WAEC Commerce 2021 Theory — Question 2

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.