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WAEC: COMMERCE

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2021 Commerce WAEC Theory Past Questions

WAEC: COMMERCE 2021 Commerce WAEC Theory Past Questions
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2021 WAEC Commerce Theory Question 1

QUESTION 1

(a) Differentiate between a merger and an acquisition.

ANSWER

A merger is the coming together of two or more companies in a way that all the merging companies will close and a new company formed while an acquisition is the process of buying another company in which the company bought stops to exist and the company that purchased it becomes bigger and continues to exist.

(b) Explain five ways commerce is important in the life of a nation.

ANSWER

The five ways commerce is important to the life of a nation are:

  • Commerce facilitates exchange of goods and services which people enjoy, whether produced within or outside their territory.
  • Commerce facilitates the creation of wealth, thereby improving the standard of living in a nation.
  • Commerce promotes rapid transfer of both oral and written messages through communication.
  • Commerce makes room for protection against risks in day to day business operations through insurance.
  • Commerce creates awareness of the existence of goods and services through advertising.
  • Commerce ensures that goods produced are stored until needed. Thus, making sure that there is steady supply of goods for the nation through warehousing.
  • Commerce offers employment opportunities to a large number of people in a nation.
  • Commerce encourages international trade and cooperation as a result enhances friendly relations among countries.
  • Commerce brings technological innovation and new ideas, resulting in market development.
2021 WAEC Commerce Theory Question 2

QUESTION 2

Differentiate between the following pairs of terms:

  • Interest and profit
  • Share and debenture
  • Ordinary share and preference share
  • Cumulative preference share and participating preference share
  • Cum div and ex div

ANSWER

Share and Debenture

  • A share shows part ownership of a company while a debenture is debt owned by a company. Or a share earns dividends while debenture earns fixed interest.

Interest and Profit

  • Interest is the reward earned from the use of capital while profit is the reward from entrepreneurship.

Ordinary Share and Preference Share

  • Ordinary Share is a share whose holder is paid after all other shareholders have received their dividend while preference share is a share whose owner receives dividend first. Or a holder of ordinary shares has voting right while that of preference share has no voting right.

Cumulative Preference Share and Participating Preference Share

  • Cumulative Preference Share is a share whose owner is entitled to payment of unpaid dividends during future years when profit is made while a participating preference share is one whose holder is entitled to extra dividend if a certain level of profit is attained.

Cum div and Ex div

  • If a person buys shares cum div, it means that the dividend that is about to be paid will be his but if a person buys shares at ex-div, it means that the dividend that is to be paid will not be paid to him.
2021 WAEC Commerce Theory Question 3

QUESTION 3

(a) State four functions of money.

ANSWER

Functions of Money are:

  • It serves as a medium of exchange.
  • It serves as a standard of deferred payment.
  • It is used as a unit of account.
  • It is used as a measure of value.
  • It serves as a store of value.

(b) Explain how the following operators function on a stock exchange:

  • Bull
  • Jobber
  • Broker
  • Stag

ANSWER

Bull: This is a speculator who buys securities with the intention of reselling them at a higher price before the payment of the securities is due.

Jobber:  A jobber buys and sells securities on his own for a profit called jobber’s turn.

Broker:  This is an individual or firm who links buyers and sellers of securities with jobbers and earns a commission known as brokerage.

Stag: This is a speculator who subscribes to new issue of shares with the hope of selling them at a profit when dealings in them begin.

2021 WAEC Commerce Theory Question 4

QUESTION 4

(a) List five means of payment in home trade.

ANSWER

Means of Payment of Home Trade are:

  • Cheques
  • Vouchers
  • Money order
  • Bank notes and coins
  • Postal order
  • Bank transfer
  • Point of sale (POS)
  • Bank draft
  • Credit/debit cards
  • Inland bills of exchange.

(b) Explain to a seller of motor vehicles, five ways computers could be useful in his business.

ANSWER

  • He could use a computer to communicate with his suppliers and customers through email.
  • He could use word processing software to write letters and memos to his customers or document business activities rather than writing them manually.
  • The use of spreadsheet and accounting software could help him to keep his accounts better than doing it manually.
  • It searches for cars available for sale as well as potential buyers on internet. This reduces the cost of travelling to specific destinations to view cars being offered for sale.
  • Information about suppliers, debtors, and potential customers could be kept in a database which could be retrieved easily compared to searching for such information recorded in books.
  • He could use computers to manage his level of stock.
  • He could use computers to prepare and issue receipts and invoices.
  • He could use computers to advertise his stock or provide catalogues and pricelist.
2021 WAEC Commerce Theory Question 5

QUESTION 5

(a) What is entrepot trade?

ANSWER

Entrepot trade is the importation of goods into a country with the intention of re-exporting them to other countries.

(b) (i) Differentiate between a bill of lading and a consignment note.

(ii) Explain the use of a bill of sight in foreign trade.

ANSWER

  • A bill of lading is a contract between the export and the ship owner for carriage of goods to their destination while a consignment note is a contract of domestic carriage of goods when the seller uses an independent carrier.
  • The purpose of a bill of sight is to enable customs officers carry out inspection and valuation of goods when the bill of lading has not arrived.

(c) State five reasons for the criticism against advertising.

ANSWER

Reasons for the Criticism against Advertising

  • It increases the cost of marketing products and thus the price of the products.
  • Certain advertisements mislead consumers through false or exaggerated statements about the products.
  • Persuasive advertising induces consumers to buy what they do not really need.
  • Certain advertisements by companies aim at driving away small firms from business.
  • Advertisement may create false personality images and moral exploitation of the youth. Advertisement could be harmful to the society because of the use of indecent language.
  • Advertisement of certain products encourages consumers to use harmful products.
  • Successful advertisement will lead to monopoly.
2021 WAEC Commerce Theory Question 6

QUESTION 6

Madam Fana, the human resources manager of Baku limited, is due to start her annual leave. She wishes to assign one of her assistants to perform her duties in her absence.

(i) Identify and explain the organizational principle on which Madam Fana has based her decision.

ANSWER

The principle is delegation. It enables a manager or superior to assign some of his duties to his subordinates.

(ii) Duties of Madam Fana in Baku Limited

  • She is responsible for the recruitment, selection and staff placement.
  • She participates in staff appraisal and evaluation.
  • She serves as a liaison officer between Baku Limited and labour unions.
  • She is responsible for management of training and staff development.
  • She is involved in the disengagement of staff.

(iii) Planning: It is setting of objectives and establishing strategies for     achieving them.

Organizing:   This is the process of arranging and structuring of tasks into units and assigning such tasks to qualify staff.

Controlling: It involves monitoring of activities of the firm to ensure that set standards are followed and taking corrective actions where deviations occur.

Directing: This refers to the provisions of guidance and supervision to subordinates in order to achieve organizational goals.

2021 WAEC Commerce Theory Question 7

QUESTION 7

(a) What is an economic grouping?

ANSWER

An economic grouping is the coming together of different countries with common economic interests and goals to promote economic cooperation and development among member states.

(b) State three objectives of each of the following organizations:

  • Lake Chad Basin Commission
  • ECOWAS
  • Niger Basin Commission

ANSWER

Objectives of the Lake Chad Basin Commission

  • To regulate the exploitation of the water resources of the Lake Chad Basin Commission.
  • To survey the lake Chad water resources.
  • To harness and develop the water resources for electricity, crop, livestock and fish production.
  • To enhance the development of irrigation systems for agricultural processes/purposes.
  • To ensure economic co-operation and development among member states.
  • To promote regional integration and security.
  • To preserve the ecosystem of the Lake Chad.

Objectives of ECOWAS

  • To promote co-operation and development in all fields of economic activity.
  • To raise the standard of living of the people.
  • To increase and maintain economic activity in the sub-region.
  • To have regional economic co-operation.
  • To abolish obstacles to the free movement of persons, goods and services between member states.
  • To harmonize monetary policies as required for the proper functioning of the community.
  • To maintain political stability in the event of crises.
  • To help promote international unity.
  • To develop infrastructural schemes among member states.

Objectives of the Niger Basin Commission

  • To assist in the exploitation of the resources of the river Niger as well as its tributaries and sub-tributaries.
  • To liaise with member countries in order to gather and disseminate information about the River Niger.
  • To consider plans and suggestions emanating from member states and make recommendations to members.
  • To undertake surveys on how navigable the River Niger is.
  • To streamline the construction of dams on the River Niger.
  • To control flood and erosion on the River Niger.
2021 WAEC Commerce Theory Question 8

QUESTION 8

(a) Explain the following types of capital:

  • Authorized capital;
  • Liquid capital

ANSWER

(a) (i) Authorized Capital: This is capital which is stated in the memorandum of a company and it is the maximum amount a company is allowed to raise.

(ii) Liquid Capital: This is capital that is made up of assets that can easily be converted into cash.

ANSWER

ALTERNATIVE A:

(b)

(i) Fixed Assets D
  Equipment 150,000
  Motor van 300,000
  Fixtures and fittings 40,000
    490,000
(ii) Current Liabilities D
  Creditors 120,000
  Overdraft 45,000
    165,000
(iii) Current Assets D
  Stock 25,000
  Debtors 150,000
  Cash at Bank 25,000
    200,000

(iv) Working Capital = Current Assets – Current Liabilities

Current Assets = D25,000 + D150,000 + D25,000

= D200,000

Current Liabilities = D120,000 + D45,000

= D165,000

Therefore, Working capital = D200,000 – D165,000

= D35,000.

ALTERNATIVE B:

BALANCE SHEET (EXTRACT)

Fixed Assets: D D D
Equipment   150,000  
Motor van   300,000  
Fixtures and Fittings   40,000 490,000
       
Current Assets:      
Stock   25,000  
Debtors   150,000  
Cash and Bank   25,000  
    200,000  
Less Current Liabilities      
Creditors 120,000    
Overdraft 45,000 165,000 35,000

 

Average Stock = Opening Stock – Closing Stock

= D30,000 + D25,000/2

= D55,000/2

= D27,500.

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