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Real NABTEB Commerce Questions And Answers

Real NABTEB Commerce Questions And Answers

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NABTEB Questions And Answers For Commerce all for you. Note that the NABTEB Questions and Answers below are not NABTEB Expo or 2021 Real Questions. They are Questions That NABTEB has set before. They will go a long way to help you Pass 2021 NABTEB Commerce.

NABTEB Commerce Questions And Answers 2021

QUESTIONS
1a. Give reasons why firms spend a lot of money on advertising.
b. State the reasons why a business man may choose each of the following media for advertising
his goods.
(i) News paper (ii) Television (iii) Radio.
ANSWER
a. The following are some of the reasons why firms spend money on advertising
(1) It projects good image of the firm to external world.
(2) It educates the public on the uses of the goods
(3) It leads to increase in sales
(4) It is used to let the public know of the introduction of new products
(5) It helps to enlighten the public of the availability of goods
(6) It may give rise to higher revenue
(7) It may lead to increased in production
(8) It creates employment.

b. (i) The reasons why a business man uses news paper for advertising his goods are;
(a) Circulates throughout the country
(b) Can be printed in many languages
(c) It can be preserved for future use
(d) Circulates daily.
(e) It can be presented in various colours
(ii) Business man uses television as a means of advertising because of the following;
(a) It combines sight and sound
(b) It uses colour
(c) It covers wide range of goods
(d) It is suitable for target audience
(e) It has instant effect through pictorial demonstration
(f) It appeals to different classes of people who watches it
(iii) Radio is used as a means of advertising by business man because of the following
(a) Nearly all homes possess radio set.
(b) Covers all nook and corners
(c) Various languages could be used to reach the people
(d) Slogans or catchy words are often used

QUESTIONS:
(a) Define commerce
(b) Explain the different functions of commerce in your country.

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ANSWER:
(a) Commerce can be defined as the process of buying, selling, exchange and distribution of goods
and services. Commerce can also be defined as trades and aids to trade.
(b) The function of commerce in any given country is as follows;
(1) Provide employment opportunities for citizens of the country. This can be seen from people
who engages either in retail, wholesale or a big conglomerate trading.
(2) Storage of goods is made possible through commerce. Ware housing as one of aids to trade
ensures the storage of goods till they are wanted. In most cases, big traders, like
wholesalers and big retailers, usually acquire large quantities of goods for sale. They need
ware housing facilities to store the goods before they are sold.
(3) It increases the standard of living of the people by making it possible for scarce commodities
to arrive into the country from other countries through international trade
(4) It facilitates international cooperation. Many countries engage in different types of
productive occupations due to improvement in technology, these countries produce more
than they need for themselves. They export the surplus of what they produce to other
countries that needs these things. In turn they import from other countries some other
things they are not able to produce themselves. This interdependence of people and
countries fosters friendship and cooperation.
(5) Infrastructural development. Commerce brings about the development of the
infrastructural facilities of a country. Many developing countries depend on the services of
the advanced countries for the provision and building of their infrastructural facilities.
(6) Through banking and finance, the fund needed for commerce is made possible
(7) Through commerce, exchange of goods and services is made possible.

QUESTIONS
a. State the ways through which transport aids trade
b. Explain the factors which a business man may consider before choosing means of transport for
his goods
ANSWER
a. The ways through which transport aids trade are;
1. Facilitates the movements of goods and passengers from place to place.
2. It aids specialization by moving the factors of production from one place to the other.
3. Greater choice of goods is made available to the consumers.
4. Helps in stabilization of prices of manufactured and agricultural goods.
5. It creates interdependent world. No country can now exist without the others.
b. The factors which a business man may consider before choosing means of transport for his
goods are;
1. Distance/Location: The location where the goods are needed will help to determine the choice
of transport. Where the place is far, air may be chosen.
2. Unit volume of the goods: valuable goods like minerals need to be carried as quickly as possible
to avoid pilfering.
3. Destination: There are such places that have no other means of transport than by road.

4. Available means: The means of transport available where the goods are located is what will be
used.
5. The nature of the goods: perishable items need to be carried quickly to minimize spoilage while
bulky goods are carried by rail or road.
6. The weight of goods is equally considered
7. Customer’s preference: The choice of the customer will also influence the choice of transport.
8. Safety of the goods: A means of transport that will ensure safety movement of goods is also a
factor to consider
9. Volume or quantity of goods also determine the choice of transport for a given commodity
10. Cost of transport is also considered because a trader will prefer a cheaper means of transport
11. Timeliness of goods: Fast means of transport is needed to convey goods needed urgently

QUESTIONS
a. Outline the disadvantages of partnership
b. Explain the condition for dissolving a partnership.
ANSWERS:
a. The disadvantages of partnership are;

1. Unlimited liability: Each partner is jointly liable with the other partners for all the debts and
obligations of the firm
2. The formation of partnership requires a lot of formalities.
3. Constant disagreement that may bring the business to end
4. Death or retirement of member may result to the end of the partnership
5. The pride of ownership in partnership business is always diminished
6. In most cases, action of one partner binds the other whether favorable or not
7. There is always delay in decisions making due to series of consultation.
8. Partnership business always lack retained profit because of the business profit shared.

b. The conditions for dissolving a partnership are;
1. At the expiration of the fixed time for which the partnership was formed
2. By court order to dissolve the association.
3. When one partner give notice to the others of his intention to dissolve the firm
4. At the death of partner or if he is declared bankrupt
5. By the termination of the venture or undertaking for which the business was formed
6. The happening of an event which causes the partnership to become illegal

QUESTIONS:
a. List the measure which government may take to restrict import
b. state the measures a government may take to promote export
ANSWERS
a. The measure government may take to restrict import are;
1. Import license: Government making it a rule for importers to obtain it before embarking on
importation
2. Devaluation of local currency: This will make the importation to be very costly.

3. Stiff exchange control regulation: This makes it difficult for importers to obtain foreign exchange to
pay for the commodities he might like to import.
4. By encouraging the use of home made products.
5. Imposition of import duties: Heavy tariff which will increase the prices of the goods thus people
will desist from buying foreign goods.
6. Quotas: This is discriminatory measure in that a limit is set to the quantity of some goods imported
from certain countries.
7. Tax exemption: The government may decide to give out right help to home manufacturers in terms
of exempting them from taxes.
b. The following are the measures government may take to promote export;
1. Subsides: This is payment made by government to producers in order to reduce the cost of
production and make their goods more competitive with foreign ones.
2. Organizing local or international trade fares were home made goods could be displayed to attract
foreign marketers.
3. Removal of excise duties on goods meant for export over a period of time.
4. Giving encouragement to exporters to keep their foreign earning for use in the country.
5. Granting of loans to exporters to aid them finance their export trade.
6. Government should carve out industrial areas that are meant for producing goods that are for
export.
7. Making available statistical dates as well as trading opportunities to those involved in export trade.
8. Establishing export credits guarantee departments that will play the role insurance companies that
take on such risk not covered by commercial insurance companies e.g. political and war risks.

QUESTIONS
6a. State the various mode of transportation in Nigeria
b. Explain five factors that must be considered in selecting a mode of transportation
ANSWERS
a. The various means of transportation are;
1. Road
2. Rail
3. Air
4. Sea or water
5. Containerization
6. Pipelines
7. Beast of burden
8. Porter age
9. Parcel post.

b. The factors that must be considered in selecting mode of transportation are;
1. Distance/Location: The location where the goods are needed will help to determine the choice of
transport. Where the place is far, air may be chosen.
2. Unit volume of the goods: Valuable goods like minerals need to be carried as quickly as possible
to avoid pilfering.
3. Destination: There are such places that have no other means of transport than by road.

4. Available means: The means of transport available where the goods are located is what will be
used.
5. The nature of the goods: perishable items need to be carried quickly to minimize spoilage while
bulky goods are carried by rail or road.
6. The weight of goods is equally considered
7. Customer’s preference: The choice of the customer will also influence the choice of transport.
8. Safety of the goods: A means of transport that will ensure safety movement of goods is also a
factor to consider
9. Volume or quantity of goods also determine the choice of transport for a given commodity
10. Cost of transport is also considered because a trader will prefer a cheaper means of transport
11. Timeliness of goods: Fast means of transport is needed to convey goods needed urgently

QUESTIONS
a. Explain consumer protection
b. state four organization involved in consumer protection
c. explain the functions of these organizations.

ANSWERS
a. Consumer protection consist of the process adopted by the government, its agent as well as
private institutions to avoid the exploitation and cheating of the consumers as they purchase
goods from producers
b. The organizations involved in consumer protection are;
1. Nigerian standard organization (NSO)
2. Manufacturer/producer association
3. Rent tribunals
4. Price control board
5. Professional board e.g. Nigerian medical association(NMA), Nigeria bar association e.t.c
6. Environmental protection agencies e.g task force on environmental sanitation
7. National Agencies for Food and Drug Administration Control(NAFDAC).
c. The functions of these organizations are;
1. To eliminate hoarding of the goods by producers and middle men.
2. To stamp out profiteering by business men
3. To prevent the dumping of substandard and unsafe goods on the consumers
4. To protect the consumers from misleading or untruthful information
5. To educate the consumers about right and obligations of the producers or sellers
6. They help consumers to eliminate assessment of choice problems in the market.
7. They ensure that producers honours warrantees or guarantees

QUESTIONS:
a. Who is a seller in the chain of distributions
b. List and explain five function of the wholesaler to the;
(i) Supplier
(ii) Retailer.

ANSWERS
a. In the chain of distribution, a wholesaler is a person that normally buy goods either raw
materials or finished goods in large quantities from the producers and manufacturers and resell
in small quantities to retailers
b. (i) The functions of wholesalers to the supplier are;
1. Information
2. Storage/ware housing
3. Preparing commodities.
4. Advertising and promotion
5. Financing
6. Quantity and bulk buying

EXPLANATIONS:
INFORMATION: The wholesaler gives useful information to the supplier in respect of the state of the
market, such as changes in demand, as a result of price, taste or fashion.
STORAGE/WAREHOUSING: The wholesaler provides facilities for storing goods and thereby relieves
the supplier of storage expenses.
PREPARING COMMODITIES: The wholesalers helps to complete the process of production by
labeling, packaging, branding and blending the goods he buys from the suppliers before selling them to
the retailer
ADVERTISING AND PROMOTION: The wholesaler creates market for the supplier by means of various
advertising methods such as trade, journals and catalogues
FINANCING: The wholesaler finances the supplier by paying for goods bought promptly or in
advance.

QUANTITY OR BULK BUYING: The wholesaler buys in large quantity and thereby encourages the
suppliers or producers to produce more and thus reap the advantages of large scale production
ii. The functions of wholesalers to retailers are;
1. Break bulk
2. Regular supply/warehousing
3. Credit/financing
4. Delivery/transport facilities
5. Advice/information
6. Varieties of goods
7. Stabilization of prices.

EXPLANATIONS
BREAK BULK: The wholesaler breaks bulk by selling in small quantities to the retailer, this enables the
retailer to carry small amount of goods which he can afford to pay for.
REGULAR SUPPLY/WAREHOUSING: The wholesaler store large quantities of goods in his ware house
and thereby ensure that retailer has a regular supply of goods.
CREDIT/FINANCING: The wholesaler finances the retailer by granting him credit that is by allowing
the retailer to buy goods and to make payments for such goods later.

DELIVERY/TRANSPORT FACILITIES: The wholesaler sometimes delivers goods and provides
transport facilities for the delivery of goods to the retailer’s door.
ADVICE/INFORMATION: The wholesaler offers advice or information that keeps the retailer up to
date with new trends concerning new goods and prices to be expected on the market.
VARIETIES OF GOODS: The wholesaler stores goods from different manufacturers and thus,
avails the retailer of varieties of goods.
STABILIZATION OF PRICES: By storing goods in its ware houses and thus regulating supply, the
wholesaler keeps prices fairly stable for the retailers.

QUESTION
a. What is marketing
b. List the marketing mix and explain each of them
ANSWERS
a. Marketing is business activities that direct flow of goods from the producer to the consumer at a
profit or satisfying the goods of the organization.
b. The marketing mix commonly called 4ps are;
(i) Price
(ii) Place
(iii) Product
(iv) Promotions

EXPLANATION
1. PRICE: This is the money consideration which the buyer provides in exchange for transfer of the
property in the goods. The producer takes decisions on the right, profitable, reasonable and
realistic price to sell the goods.
2. PLACE: This is the area where the action market takes place. It is an organized place where
products are been offered for sale. It involves distribution of goods to consumer at the right
place
3. PRODUCT: This is the goods that a producer wants to sell. It takes it to designated place
where buyer will purchase the goods. It involves taking decisions on planning, packaging
branding trade mark etc.
4. PROMOTION: This is a way to make people be aware of the goods and services through
advertising, public relations, sales promotions etc.

QUESTIONS:
Write short notes on any five of the following;
(a) Called up capital
(b) Paid up capital
(c) Issued capital
(d) Poste restante
(e) Capital employed.

(f) Capital owned.

ANSWERS
a. Called up capital: This is the amount of money called up on the shares that have been
subscribed
b. Paid up capital: This is the actual amount of capital that share holders have paid to the
company. At times, shares are paid in installments or when the share holders are called upon to
make payment
c. Issued capital: This is the amount of share capital which is actually issued for subscription to
members of the public
d. Poste restante: This service is intended for a person travelling out of normal residence. During
the period he will be away, he arranges for mails to be addressed to the post office of a place he
is going
e. Capital employed: This is the total assets of the business, both fixed and current. This is the
total value of the resources used in running the business.
f. Capital Owned: This is the excess value of the assets of a business over the value of its
liabilities, both long and short term.


QUESTIONS:
a. Explain FIVE reasons why commerce is important in the life of a nation
b. Explain FIVE factors that contribute to the growth of commerce in Nigeria

Answers:
(a) Reasons why commerce is important in the life of a nation are:
(i) Commerce facilitates exchange of goods and service through buying and selling
(ii) Commerce makes storage possible through warehousing
(iii) Commerce provides employment opportunities
(iv) Commerce assist in financing businesses through banks
(v) Commerce increase the standard of living of a people by bringing in a variety of goods from
other countries
(vi) Commerce makes for interdependence of nations through international trade
(vii) Commerce facilitates specialization and mass production of goods and services
(viii) Commerce aids the movement of goods and services from areas of abundance to areas
where they are scarce
(ix) Commerce promotes rapid transfer of both oral and written messages through
communication
(x) Commerce creates awareness for goods and businesses opportunities, through advertising
(xi) Commerce generates revenue for entrepreneur and for the nation

(b) Factors that contributes to the growth of commerce in Nigeria are:
(i) Development of modern techniques of production: This gives rise to production of goods in
large quantity and makes buying and selling possible thereby helping to promote the growth
of commerce
(ii) Ware housing: Availability of ware housing makes it possible for goods produced ahead of
time to be stored until they are needed, creates space for further production, helps to
stabilize price of goods, etc. These go a long way in promoting commerce
(iii) Development of efficient means of transport and communication: Efficient transport
system makes it possible for raw materials and workers to be carried to manufacturing
centers, and goods produced to be distributed to areas where they are needed.
Development of telecommunication system makes contacts in commercial centers easier.
(iv) Insurance: Insurance helps to reduce the risks associated with commercial activities like
production, distribution and exchange of goods and services.
(v) Development of financial institution: The world of commerce cannot develop without
money. This money that is crucial for the development of commerce is made available by
banks.
(vi) Advertising: The availability of goods and services are brought to the notice of members of
the public through advertising to buy goods and services produced, thereby promoting
sales.
(vii) Political stability: Commerce cannot develop in a political rowdy atmosphere, but in an
atmosphere devoid of political bickering, rancor and squabble, which guarantee meaningful
commercial activities.

QUESTIONS:
(a) what is production?
(b) Explain THREE forms of production.
ANSWERS:
(a) Production is the creation of utility/value OR
The making of goods and services for satisfying human wants.
(b) Forms of production are:
(i) Primary production: This is the extraction of food and materials from land and sea, e.g. mining,
agriculture, quarrying, lumbering, fishing etc.
(ii) Secondary production: This is the transforming of raw materials into finished goods. OR the
manufacturing and construction af raw materials into finished goods e.g. textile making, saw milling,
cement making, building construction, road construction, food processing etc.
(iii) Tertiary production: This is the production of all services to satisfy human wants e.g.
(a) Commercial services, banking, warehousing, advertising etc.
(b) Direct services or personal services e.g. shoe making, gardening, house maid services etc.
(c) Indirect services are the civil and government services e.g. public teachers, police force and
armed forces OR

FORMS OF PRODUCTION ARE:
1. Industrial activities: these are concerned with the actual production of goods and services
The activities include:
(a) Extractive or primary: This is concerned with extraction of raw materials from natural
resources e.g. mining, drilling, farming etc.
(b) Manufacturing/secondary: This is concerned with activities involved in turning extracted raw
materials into finished good e.g. textile making, banking etc.
(c) Construction/secondary: This is concerned with activities involved with the converting of
manufactured goods into other goods, e.g. building bridges, assembling cars etc.
2. Commercial /tertiary occupations: These are concerned with activities aimed at making goods
and services available to consumer
Trade is buying and selling carried on through retailing and whole selling
Aids to trade are facilitating activities that make trade easy and smooth e.g. banking,
transporting, warehousing etc.
3. services/tertiary: These are personal services rendered directly or indirectly for the satisfaction
of human wants by professionals. Indirect service occupation includes teaching, nursing etc.
Direct service occupation includes cooking, gardening etc.

QUESTIONS:
(a) List FIVE environments in which a business may operate.
(b) Explain the environments listed in 3(a) above
ANSWERS:
(a) Environment in which business may operate are:
(i) Legal Environment
(ii) Political environment.
(iii) Economic environment
(iv) Social/cultural/religious/ethical environment
(v) Technological Environment
(vi) Physical/ecological climate/Geogrphical environment
(vii) Demographic environment
(viii) Pressure group environment
(ix) Infrastructural environment

(b) EXPLANATIONS.
(i) Legal environment: This constitutes all the laws, decrees or edicts made by the government
to regulate commercial operations. A business is required to operate within the laws of the
country or face closure
(ii) Political environment: This refers to the system of government existing and the
administrative subdivisions of the country which affect commercial operations. A business
is bound to adapt to the changing political situations. Political instability adversely affects
commercial operations
(iii) Economic environment: This includes the general economic conditions which affects
commercial decisions such as economic growth or boom or recession, inflation, depression
and change in market trends exert great impact on commercial organizations. It includes
the government fiscal and monetary policies with which government uses to stimulate
commercial activities. Commercial institutions watch closely details of these government
fiscal and monetary policies and economic forces that affect their operations
(iv) Social/cultural/religious/ethical environment: This is defined as the social institutions,
family, religious, languages, customs, beliefs and value system prevalent in a society. This
may affect commercial operations in terms of the type of products and persons available
for employment.

(v) Technological environment: This describes the current state of scientific knowledge,
production process, machines and supportive systems that enable a nation to carry on its
daily life. Advancement in technology such as electronic communication and
computerization have affected the way commercial activities are carried out. Any business
that does not adapt to such changes in technology will find itself obsolete
(vi) Physical/ecological/geographical environment: This includes the climate conditions e.g.
desert encroachment, drought, river pollution, depletion of forest and mineral resources.
The physical condition in which a commercial institution must be involved in any ecological
development and control of all forms of pollution and natural hazards e.g. air, water, noise,
flood etc.
(vii) Demographic environment: This deals with commercial environment which affects the
population of the state, district or area within which the business operates. The
composition of the population, age, sex distribution which determines the market for the
business product and the supply of labor
(viii) Pressure groups environment: The activities of interest and pressure groups, mass media,
other institutions and social groups have a lot of influence in business activities of a
country.
(ix) Infrastructure environment: Infrastructural facilities such as electricity, roads, railways, air
and seaports play crucial roles to the success or failure of the business firm.

QUESTIONS:
(a) State FIVE conditions under which the wholesaler may be eliminated
(b) Discuss FIVE functions of the wholesaler.

ANSWERS:
(a) Conditions under which a wholesaler may be eliminated are:
(i) Where perishable goods are involved
(ii) Where manufacturers have well branded goods and can deal directly with customers
(iii) Where the goods are of a technical nature requiring well qualified technicians for sales,
installation, advice and service
(iv) Where customers order to specification
(v) Where the turnover rate is low
(vi) Where there are large single retailers like the cooperative societies and customers with
enough capital to deal directly with manufacturers
(vii) Where goods can be sold by mail order system
(viii) Where the manufacturer has his own retail out let
(ix) Where the manufacturer wants to maintain retail price
(b) Functions of a wholesaler are:
(i) He provides warehousing facilities/storage/stability of prices
(ii) Buys and breaks bulk
(iii) Gives trade information
(iv) Grants credits to the retailer and manufacturer
(v) Carries the research for the retailer and manufacturer
(vi) Undertakes some services like packaging, branding and standardization of goods
(vii) Provides advertising facilities
(viii) Sometimes provides storage facilities
(ix) Provides insurance facilities

QUESTIONS:
(a) Explain FIVE services NIPOST renders to the public
(b) Discuss FIVE advantages of using courier service
ANSWERS:
(a) Services which NIPOST renders to the public are:
(i) Mail post: First class and second class mail including air mail services
(ii) Parcel post: Parcels are handled in the NIPOST
(iii) Business reply service or Free post:
 The addressee is able to send reply without incurring any expenses
 The normal postage for this service is prepaid by the user
 It is mostly used for advertisement
(iv) Private box and mail bag.
All letters addressed to the business man are placed in a numbered private box, until they are
collected
(v) Licensing of Franking machines: Firstly recorded impressions and the amount of postage
where there is considerable quantity of mail to be stamped and posted.
(vi) Redirection of mails: Where the addressee changed his address
(vii) Post restante:
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 By travelers who have no fixed address for receipt of parcels or correspondences
 The postal packets are kept in NIPOST until they are collected
(viii) Registration of letters:
 To ensure the safety of the mail; receipts are obtained every time the letter changes
hand.
 The addressee must sign for the parcel when it is delivered to him.
(ix) Recorded delivery: For parcels that are important but not financially valuable.
 To ensure that the sender is given evidence of delivery of the mailed parcel
(x) Express delivery service (Expedited Mail Service) EMS.
 Letters and parcels are conveyed specially to the addressee immediately on arrival
at NIPOST
 Handed over at the counter to the NIPOST official to deliver.
(xi) Payment functions:
 Money order- Means of payment for mail order business through the NIPOST.
 Cash on Delivery (COD)
 Provided to assist the mail order delivery
 It provides a safe guard to both sellers and buyers.
 Sellers do not tie up in bad debts, and the mail order customers have the goods as
soon as they pay.
Postal order:
 Issued for fixed amount and used for payments
 May be crossed for payment into the bank account
 Valid for six months.
Postage Stamps:
Used for payment of little debts.
(xii) National Giro: Payment is effected by making the payment.
(b) Advantages of using courier service.
(i) Courier service provides safe and fast delivery of mails and parcels
(ii) Courier services are reliable
(iii) To avoid misconduct and mishandling, courier services send their personnel to the client to
collect the mail or parcel and when delivering, the customers sign the register as evidence of
delivery.
(iv) Courier services undertakes air, cargo and bulky shipments of commodities
(v) Courier services are personal and cordial
(vi) Courier services provides a lot of employment opportunities
(vii) Courier services are rendered in many parts of the country including rural areas.
(viii) Longer hours of services (twenty four hours of service).
(ix) To make sure that mails and parcels do not miss in transit, very important ones are insured
(x) Courier services render door-to-door courier services
(xi) Quite decisions are taken because it is an independent organization.
QUESTIONS:
6(a) Explain FIVE reasons why life assurance policy may be taken
(b) Describe FIVE insurance policies that a large departmental shop owner may take .

ANSWERS:
(a) Reasons why a life insurance policy may be taken are:
(i) As a provision for the dependence for the assured
(ii) In order to obtain lump sum after retirement
(iii) As a protection for old age
(iv) As part of people’s investment if it is with interest
(v) As a security for loan obtained or houses purchased
(vi) As assurance and motivation to workers
(vii) It assures a pattern of a firm that his capital will be repaid when he die
(b) Insurance policies that a large departmental shop owner may take are:
(i) Motor vehicle insurance:- To avoid careless driving, protect road users, accident, damage,
loss etc of motor vehicles. It could be third party or comprehensive policy.
(ii) Fire insurance:- To cover risk associated with fire outbreak that may damage building,
factories, shops, stocks, machines etc.
(iii) Fidelity guarantee insurance:- To guard against possible loss of money through
embezzlement or misappropriation of funds by their fraudulent employees in positions of
trust
(iv) Burglary, theft and robbery insurance:- To cover against possible loss resulting from
breaking and entering of shops, dwelling houses, theft or larceny etc. by thieves or
robbers
(v) Accident insurance:- To cover personal accident, sickness, employers liability, accident to
properties, etc.
(vi) Consequential loss insurance:- To cover loss of revenue or profit
(vii) Bad debt insurance:- To guarantee, to protect the firm or owner against bad debts.

QUESTIONS:
(a) List FIVE factors to be considered by banks before granting credit to customers.
(b) Discuss FIVE functions of the central bank of Nigeria(CBN)
ANSWERS:
(a) Factors to be considered by banks before granting credits to customers are:
(i) The type of account the customer operates
(ii) The amount involved.
(iii) The past financial dealings of the customer with the bank
(iv) The purpose for which the loan will be used
(v) The collateral security offered
(vi) The period of repayment
(vii) The customers referee
(viii) The earning power of the borrower
(ix) The source of repayment
(x) The present government policy on banks’ lending
(b) Functions of the central bank of Nigeria :
(i) Issuing of currency: It is the only authority empowered to issue coins and currency notes
in the country. It also circulates them through other banks.
(ii) The government’s bank: It is responsible for the banking of the government revenues. It
also lends money to the government when the need arises.

(iii) The banker’s bank: It is the banker to all commercial banks in the country. All
commercial banks have account with it.
(iv) Manages national debts: It is responsible for paying interest on external and internal
loans. It is in charge of loans repayments and debt rescheduling.
(v) It is the lender of last resort: It acts as lender to commercial banks and other financial
institutions in a period when there is a high demand of money from customers.
(vi) Implements government policies: It controls inflation when necessary through
implementation of government fiscal and monetary policies
(vii) Foreign exchange: It controls the foreign exchange of the country especially when the
country is faced with balance of payment problems
(viii) Controls commercial banks: The central bank controls the credit policy of the
commercial banks through the use of any of these methods- Moral situation, the open
market operation, the bank rate and special directives.
(ix) Represents the nation in international monetary conferences, World Bank, IMF, etc.

QUESTIONS:
(a) Explain the meaning of the following:
(i) Balance of trade
(ii) Balance of payment
(iii) Discuss FOUR ways an adverse balance of payment can be corrected.

ANSWERS:
(a) The meaning of the following
(i) Balance of trade is the difference between export and import of tangible goods also known
as visible items of foreign trade for a country within a given period. This balance may be
either favorable or unfavorable. Favorable balance of trade occurs when export of visible
items are greater or exceed the import of the visible items. Unfavourable balance of trade
occurs when export of tangible goods is less than the import of tangible or visible items.
(ii) Balance of payment is the difference between the total amount of export and import of
both visible and invisible goods and items within a given period for a country. This balance
may be favorable or unfavorable. Favorable balance of payment occurs when total receipts
are more than total payment. Unfavorable balance of payment occurs when total receipt
are less than total payment. It is also called adverse balance of payment

(b) Ways through which an adverse balance of payment can be controlled are :
(i) Increasing export: An increase in production in the export sector will increase the countries
exports earning and will affect the import bills
(ii) Decreasing import (import substitution through local industries and imposing high tariffs).
Any country facing the problem of an adverse balance of payment will have to restrict
import so as to reduce the peoples demand for import and thus cut down on high bills of
import
(iii) Exchange control regulations: An introduction of import exchange regulation will aim at
controlling the amount of foreign exchange that can be made available for a countries
citizen for their transaction overseas
(iv) Borrowing: Loans may be taken by the country to finance mainly imports of capital,
equipments and raw materials in other to increase production in the home industries for
export.

(v) Devaluation: This is a situation whereby the value of a countries currency is reduced and
made cheaper than other countries. By so doing, import materials will become costlier than
locally made goods. There will therefore be an increase in the demand for export
(vi) Depletion of foreign reserves: Part of the countries good, reserves and securities may be
sold in other to normalize the adverse balance of payments.
(vii) Acceptance of gift or technical or personal aids
(viii) Deflationary measure: A country may decide to reduce the quantity of money in circulation
so that its citizen do not have much money to finance consumption of goods and services.

QUESTIONS:

(a) Explain FIVE factors to be considered in the choice of transport for goods
(b) Discuss FIVE function of transport to commerce.

ANSWERS:
(a) Factors to be considered in the choice of transport for goods
(i) Cost : No matter how advantageous any transport may be, its cost plays a crucial role in
determining whether it will be chosen for the transportation of goods and people
(ii) Distance: Means of transport used in transporting people or goods within a country
might not be the same when another country is involved because of distance
(iii) Nature of goods: Bulky goods are better transported through ships while fragile and
lighter ones are good for aero plane
(iv) Destination: Some places like rural area do not enjoy the services of other means of
transport other than transport by road. Therefore, people living in those places have no
choice or means of transport than road
(v) Degree of urgency: Air transport is the best means of transporting urgently needed
goods.

(vi) Value of goods: Valuable goods are mainly transported through means of transport that
is safe and faster
(vii) Safety: This is taken into account in choosing any means of transport.
(viii) Convenience: Many people choose airplane as a means of transport because of the
degree of convenience
(ix) Speed: When transporting perishable goods such as frozen fish, fruits, and vegetables
etc. the speed of the means of transport to be used is seriously considered.
(x) Instruction from the owner of goods: Owner of goods may instruct that the goods
should be transported through a particular means of transport
(xi) The social class of passenger: Many people nowadays consider aero plane as a status
symbol and therefore choose it as a means of transport in other to boost their ego
(xii) Time: The time and period one wants to travel have a lot to do in determining the
means of transport one has to choose. Some means of transport are not available at
particular times of the day and some period of the year

(b) Functions of transport to commerce are:
(i) Transport facilitates quick and efficient distribution of goods in the country
(ii) Promotion of trading activities between part of the country
(iii) Facilitates efficient movement of production resources
(iv) It increases the efficiency of productive unity in a country
(v) Transport encourages the development of rural areas
(vi) It leads to economic growth and development of a country.

(vii) It widens the market for the sale of goods and services
(viii) Transport prevents wastes because perishable and surplus goods will get rotten where
they were produced if efficient transport fails to exist.
(ix) By making goods and services from other part of a country and other country available,
transport helps to improve the standard of living of the people of a country
(x) Transport encourages trade between one country and another

QUESTIONS:
(a) What is advertising?
(b) state SIX advertising media
(c) Explain FOUR advantages and TWO disadvantages of advertising

ANSWERS:
(a) Advertising is a paid form of non-personal commercial means of bringing the existence of
production of new goods and services to the knowledge of members of the public and to
persuade them to buy and use the goods and services
(b) Advertising media are:
(i) Radio
(ii) Television
(iii) Newspapers
(iv) Magazines and journals
(v) Hoarding
(vi) Cinema
(vii) Catalogue and price list
(viii) Leaflets, handbills and circular
(ix) Mobile shops and loud speakers
(x) Window display
(xi) Trade fair and exhibitions
(xii) Free samples
(xiii) Miscellaneous

(c) Advantages of advertising are :
(i) Advertising arouses consumer’s interest in particular product advertised
(ii) It increases production as a result of increase in demand and lead to mass production
(iii) It leads to increase in the quantity of goods supplied to the market as aresult of increase
in production
(iv) Consumers will benefit by paying less
(v) Advertising makes the existence of goods or the introduction of new line of product
known to the public
(vi) Advertising leads to the profit of firms
(vii) The profit made by firms helps them to embark on expansion processes
(viii) Advertising creates employment opportunities which directly or indirectly helps a firm
to expand
(ix) Successful advertising may lead to monopoly which makes a firm to derive the
advantages of monopoly
(x) Advertising encourages competition among firms which leads to increase in the quality
of goods and services

(xi) In a bid to advertise their products to greater members of people, firms sponsor
selected radio and television programmes to the benefit of the people
(xii) Advertising contributes to increasing the general standard of living of the people
through the introduction of products, reducing the cost of goods, increase in production
of supply
(xiii) Mass media gain through increase in their revenue from advertisers
(xiv) Advertising helps to give security to employees of firms and confidence to
entrepreneurs through increase in demand and supply
Disadvantages of advertising are:
(i) Advertising helps to increase the cost of goods sold
(ii) Consumers bear the brunt of advertising because producers and advertiser shift the cost
of advertising to them in forms of high price of goods
(iii) Advertising contributes in making large firms to drive small firms out of production and
business
(iv) Advertising leads to monopoly in the production and supply of some goods including
essential ones.

(v) It leads to scarcity of goods because few producers deliberately decrease their
production when they must have created demands through advertising in order to make
more profits
(vi) If advertising leads to the driving away of small firms from business, it helps in causing
unemployment because many workers will be retrenched from the small firm that will
fold up
(vii) Advertising contributes in denying the consumers their traditional rights of reproducing
and picking the goods they want to buy
(viii) Some advertising through persuasion mislead the consumers to buy goods that they do
not need thereby wasting their money
(ix) Advertising especially that of television interrupts nice programmes being watched by
people
(x) Advertising is expensive and causes wastage by making consumers to buy almost every
new products in addition to the old ones they have in their homes
(xi) Advertising encourages multiplication of brand names.
(xii) It encourages people to live beyond their means, by buying goods that they cannot
afford on credit ors hire purchase because advertising diverts peoples’ perception from
the reality.

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