SECTION A: (20 marks)

1. A limited partner

A) Plays an active role in the running of the business,

B) Must have his or her name registered with the Registrar of companies,

C) Does not share in the payment of any liabilities of the business,

D) Enters into contracts on behalf of the firm.

2. Which of the following are current liabilities?

A) Wages, salaries, commission, bank overdraft.

B) Wages, mortgages, creditors,bank overdraft.

C) Commission, salaries, bank loans, creditors.

D) Bank overdraft, rents, creditors, mortgages.

3. The principle of insurance that requires one to disclose all relevant information about what is to be insured is called

A) Indemnity,

B) Proximate cause,

C) Insurable interest,

D) Utmost good faith.

4. A businessman had an average stock of shs12.000 and his rate of stock turn was 10. What was the cost of goods sold?

A) Shs120,000

B) Shs1,200

C) Shs11,990

D) Shs12,010

5. Which one of the following bank documents would help one to know the financial position of his/her customer before transacting a business?

A) Bank financial statement.

B) Letter of credit.

C) Credit status inquiry.

D) Credit transfer.

6. The reward for the use of land is called

A) Profit.

B) Wages.

C) Interest.

D) Rent.

7. Which one of the following is true of indirect takes? They are charged on

A) Personal incomes

B) Expenditure

C) Excess goods produced

D) Illegal goods and services.

8. The main purpose of setting up public corporations is to

A) Maximize profit

B) Sell shares to the public

C) Provide essential goods and services

D) Advise the public on how to conduct business.

9. Determine the value of fixed capital from the following records of a business.

Machinery shs 1,350,000

Bank loan shs 1,200,000

Premises shs 1,800,000

Debtors shs 600,000

A) Shs 4,350,000

B) Shs3,150,000

C) Shs3,600,000

D) Shs4,950,000

10. The following are advantages of a sole proprietorship except

A) Enjoyment of limited liability.

B) High level of flexibility.

C) Enjoyment of all profits.

D) Quick decision-making.

11. The process of distinguishing related products by producers is called

A) Branding.

B) Blending.

C) Pre-packing.

D) Standardization.

12. The bearing of risks in the production process falls on

A) Capital owners

B) Labourers

C) Land owners

D) Entrepreneurs.

13. The payment of dividends in a producer co-operative society depends on each member's

A) Capital contributed.

B) Amount of sales.

C) Number of shares.

D) Honesty and joyalty.

14. The number of times a business replaces its stock is called

A) Turnover

B) Stock-taking

C) Rate of stock-turn

D) Stock valuation

15. Shell petrol stations in Uganda are examples of

A) Tied shops.

B) Departmental stores.

C) Discount stores.

D) Supermarkets.

16. Calculate the average stock where a business had stock of shs2,400,000 as of Jan,2001 and stock of shs3,600,000 as of 31st Dec,2001.

A) Shs 1,200,000

B) Shs 3,000,000

C) Shs 6,000,000

D) Shs12,000,000

17. The safest method of sending money urgently from Kampala to gulu is by

A) Expected mail service.

B) Ordinary money order.

C) Postal order.

D) Telegraphic money order.

18. Government can best control imports through

A) Levying low excise duties.

B) Fixing import and export quotas.

C) Charging high taxes on foreign goods.

D) Giving subsidies to local producers.

19. A carpenter who makes furniture for his/her own use is engaged in

A) Indirect production

B) Direct services

C) Indirect services

D) Direct production.

20. A wholesaler offers the following services to the manufacturers except

A) Giving credit facilities

B) Buying goods in bulk

C) Prompt cash payment

D) Advertising the goods.

SECTION B: (80 marks)

21. a) What is the difference between demand and supply?

b) Explain the factors that influence the demand for a commodity.

22. a) state the contents of an invoice.

b) What steps should be taken by the buyer when an invoice is received from the seller?

23. a) i) Define a Memorandum of Association.

ii) Name and explain six clauses/contents of a Memorandum of Association.

b) Outline the steps involved in selling shares of a public limited company.

24. a) Explain the following insurance terms:

i) pooling of risks

ii) over-insurance

iii) under-insurance

iv) re-insurance

v) co-insurance

b) Describe the risks an owner of a factory is likely to insure against.

25. a) What is warehousing?

b) Describe the organization of a warehouse of a large -scale business.

c) How does warehousing facilitate trade?

26. a) Distinguish between a bank loan and bank overdraft.

b) What factors will the bank manager consider in giving a loan to an application?

c) How does a central bank control the commercial banks' capacity to give loans?

27. a) What factors should be considered when setting up a retail business?

b) Explain the function of a retailer in home trade.

28. A trading company had the following balance as at 31st Dec, 2001:

§ Opening stock shs 700,000

§ Purchases shs 200,000

§ Sales shs 950,000

§ Closing stock shs 50,000

§ Gross profit shs 100,000


I. Average stock

II. Sales at coast

III. Rate of turnover

IV. Margin

V. Mark-up