SECTION A: (20 marks)

1. A document which shows a summary of transaction between a seller and a buyer for a particular period is called

A) An invoice

B) A consignment

C) A statement of account

D) Accredit note

2. Entreport trade refers to

A) Re-export trade

B) Multi-lateral trade

C) Trade between two countries

D) Barter trade

3. Which one of the following is a feature of a supermarket?

A) Stocks goods from one producer

B) Goods are pre-priced

C) Sells goods in bulk only

D) Prices are negotiable

4. At the end of a trading period, a businessman's records showed a stock of shs1,020,000, cash at hand shs670,000, debtors shs850,000, creditors shs360,000 and unpaid wages shs590,000. What is his working capital?

A) Shs610,000

B) Shs2,590,000

C) Shs670,000

D) Shs1,590,000

5. A sole trader is one who

A) Enjoys limited liability.

B) Only sells goods through an agent.

C) Enjoys all the profit of the business

D) Has an inflexible business.

6. The advantage of a credit card is that it

A) Can be used anywhere.

B) Economizes the use of cash.

C) Guarantees payment over the set amount.

D) Enables the holder to buy goods cheaply.

7. The reduction of prices which results from large purchases is known as

A) Price support.

B) Resale price maintenance.

C) Cash discount.

D) Trade discount

8. Joyce insured her new car for shs12, 000,000. By the time an accident occurred, it was valued at shs9, 000,000 and the scrap was valued at shs1, 200,000. If Joyce opted to retain the scrap, how much would she obtain from the insurance company?

A) Shs7,800,000

B) Shs1,000,000

C) Shs9,000,000

D) shs10,800,0000

9. Which one of the following is a Bill of Exchange payable by the drawer before the maturity date?

A) Retired bill

B) Usance bill

C) Sight bill

D) Conditioned bill

10. The main reason for the existence of public corporation is to

A) Sell shares to the public cheaply

B) Provide certain essential goods and services to the public cheaply

C) Enlighten the public on how to conduct business

D) Maximize profits from the distribution of goods and services to the public.

11. Mark-up of a business is the

A) Ratio of net profit to sales.

B) Difference between cost of sales and goods available for sale.

C) Gross profit expressed as percentage of selling price.

D) Gross profit expressed as percentage of cost price.

12. If a trader is given 20% trade discount and 5% cash discount for goods purchased at shs100,000, how much will he/she pay?

A) Shs75,000

B) Shs80,000

C) Shs76,000

D) Shs60, 000.

13. The practice by large retailers to keep prices as low as possible is called

A) Resale price maintenance

B) Minimum price legislation

C) Loss

D) Maximum price legislation

14. Which one of the following is correct order when taking up an insurance policy?

A) Applying for policy, paying premium, issuing cover note and issuing insurance policy.

B) Applying for policy, issuing over note, paying premium and issuing insurance policy.

C) Issuing cover note, paying premium, issuing insurance policy and applying for insurance policy.

D) Applying for policy, issuing cover note, issuing insurance policy and paying premium.

15. Which one of the following activities is an example of, primary production?

A) Road construction.

B) Manufacturing.

C) Teaching

D) Fishing

16. Multi-lateral trade refers to trade

A) Between two countries

B) Among many countries

C) In a variety of goods

D) In both goods and services.

17. The practice where valuable goods are insured by more than one insurance company is called

A) Re-insurance

B) Co-insurance

C) Over insurance

D) Under insurance

18. A tax levied on goods produced within a country is called

A) Specific tax

B) Advalorem tax

C) Excise duty

D) Customs duty

19. What is the rate of turnover for a business whose

Opening stock is shs50,000

Closing stock is shs70,000

And net purchase is shs380,000?

A) 6.

B) 5.

C) 3.

D) 8.

20. The loss of value by a fixed asset is known as

A) Inflation

B) Devaluation

C) Deflation

D) Depreciation

SECTION B: (80 marks)

21. a) Explain the functions of advertising in business.

b) Outline the disadvantages of advertisements to a consumer.

22. a) Distinguish between liners and tramps as used in sea transport.

b) Outline the advantages and disadvantages of sea transport.

23. a) Distinguish between "location" and "localization" of industries.

b) What factors influence the location of an industry?

24. a) Define the following terms as used in insurance:

i) pooling of risks,

ii) sum insured,

iii) fidelity guarantee,

iv) Aviation hull.

b) Explain the basic principles of insurance.

25. a) Give the difference between ordinary partnership and limited partnership.

b) What are the advantages and disadvantages of a partnership?

26. a) What are functions of a wholesaler?

b) Under what circumstances may the services of a wholesaler not be required?

27. a) Explain the uses of each of the following documents to a company:

i) Articles of Association,

ii) Memorandum of Association,

iii) Prospectus,

iv) Certificate of Incorporation.

b) Give four ways in which the government can support the private sector.

28. a) Distinguish between working capital and capital employed.

b) The following were the records of a business at the end of a trading period:


Opening stock 840,000

Closing stock 970,000

Purchases 2,330,000

Sales 3,410,000

Required: Calculate the:

i) Cost of goods sold.

ii) Gross profit.

iii) Average stock.

iv) Rate of stock turn.