WAEC Commerce 2021 Theory Past Questions

Model answer

(a) An acquisition is a form of business combination whereby one company/firm buys or takes over another; there is a bigger/more powerful firm taking over the other entirely, and in most cases the acquiring company's name and policies are retained. A merger is a form of business combination whereby two companies come together to form a single, large company, combining names/logos, with no single company imposing itself on the other. (b) Importance of commerce to a nation: i. Commerce promotes trading activities which contribute to economic growth and development. ii. It provides job opportunities, reducing pressure on government and unemployment. iii. Through commerce, government generates more taxes and revenue to execute developmental programmes. iv. It removes obstacles that hinder easy buying and selling. v. It lessens the burden of producers by providing appropriate places to present and display goods. (Also: it satisfies people's wants, fosters good relationships between persons and countries.)

Model answer

(i) Interest is a regular payment based on a particular percentage, paid as a result of delay in payment or usage of money for a period. Profit is the excess of revenue over expenses; it does not have a particular percentage and may not be regular. (ii) A share is a security document/unit of ownership in a limited liability company, issued with a share certificate; the holder participates in profit sharing. A debenture is a document signifying the indebtedness of a limited liability company to the bearer, usually paid with interest at a set rate with a maturity date. (iii) An ordinary share does not carry a fixed dividend – holders receive dividend based on a set percentage after preference shareholders are settled. A preference share entitles the holder to a fixed percentage of profit whenever dividend is declared. (iv) A cumulative preference share entitles the holder to carry over unpaid dividend to another year. A participating preference share entitles the holder to share part of the remaining profit after all dividends and interest obligations have been settled. (v) Cum-div means the buyer/subscriber to a share will be entitled to the next dividend declared on the share. Ex-div means the buyer/subscriber is excluded from the next dividend.

Model answer

(a) Functions of money: 1. Money serves as a store of value. 2. It serves as a unit of measurement. 3. It serves as a standard for deferred payment. 4. Money serves as a medium of exchange. (b) (i) Bull: a stock market speculator who buys stocks in the expectation that the price will rise in the very short term, then resells at a profit – an opportunity seeker. (ii) Jobber: a person who holds shares on their own account and helps boost market liquidity by matching investors' buy and sell orders through their brokers; also called a jobber because they buy and sell at the flow of the market. (iii) Broker: an independent person or company that organizes and executes financial transactions on behalf of another party, helping people/companies manage shares; sometimes acts as an underwriter. (iv) Stag: unlike a bull, a stag is a one-day buyer and seller of securities, buying from a distress seller and selling to a desperate buyer.

Model answer

(a) Means of payment in home trade: i. Cash payment. ii. Bank transfer. iii. Issuance of cheque. iv. Promissory note. v. I.O.U. (b) Usage of computer in motor vehicle business: i. Computer can be used to track stock records so as to know when a vehicle arrives. ii. Storage of customers' information. iii. With the aid of computer, he can know the average time a vehicle stays in stock. iv. It can be used to calculate any discount given on the vehicle. v. Computer can be used to place order for vehicles from the manufacturer.

Model answer

(a) Entrepôt trade is the act of importing goods which will be re-exported; goods are brought into a country for the purpose of exporting them, referred to as entrepôt. (b)(i) A bill of lading is a document issued by a carrier to a shipper detailing the types, quantity and destination of goods carried, and signed by the consignee on delivery. A consignment note is a document containing details of the goods sent, and it is a title to the goods; it is issued by the sender/consignor (receiver's copy) rather than the carrier. (ii) A bill of sight is a document used in international trade where importers are required to complete the appropriate entry document if there is insufficient information about the cargo to determine the correct duty in advance. (c) Criticism against advertising: 1. Majority of advertising is deceptive. 2. Advertising adds to the cost of goods. 3. At times, it may lead to monopoly. 4. It may lead to unhealthy competition among firms. 5. Advertising can lead to multiplication of needs.

Model answer

(i) The organizational principle Madam Fana has based her decision on is Delegation of Authority – the subdivision and sub-allocation of powers to subordinates in order to achieve effective results. (ii) Duties of the Human Resource Manager: i. Recruitment of manpower needed in the organisation. ii. Promotion and training of staff. iii. Designing salary packages and other emoluments. iv. Seeing to the welfare of staff. (iii) Planning: setting organisational goals and objectives and how to achieve them. Organising: assignment of tasks, grouping tasks into departments, and allocating responsibility/resources to achieve common goals. Directing: guiding, supervising and motivating staff for the achievement of organizational goals. Controlling: monitoring employees' steps to ensure they align with organisational objectives, making adjustments where necessary.

Model answer

(a) An economic grouping is the coming together of different countries with a common economic interest and goals with a view to promoting economic cooperation and development among member states. (b) (i) Lake Chad Basin Commission: to regulate and control the use of water and other natural resources in the basin; to initiate, promote and coordinate natural resource development projects and research; to monitor the Lake's activities to prevent disaster. (ii) ECOWAS: promotion of trade among member countries; expanding markets for West African countries and citizens; cultural cooperation and promotion among member countries. (iii) Niger Basin Commission: to promote co-operation among member states; to ensure an integrated development of the Niger Basin in all fields; promotion of economic activities around the Basin.

Model answer

(a)(i) Authorized capital is the total amount/unit of shares which a limited liability company is given authority to issue for subscription — the maximum unit of shares a company can issue. (ii) Liquid capital is the amount of asset held in the form of cash or which can be easily converted to cash. (b)(i) Fixed assets = Equipment + Motor van + Fixtures and fittings = 150,000 + 300,000 + 40,000 = N490,000. (ii) Current liabilities = Creditors + Overdraft = 120,000 + 45,000 = N165,000. (iii) Current assets = Cash at bank + Debtors + Closing stock = 25,000 + 150,000 + 25,000 = N200,000. (iv) Working capital = Current Assets − Current Liabilities = 200,000 − 165,000 = N35,000. (v) Average stock = (Opening stock + Closing stock) ÷ 2 = (30,000 + 25,000) ÷ 2 = N27,500.