Product: The product or service that is being sold. 2. Place: The location where the product is sold, such as a physical store or online marketplace. 3. Promotion: The ways in which the product is promoted and marketed, such as advertising, sales promotions, and public relations. 4. Price: The price at which the product is sold. Production is a separate concept that refers to the creation of a product or service. While production is an important aspect of the overall business strategy, it is not considered one of the four main components of the marketing mix.

Maelezo ya Majibu

Commerce refers to all activities involved in the distribution and exchange of goods and services. This includes buying and selling of goods and services, but also encompasses other related activities such as advertising, marketing, financing, and customer support. Commerce involves the movement of goods and services from producers to consumers, and it also involves the management of supply chains, logistics, and inventory. Therefore, is the correct definition of commerce.

Maelezo ya Majibu

One advantage of small scale retail outlets is personal attention to customers. Unlike big stores where customers may feel like just another number, small retail stores often provide a more personalized shopping experience. The store owners and employees are often more hands-on and able to offer tailored suggestions and recommendations to customers based on their individual needs and preferences. This can lead to a higher level of customer satisfaction and loyalty.

Maelezo ya Majibu

The issue of prospectus by a company is an invitation to members of the public to subscribe to the company's shares. A prospectus is a legal document issued by a company when it offers its shares to the public for the first time. The document contains information about the company, including its history, financial information, management, and the terms and conditions of the offering. By issuing a prospectus, the company is inviting members of the public to buy its shares and become part owners of the company. The process of issuing a prospectus is regulated by securities laws to ensure that investors are fully informed about the investment they are making. Once the shares are issued, the investors can buy and sell them on the stock exchange.

Maelezo ya Majibu

The result of dividing the cost of sales by the average stock is the rate of turnover. This ratio measures how quickly a company's inventory is sold and replaced over a specific period. The cost of sales refers to the direct costs associated with producing and selling a company's products or services, including materials, labor, and other costs directly related to production. The average stock, on the other hand, represents the average amount of inventory a company holds during a given period. By dividing the cost of sales by the average stock, we get a measure of how many times a company's inventory is sold and replaced over the period. This rate of turnover can provide insights into a company's efficiency in managing its inventory, as a higher rate of turnover indicates that the company is selling its products more quickly and efficiently. It's important to note that this ratio alone does not provide a complete picture of a company's financial health, and it should be considered alongside other financial metrics.

Maelezo ya Majibu

The type of insurance a company takes out for all its employees collectively is called "group insurance." This type of insurance provides coverage to a group of people, usually employees of a company, under a single policy. The company pays the premium, and the employees and their families are covered for specific benefits, such as life insurance, health insurance, or disability insurance. This allows the employees to have access to insurance coverage that they may not have been able to afford on their own.

Maelezo ya Majibu

Weaving is not an example of the extractive industry. Extractive industry refers to activities that involve the extraction of natural resources from the earth, such as mining, drilling, and logging. These activities involve physically removing natural resources from the earth's surface or subsurface. Weaving, on the other hand, is a manufacturing process that involves transforming raw materials such as cotton, wool, or silk into textiles through a series of mechanical or manual steps. Weaving does not involve extracting natural resources from the earth. Instead, it uses raw materials that have already been extracted and processed. Therefore, weaving is not an example of the extractive industry.

Maelezo ya Majibu

A partner whose name is used to boost the image of the business and does not contribute capital is called a "nominal partner". This type of partner is also known as a "partner by estoppel". A nominal partner is not actively involved in the day-to-day operations of the business and does not contribute any capital to the business. Instead, they lend their name and reputation to the business in order to enhance its credibility and reputation. This can be beneficial in attracting customers, suppliers, and investors. While a nominal partner may not contribute capital or actively participate in the business, they can still be held liable for any debts or legal obligations of the business. This is because they are seen as a partner in the eyes of the law and are therefore responsible for the actions of the business. Overall, a nominal partner can be a useful asset for a business looking to enhance its reputation, but it is important to understand the legal implications of this type of partnership before entering into it.

Maelezo ya Majibu

The discount that is given to a retailer from the supplier's invoice price of goods is called a "trade discount." This discount is typically given to the retailer as a percentage off the listed price, allowing the retailer to make a profit when they sell the goods to their customers at the listed price. Trade discounts are a common business practice and are often used to incentivize retailers to purchase goods in larger quantities or to establish long-term relationships with suppliers. Unlike a cash discount, which is given to a customer who pays their bill quickly, a trade discount is given to the retailer regardless of when they pay their bill. A seasonal discount is a discount that is given to customers during a particular season, and a functional discount is a discount that is given to customers for meeting certain criteria or fulfilling specific functions.

Maelezo ya Majibu

Maelezo ya Majibu

A contract will not be discharged, or ended, through acceptance. Acceptance refers to one party agreeing to the terms of the contract, but it does not mean the contract is over. A contract may be discharged through agreement, meaning both parties agree to end the contract. A contract may also be discharged through breach, meaning one party fails to fulfill their obligations outlined in the contract, causing it to end. Finally, a contract may be discharged through performance, meaning both parties have fulfilled their obligations and the contract has been completed.

Maelezo ya Majibu

Maelezo ya Majibu

The right to buy or sell stock exchange with a stipulated period is called an option. An option gives the buyer the right, but not the obligation, to buy or sell an underlying asset (such as a stock) at a predetermined price within a specific period of time. The price at which the underlying asset can be bought or sold is called the strike price, and the specific period of time during which the option can be exercised is called the expiration date. Options can be used for a variety of purposes, such as to speculate on the future price movements of an asset, to hedge against potential losses, or to generate income. Contango and backwardation are terms used to describe the relationship between the current price of an asset and its price in the future, particularly in the context of commodities. Contango refers to a situation where the future price of an asset is higher than its current price, while backwardation refers to a situation where the future price is lower than the current price. Brokerage refers to the commission or fee charged by a broker for executing a transaction, such as buying or selling an asset on behalf of a client.

Maelezo ya Majibu

Maelezo ya Majibu

Maelezo ya Majibu

The financial market where existing shares and bonds are bought and sold is called the "stock market". The stock market is where individuals and businesses can buy and sell shares of publicly traded companies, as well as government and corporate bonds. When you purchase a share of stock, you are essentially buying a small piece of ownership in that company. As the company grows and becomes more profitable, the value of your shares can increase, allowing you to sell them for a profit. Conversely, if the company performs poorly, the value of your shares can decrease. The stock market is an important part of the economy because it provides companies with a way to raise capital by selling shares to investors. It also provides investors with an opportunity to earn a return on their investment by buying and selling shares. The stock market can be influenced by a wide range of factors, including economic indicators, company performance, and geopolitical events. Overall, the stock market plays a vital role in the functioning of the modern economy and is a key way for individuals and businesses to participate in the financial system.

Maelezo ya Majibu

(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.

Maelezo ya Majibu

(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.

Maelezo ya Majibu

(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.

Maelezo ya Majibu

(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.

Maelezo ya Majibu

(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.

Maelezo ya Majibu

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)

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

Maelezo ya Majibu

(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.

Maelezo ya Majibu

(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.