SECTION A: (20 marks)

1. If import prices rise faster than export prices, a country is said to be experiencing unfavorable

A) Terms of trade.

B) Balance of trade.

C) Terms of payment.

D) Balance of payment.

2. Which of the following is the fastest means of transferring money from Kampala to Arua by post?

A) Registered post.

B) Postal order.


D) Telegraphic money order.

3. Hadija's total sales during 1998 was shs.160,000. If her gross profit was 20% of sales, what was the cost of goods sold during the year?

A) Shs20,000

B) Shs110,000

C) Shs128,000

D) Shs32,000

4. A document that empowers the public limited company to commerce business is called

A) Certificate of incorporation.

B) Memorandum of association.

C) Articles of association.

D) Certificate of trading.

5. Which one of the following media would be most suitable to advertise a cheap commodity which is for general consumption in Uganda?

A) Newspaper.

B) Radio.

C) Television.

D) Posters.

6. What are financial institutions that facilitate the negotiation of Bills of Exchange?

A) Discount houses.

B) Investment trusts.

C) Building societies.

D) Finance houses.

7. Which of the following explains why import trade is sometimes restricted?

A) Generates money to the exporting country.

B) Creates employment in the exporting countries.

C) Discourages growth of infant industries in importing country.

D) Hinders standard of living in importing country.

8. The interest charged by a central bank on any short loans is called

A) Bank overdraft.

B) Interest rate.

C) Bank draft.

D) Bank rate.

9. Using the following information, calculate the turn over of a business:

Opening stock shs15,000

Closing stock shs25,000

Net purchases shs900,000

Gross profit shs20,000

A) Shs.890,000

B) Shs.910,000

C) Shs.920,000

D) Shs.930,000

10. Which one of the following functions of wholesaler benefits consumers?

A) Helping in keeping prices of goods stable.

B) Extending credit facilities to consumers.

C) Buying goods in large quantities and selling them in small quantities to consumers.

D) Transporting goods to the consumers' premises.

11. What form of intergration is involved when Mukwano soap industries ltd. joins Mbale soap Works and Madhvani to form one soap industry?

A) Forward intergration.

B) Backward intergration.

C) Vertical integration.

D) Horizontal integration.

12. What is a retail establishment stocking one class of goods under one management called?

A) Department store.

B) Hyper market.

C) Multiple shop.

D) Supermarket.

13. Which insurance principle refers to a financial compensation which restores the insured to the original financial position?

A) Insurable interest.

B) Indemnity.

C) Proximate cause.

D) Subrogation.

14. An agent who guarantees that his principal will receive payment for the goods he has sold on his behalf is called

A) Broker.

B) Factor.

C) Dealer.

D) Del credere.

15. Which of the following means may the government employ to protect consumer

A) Fixing maximum prices for goods and services.

B) Fixing minimum prices for goods and services.

C) Collecting high taxes from traders.

D) Allowing consumers to buy at any price they like.

16. What is the kind of trade when a buyer can claim compensation from the seller if goods are found to be defective?

A) A condition.

B) Caveat emptor.

C) A warranty.

D) Subrogation.

17. The following services are rendered by commercial banks except

A) Giving loans to customers.

B) Accepting deposits for custody.

C) Opening letters of credit to intending importers.

D) Replacing old bank notes in circulation.

18. Okello insured his car against accident for shs.4,000,000. He then had an accident. Before the accident the value of the car was shs 3,000,000. The wreck was valued at shs 400,000. If Okello chose to keep the wreck, how much was he compensated?

A) Shs.400,000

B) Shs.2,600,000

C) Shs.3,000,000

D) Shs.3,400,000

19. Sharing profits in a consumer cooperative society depends mainly on

A) One's capital contribution.

B) Level of profit realized.

C) Ratio of purchases.

D) The number of share one owns.

20. What is capital employed? It is

A) Fixed assets plus working capital.

B) Current assets less current liabilities.

C) Fixed assets less current liabilities.

D) Fixed assets plus current assets.

SECTION B: (80 marks)

21. a) state reasons why government owns some enterprises.

b) Why is the government of Uganda selling off some of her enterprises ( privatization) ?

22. a) What is retail trade?

b) Mention five types of large scale retailers in Uganda.

c) What factors are considered when starting a retail business?

23. a) Distinguish between the terms exchange and specialization.

b) How are the two terms mentioned in (a) above inter-related?

c) Give:

i) three disadvantages of barter exchange.

ii) two disadvantages of specialization.

24. a) What is partnership?

b) Why are professional firms such as law firms, clinics operates as partnerships?

c) What problems are likely to be encountered by such firms mentioned in (b) above?

25. a) State the advantages of warehousing as an aid to trade.

b) Describe four characteristics of a good warehouse.

26. a) Give four differences between private and public limited companies.

b) What are the advantages of public limited companies?

27. a) What is advertising?

b) Give the merits and demerits of advertising to a consumer?

28. A retailer has the following records for 1997 and 1998:

1997 1998


Total cost of sales 480,000 480,000

Average mark-up 25% 40%

Expenses 48,000 134,400

Capital 160,000 230,000

Average stock at cost 60,000 96,000

a) Calculate for each year:

i) The turnover,

ii) The net profit,

iii) Rate of return on capital.

b) Determine using the rate turnover the year the retailer did better.

Give reason.