WAEC SSCE - Commerce - 1993 (Essay)

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(a) Four sources of capital for a public limited company

1. Sale of shares: Issuing ordinary and preference shares to the public who then become part-owners.
2. Issue of debentures: Borrowing long-term funds from the public through debentures on which fixed interest is paid.
3. Ploughed-back (retained) profits: Undistributed profits kept in the business and used to finance expansion.
4. Bank loans and overdrafts: Borrowing from commercial and development banks.

Other sources include trade credit from suppliers and mortgages on property.

(b) Four advantages of converting a business into a public limited company

1. It can raise very large amounts of capital by selling shares to the general public.
2. Shareholders enjoy limited liability, so their loss is limited to the amount they invested.
3. It has continuity (perpetual succession) and is not affected by the death or withdrawal of any member.
4. Its large size allows it to enjoy economies of scale and employ specialist managers.

Four disadvantages

1. Formation is expensive and involves many legal formalities and documents.
2. Its accounts must be published and audited, so it loses privacy in its affairs.
3. Decision making is slow because of its large size and the many people involved.
4. There is separation of ownership from control, which may lead to conflict of interest and less personal attention.

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(a) Functions of the Stock Exchange

1. Provides a ready market for securities: It is an organised market where existing shares, stocks and bonds can be bought and sold.
2. Provides liquidity to investors: It enables holders of securities to convert their investments into cash quickly by selling to other investors.
3. Aids capital formation: It channels the savings of the public into productive investment by making it easy to buy new securities.
4. Values securities and fixes prices: Through the forces of demand and supply, it determines and publishes the current prices of securities.
5. Protects investors: By regulating its members and dealings, it guards against fraud and ensures fair dealing.
6. Provides investment information: It supplies information on prices and performance of companies, guiding investors in their decisions and acting as a barometer of the economy.

It also helps government and companies to raise long-term capital.

(b) Types of securities traded in the Stock Exchange

• Ordinary shares (equities).
• Preference shares.
• Debentures.
• Government stocks and bonds (for example development stocks and treasury bonds).
• Industrial loans and corporate bonds.

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Four environments under which a business operates

A business does not operate in isolation; it is influenced by forces around it known as the business environment. Four of these are explained below.

1. Economic environment: This refers to the economic factors that affect the business, such as the level of income, prices, inflation, interest rates, taxation, government economic policies and the general state of the economy. These determine the demand for the firm's goods and its costs of doing business.
2. Social (socio-cultural) environment: This is made up of the customs, beliefs, values, tastes, religion, language and way of life of the people. It affects the type of goods that will sell, consumer preferences and how the firm relates with the community.
3. Political and legal environment: This consists of the government, its laws, regulations and political stability. Laws on company registration, taxation, employment, prices and trade, as well as the degree of peace or unrest in the country, affect how the business is run.
4. Technological environment: This refers to the level of technology, machinery, tools and methods available. Advances in technology such as computers, the internet and modern machines affect production methods, efficiency, costs and the ability of the firm to compete.

Other environments include the physical (natural) environment and the competitive environment.

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(a) What is Public Relations?

Public relations is the deliberate and planned effort by a firm to create, build and maintain a good image and mutual understanding between the firm and its various publics, such as customers, employees, shareholders, government and the general community. Its aim is to win and keep the goodwill and confidence of the public.

(b) Five methods a firm can use to promote its public relations

1. Publicity and press releases: Sending favourable news and stories about the firm to newspapers, radio and television to create a good public image.
2. Sponsorship of events: Supporting sporting, cultural, educational and community events to bring the firm to public notice in a positive way.
3. Corporate social responsibility: Undertaking community projects such as building schools, hospitals, boreholes and giving scholarships to show that the firm cares for society.
4. Exhibitions, open days and factory visits: Inviting the public to visit the firm and see its operations, which builds trust and understanding.
5. Good staff and customer relations: Treating employees and customers well, handling complaints promptly and courteously, and publishing house journals and newsletters to keep the public informed.

Other methods include donations to charity and prompt, honest response to public complaints.

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(a) Four features of a multiple shop

1. Chain of similar shops: It is a group of many branch shops, owned by the same organisation, spread over different towns and streets, all selling the same range of goods.
2. Uniform appearance and price: The shops have a similar layout, design and shop front, and goods are sold at the same fixed prices in all branches.
3. Central control and buying: Buying is done centrally in bulk by the head office, which gives large discounts, while the branches concentrate on selling.
4. Specialisation in a line of goods: Each multiple shop organisation usually specialises in one type of product, for example shoes, chemists' goods or provisions.

Other features include cash sales (little or no credit) and standardised management policies from the head office.

(b) Four reasons why small scale retailing is common in Nigeria

1. Small capital requirement: Little money is needed to start, so many people with limited funds can go into it.
2. Low level of education and skill: It does not require special training or high education, so it is open to almost everyone.
3. Low and irregular incomes of consumers: Many customers buy in small quantities and on credit, which small retailers are able to provide.
4. High level of unemployment: Many people take to petty trading as a means of self-employment and survival.

Other reasons include the ease of entry and exit and the demand for goods in small, affordable units.

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(a) Five problems of using rail transport in Nigeria

1. Old and poorly maintained facilities: Many of the rail lines, engines and coaches are old, worn out and inadequately maintained, leading to frequent breakdowns.
2. Limited coverage (narrow network): The rail lines do not reach many parts of the country, so many towns and villages are not served.
3. Slow and unreliable service: Trains are often slow and do not keep strictly to timetable, causing delays for passengers and goods.
4. Inflexibility: Trains can move only along fixed tracks and cannot offer door-to-door delivery, so goods must still be moved by road to and from stations.
5. Inadequate funding and management: Poor funding, mismanagement and shortage of skilled staff have weakened the operation and maintenance of the railway.

Other problems include insecurity/vandalism of tracks and the use of an outdated narrow gauge.

(b) Short notes

• (i) Tramp liners: Tramp ships (tramp liners) are vessels that have no fixed route and no fixed timetable. They sail to any port where cargo is available and carry mainly bulky, full-load cargoes such as timber, grain or coal. Their charges (freight) are not fixed but are negotiated between the shipowner and the shipper.
• (ii) Ocean liners: Ocean liners are ships that ply fixed, regular routes according to a published timetable, whether or not they have a full load. They carry general cargo and passengers between named ports, and their freight charges are fixed and advertised in advance.

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(a) Five examples of trade associations

1. Chamber of Commerce (and Industry).
2. Manufacturers Association of Nigeria (Employers' / Manufacturers' Association).
3. Trade (Labour) Unions such as the Nigeria Labour Congress.
4. Professional associations such as the Institute of Chartered Accountants.
5. Consumer protection associations.

Other examples include road transport owners' associations and market traders' associations.

(b) Three functions of the Employers' Association

1. It negotiates with trade unions on behalf of its member employers on matters of wages and conditions of service.
2. It protects and promotes the common interests of employers and presents their views to government.
3. It settles disputes and advises members on labour relations and industrial matters.

(c) Objectives of the Lake Chad Basin Commission

1. To regulate and control the use of the water and other natural resources of the Lake Chad basin among member states for their common benefit.
2. To promote and coordinate development projects such as agriculture, fishing, irrigation and livestock in the basin.
3. To settle disputes and promote cooperation among the member countries (Nigeria, Niger, Chad and Cameroon, with the Central African Republic joining later) in the shared use of the basin.

It also aims to prevent pollution and conserve the environment of the basin.

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(a) What are Thrift Societies?

Thrift societies are voluntary associations of people who come together to save money regularly out of their incomes so as to accumulate funds from which members can borrow, or which they can withdraw to meet future needs. They encourage the habit of saving and provide members with easy access to credit at low cost. Examples include cooperative thrift and credit societies and the informal 'esusu' or 'ajo' savings clubs.

(b) Five services rendered by Thrift Societies to their members

1. Encourage savings: They promote the habit of regular saving among members, helping them to set money aside from their incomes.
2. Grant loans: They give loans to members at low rates of interest to meet personal, family or business needs.
3. Safe keeping of funds: They provide a safe place where members' savings are kept until needed.
4. Financial advice and education: They advise and educate members on wise spending, saving and investment of their money.
5. Payment of dividends and welfare help: Surplus is shared among members as dividends, and some societies give welfare assistance in times of need such as sickness or bereavement.

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Short notes on foreign-trade documents

• (a) Shipping note: This is a document prepared by the exporter (or his agent) and given to the dock or port authority. It gives details of the goods to be shipped and requests space on the ship. It authorises the docks to receive the goods for loading and serves as a delivery note to the port.
• (b) Ship's manifest: This is a complete list of all the cargo carried on a ship. It is prepared by the shipping company from the various bills of lading and shows details of all goods on board, their consignees and destinations. It is used by the customs authorities and by the captain as a summary of the whole cargo.
• (c) Bill of sight: This is a document used by an importer when he does not have full details of the goods he is importing and cannot make a proper customs entry. It allows the customs to permit the goods to be landed and inspected so that the importer can then complete the correct entry and pay the duty.
• (d) Dock warrant: This is a document of title issued by the dock authority to the owner of goods stored in the dock warehouse. It certifies that the named person is the owner of the goods and can be transferred by endorsement, so it can be used to sell or pledge the goods while they are still in the warehouse.
• (e) Bill of entry: This is a document completed by the importer (or exporter) and presented to the customs authority giving full details of the goods being imported or exported, their value and quantity. It is used by customs to assess and collect the duty payable and to keep trade records.

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(a) What is a contract of sale of goods?

A contract of sale of goods is an agreement by which the seller transfers, or agrees to transfer, the ownership (property) in goods to the buyer for a money consideration called the price. It is a legally binding agreement between a seller and a buyer for the exchange of goods for money.

(b) Three provisions of a contract of sale of goods

1. There must be goods which form the subject matter of the sale.
2. There must be a price in money to be paid for the goods.
3. There must be two competent parties, a seller and a buyer, who agree to the transfer of ownership.

Other provisions include an offer and acceptance, and the intention to transfer ownership from the seller to the buyer.

(c) Two conditions that constitute acceptance in the contract of sale of goods

1. When the buyer intimates his acceptance: Acceptance takes place where the buyer, after examining the goods, tells the seller (expressly) that he has accepted them.
2. When the buyer does an act inconsistent with the seller's ownership: Acceptance is implied where the buyer keeps, uses, resells or otherwise treats the goods as his own, or where he retains the goods beyond a reasonable time without rejecting them.