JAMB Commerce 1997

21 reviewed questions with answers and explanations.

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Question 4

An example of indirect service is rendered by

  1. civil servants
  2. family doctors
  3. household servants
  4. entertainers.
Answer and explanation

A: civil servants

Civil servants provide public services through government institutions, traditionally classified as indirect services. A family doctor, household servant or entertainer supplies a service directly to an individual client.

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Question 5

Who determines the initial objectives when a business is established?

  1. workers
  2. government
  3. society
  4. promoters.
Answer and explanation

D: promoters.

Promoters establish a business and define its initial purpose and objectives. Workers, society and government can influence those choices but do not normally act as the founders setting them.

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Question 6

Partnerships are most suitable where

  1. The partners are family friends
  2. Professionals are involved
  3. Members can easily raise enough capital
  4. Government regulations are favourable
Answer and explanation

B: Professionals are involved

Professional partnerships allow practitioners to combine expertise, responsibilities and resources. This is why professions are a common setting for partnerships; friendship alone does not establish business suitability.

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Question 9

Which business organisation follows the primary-cooperative principle of equal member votes?

  1. sole proprietorship
  2. partnership
  3. co-operative
  4. limited liability company.
Answer and explanation

C: co-operative

Primary cooperatives use democratic member control, commonly one member, one vote. Voting power is therefore not simply proportional to share ownership as in an ordinary share company.

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Question 13

In the standard comparison with fixed-interest debt and fixed-rate preference shares, which investment has variable dividends?

  1. debentures
  2. preferred shares
  3. government bonds
  4. ordinary shares.
Answer and explanation

D: ordinary shares.

Ordinary-share dividends depend on profits and the dividend decision, so their amount can vary. The standard comparison is with fixed-interest debt and fixed-rate preference dividends.

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Question 15

Leasing is the right to use assets for an agreed period in return for

  1. profit
  2. interest
  3. wages
  4. rents.
Answer and explanation

D: rents.

A lease grants use of an asset for an agreed period in return for rental payments. The lessee pays for use rather than earning wages or receiving a share of the owner’s profit.

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Question 17

Under the authorised-capital framework, what is the share-capital ceiling stated in a company’s memorandum called?

  1. issued capital
  2. authorized capital
  3. called-up capital
  4. paid-up capital
Answer and explanation

B: authorized capital

Authorised capital is the historical constitutional ceiling on share capital a company may issue. Issued, called-up and paid-up capital describe later stages of shares actually offered and paid for.

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Question 20

The cost of transporting goods to customers is called

  1. carriage inward
  2. carriage forward
  3. carriage paid
  4. carriage outward.
Answer and explanation

D: carriage outward.

Carriage outward is the cost of sending sold goods to customers. Carriage inward instead brings purchased goods into the business and may form part of their acquisition cost.

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Question 22

In foreign trade, document of title is known as

  1. bill of lading,
  2. bill at sight
  3. certificate of origin
  4. declaration form.
Answer and explanation

A: bill of lading,

A bill of lading acknowledges cargo received by a carrier and can function as a document of title. A certificate of origin states where goods originate and does not confer title.

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Question 24

Stevedores as a term in foreign trade means men who

  1. Inspect goods in ships
  2. Import goods by ships
  3. Collect duties in ships
  4. Load and unload ships
Answer and explanation

D: Load and unload ships

Stevedores handle cargo at ports, loading it onto ships and unloading it on arrival. They are cargo-handling workers rather than customs-duty collectors or import purchasers.

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Question 26

The basic distinction between cash discount and trade discount is that while trade discount is

  1. For a period of 30 days, cash discount is for a period of 3 months
  2. Given by a wholesaler, cash discount is given by a bank
  3. A reduction in the catalogue price of an article, cash discount is a reduction in the invoice value
  4. A reduction in value of sales, cash discount is a reduction in price of goods
Answer and explanation

C: A reduction in the catalogue price of an article, cash discount is a reduction in the invoice value

Trade discount reduces the list or catalogue price before invoicing. Cash discount rewards settlement within agreed terms and reduces the invoiced amount the buyer must pay.

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Question 27

The cost that arises from failure to load or unload a ship at the port within a stipulated period is known as

  1. excess charges
  2. demurrage charges
  3. premium charges
  4. trade charges.
Answer and explanation

B: demurrage charges

Demurrage is the charge for exceeding the agreed time allowed for loading or unloading. It compensates for additional detention of the vessel beyond the permitted laytime.

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Question 30

The main purpose of insurance is to

  1. encourage business to survive and grow
  2. ensure that facilities are available for operations
  3. accept risks and extend credits to policy holders
  4. spread individual losses over all covered participants.
Answer and explanation

D: spread individual losses over all covered participants.

Insurance pools contributions from many covered participants to meet losses suffered by some. This spreads the financial burden of individual insured events rather than promising that no loss will occur.

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Question 32

Commercial banks are referred to as departmental stores of banking because they

  1. have many branches
  2. have many customers
  3. are found in the cities
  4. offer many types of services.
Answer and explanation

D: offer many types of services.

The comparison with a department store refers to variety: commercial banks provide deposits, payments, lending and other services. It does not simply refer to their branch count or city locations.

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Question 36

When a vendor supplies newspapers from house to house and across the streets, the element of marketing mix involved is

  1. product
  2. price
  3. promotion
  4. place
Answer and explanation

D: place

Place in the marketing mix concerns distribution and availability. Delivering newspapers to homes and streets determines how the product reaches buyers rather than changing its price or features.

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Question 40

One of the criteria for differentiating consumer markets from industrial ones is the

  1. type of demand
  2. type of supply
  3. nature of the services rendered
  4. price of the goods.
Answer and explanation

A: type of demand

Industrial demand is often derived from demand for the products firms make, while consumer demand relates to final use. This difference in the nature of demand helps distinguish the two markets.

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Question 44

The main objective of a trade association can best be described as promoting and protecting

  1. the products
  2. common interest
  3. the market
  4. customer’s interest.
Answer and explanation

B: common interest

A trade association represents businesses in the same trade or industry and protects their shared interests. It is distinct from a consumer association, whose central role is representing buyers.

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Question 45

The management function of evaluating whether objectives are being achieved is

  1. planning
  2. directing
  3. organizing
  4. controlling.
Answer and explanation

D: controlling.

Controlling compares actual results with objectives or standards and identifies corrective action. Planning sets the objectives, while organising and directing arrange and guide the work.

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Question 46

In a business organization, the annual operation plan or budget is a form of

  1. casual plan
  2. medium-term plan
  3. long-term plan
  4. short-term plan.
Answer and explanation

D: short-term plan.

An annual operating budget covers the coming year, so it is normally a short-term plan. It translates broader strategy into near-term targets, activities and resource allocations.

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Question 48

Social responsibility of business requires enterprises to

  1. hold annual social parties for the public
  2. draw their workers only from the immediate environment
  3. address themselves to issues relating to the society.
  4. set up social welfare centres in their areas of operation.
Answer and explanation

C: address themselves to issues relating to the society.

Social responsibility concerns how a business responds to society and the effects of its operations. It is broader than a particular welfare centre or party and does not require hiring only local workers.

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Question 49

The existing system of governance and the administrative sub-divisions of a country which affect the operations of business in the country is described as

  1. Economic environment
  2. Legal environment
  3. Political environment
  4. Social environment
Answer and explanation

C: Political environment

The political environment includes the system of government and administrative arrangements affecting businesses. The legal environment focuses more specifically on laws and their enforcement.

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