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COMMERCE ESSAY ANSWERS (TYPE B)
INSTRUCTIONS: ANSWER FIVE QUESTIONS ONLY.
(1a)
Advertising is a form of communication used by businesses, organizations, or individuals to inform, persuade, and influence potential customers about their products, services, or ideas.
(1b)
(i) Creates Awareness: Advertising introduces products or services to potential customers. Without advertising, many people may not know a product exists. For example, a new mobile phone brand can reach a large audience quickly through TV, radio, or social media advertising.
(ii) Promotes Sales: Effective advertising can persuade customers to buy a product or service, leading to increased sales. By highlighting special features, discounts, or benefits, businesses can attract more buyers and boost revenue.
(iii) Builds Brand Image: Advertising helps establish and maintain a strong brand identity. Consistent and creative advertising makes a brand more recognizable, builds trust, and encourages customer loyalty over time.
(iv) Educates Consumers: Advertising provides detailed information about products or services, including their features, uses, and prices. This helps consumers make informed decisions and choose products that best meet their needs.
(v) Encourages Competition: Advertising motivates businesses to improve quality, offer competitive prices, and innovate. Companies compete to attract consumer attention, which benefits customers by providing better products and services.
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(2a)
Chain of distribution refers to the sequence of intermediaries or stages through which a product passes from the producer to the final consumer. It includes all the businesses and individuals involved in moving the product, adding value, and making it available to the market.
(2b)
(i) Producer to Consumer (Direct Distribution): In this chain, the producer sells the product directly to the final consumer without involving any intermediaries. It allows the producer to have direct control over pricing, marketing, and customer relationship. Examples include farmers selling vegetables at local markets or manufacturers selling through their own online stores.
(ii) Producer to Retailer to Consumer: The producer sells goods to a retailer, who then sells them to the final consumer. Retailers act as the intermediary, purchasing in bulk and making products available in smaller quantities. This method is common in grocery stores, clothing shops, and electronics outlets.
(iii) Producer to Wholesaler to Retailer to Consumer: In this chain, the producer first sells the product to a wholesaler, who buys in large quantities and stores the goods. The wholesaler then supplies these products to retailers, who finally sell to the consumers. This method is widely used for products like packaged foods and household items.
(iv) Producer to Agent to Wholesaler to Retailer to Consumer: Agents or brokers act as intermediaries between the producer and wholesalers. They help in negotiating sales, marketing, and reaching markets that may be difficult for the producer to access. After the agent facilitates the transaction, the goods follow the usual path through wholesalers and retailers to the consumer.
(v) Producer to Agent to Retailer to Consumer: In this chain, the agent directly connects the producer with retailers, skipping the wholesaler. This method is used for products that require specialized marketing or when producers want to reach retailers in distant markets without managing logistics themselves.
(vi) Producer to Industrial User: In this chain, the product is sold directly to another business or industrial user rather than to the general consumer. It is common in B2B transactions, such as machinery, raw materials, or chemicals sold directly to factories or manufacturing units.
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(3a)
(i) Certificate of Incorporation: This is an official document issued by the Corporate Affairs Commission (CAC) or relevant regulatory body in a country. It confirms that a company has been legally registered and recognized as a separate legal entity. With this certificate, the company can enter into contracts, own property, and sue or be sued in its own name.
(ii) Memorandum of Association: This document defines the company’s relationship with the outside world. It outlines the company’s main objectives, the scope of its operations, the types of business activities it can engage in, and the extent of the shareholders’ liability. It serves as a public declaration of what the company is legally allowed to do.
(iii) Articles of Association: This document sets out the internal rules and regulations for running the company. It specifies how the company will be managed, the duties and powers of directors, the rights of shareholders, and how meetings and decision-making processes will be conducted. It is essentially the company’s rulebook for internal governance.
(3b)
=MEMORANDUM OF ASSOCIATION=
(i) Name Clause: This specifies the official legal name of the company. For limited liability companies, the name must end with “Limited” or “Ltd” to indicate that the liability of shareholders is limited to their shareholding.
(ii) Object Clause: This outlines the main business activities and objectives that the company is authorized to undertake. It ensures that the company operates within its defined purpose and informs the public and shareholders of the company’s intended scope of business.
(iii) Liability Clause: This defines the extent of the shareholders’ liability. In a company limited by shares, liability is limited to the unpaid amount on their shares, while in a company limited by guarantee, members’ liability is restricted to a fixed amount they agree to contribute in the event of winding up.
=ARTICLES OF ASSOCIATION=
(i) Share Capital and Shares: This section explains the types of shares the company can issue, their nominal value, and the rights attached to each type of share, such as voting rights, dividends, and transferability.
(ii) Appointment and Powers of Directors: This outlines the procedures for appointing directors, their powers, duties, and responsibilities in managing the company’s affairs, ensuring proper governance and accountability.
(iii) Meeting Procedures: This details how general and board meetings are to be conducted, including rules on giving notice, quorum requirements, voting procedures, and how decisions are to be made. This ensures transparency and fairness in company decision-making.
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(4i)
Mortgage Bank: A financial institution that specializes in granting long-term loans to individuals and businesses for the purpose of purchasing, building or renovating real estate properties, using the property as security for the loan.
(4ii)
Central Bank: A government-owned financial institution responsible for controlling the monetary system of a country, regulating the activities of other banks, issuing currency, managing foreign reserves and implementing monetary policies to maintain economic stability.
(4iii)
Current Account: A type of bank account that allows frequent deposits and withdrawals, mainly used for business transactions and payments, and usually does not earn interest but offers cheque-writing and electronic payment facilities.
(4iv)
Savings Account: A bank account designed to encourage saving habits by allowing customers to deposit money and earn interest on their balances, with limited withdrawal privileges compared to a current account.
(4v)
Commercial Bank: A financial institution that accepts deposits from the public, grants loans to individuals and businesses, provides payment services, offers financial advice and performs other related banking operations for profit.
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(5a)
(i) To prevent exploitation by producers and sellers: Consumer protection ensures that buyers are not taken advantage of through unfair pricing, false advertisement, poor-quality products or dishonest sales practices. It regulates the behaviour of producers and traders so that consumers can buy goods confidently without fear of being cheated.
(ii) To safeguard the health and safety of consumers: Many goods such as food, drugs, cosmetics and electrical appliances can be dangerous if they are poorly made. Consumer protection prevents the sale of harmful, expired or substandard products in order to reduce accidents, poisoning and other health risks.
(iii) To ensure value for money: Consumer protection ensures that the products and services received by buyers are worth the money paid. It promotes transparency in quality, quantity, packaging and performance so that consumers are satisfied with what they purchase.
(iv) To promote fair competition in the market: When consumer protection exists, no business is allowed to dominate the market unfairly or engage in harmful practices like hoarding, price fixing and monopoly control. This encourages healthy competition, improves quality and stabilizes prices.
(v) To create consumer awareness and education: Consumer protection enlightens buyers about their rights, responsibilities and the legal procedures for making complaints. It teaches consumers how to identify genuine products, avoid fraud and take informed decisions in the marketplace.
(5b)
(i) Standards Organisation Law: This law establishes government agencies such as the Standards Organisation of Nigeria (SON) to set product standards, test and certify goods, and remove fake and substandard items from the market.
(ii) Consumer Protection Council Act (CPC Act): This law creates a consumer protection body responsible for receiving complaints from consumers, investigating abuses, enforcing rights and punishing organisations that violate consumer laws.
(iii) Food and Drugs Act: This law controls the manufacturing, importation, distribution and sale of food, beverages, medicines and cosmetics to ensure they are safe, hygienic and properly labelled for public use.
(iv) Price Control Law: This law allows government to regulate the prices of essential goods like fuel, cement and food items when necessary to protect consumers from unreasonable and exploitative pricing.
(v) Weights and Measures Act: This law ensures that weighing scales, fuel pumps, measuring cans and other measuring instruments used by sellers are accurate and not manipulated to deceive consumers, so that buyers get the correct quantity of goods paid for.
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(6a)
(i) They can offer shares to the general public.
(ii) They are usually listed on the stock exchange.
(iii) Shareholders have limited liability.
(iv) They have a separate legal identity.
(v) They can raise large amounts of capital.
(6b)
(i) They can offer shares to the general public: This means the company is allowed to sell its shares to anyone in the public through public offers, increasing the number of potential investors and expanding its financial base.
(ii) They are usually listed on the stock exchange: This means their shares can be traded openly on recognized stock markets, which increases share liquidity and requires compliance with regulatory standards to ensure transparency.
(iii) Shareholders have limited liability: This means that shareholders are only responsible for the company’s debts up to the amount they invested, and their personal assets cannot be used to pay the company’s liabilities.
(iv) They have a separate legal identity: This means the company is recognized by law as a distinct entity from its owners, allowing it to own property, sue and be sued, enter into contracts, and continue existing even when ownership changes.
(v) They can raise large amounts of capital: This means the company can obtain substantial funds by selling shares to a large number of investors, enabling it to finance big projects and expand its operations.
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(7a)
A bill of exchange is a written, unconditional order from one person, called the drawer, directing another person, called the drawee, to pay a certain sum of money to a third person, called the payee, either on demand or at a specified future date.
(7b)
(i) Safety: Cheques are safer than carrying large amounts of cash. They reduce the risk of theft, loss, or damage, making them ideal for both personal and business transactions.
(ii) Convenience for Large Payments: Cheques allow individuals and businesses to make payments of large sums without physically handling money. This simplifies transactions, especially for bulk purchases or business dealings.
(iii) Provides a Record of Payment: Every cheque issued leaves a traceable record in the bank. This record serves as proof of payment, helping individuals and businesses keep accurate financial accounts and resolve disputes if they arise.
(iv) Facilitates Credit Transactions: Post-dated cheques enable payments to be scheduled for a future date, allowing the buyer to receive goods or services immediately while deferring actual payment. This helps in managing cash flow and credit arrangements.
(v) Reduces Errors in Transactions: Cheques clearly state the amount to be paid, the date, and the payee’s name. This clarity reduces the chances of errors that may occur when counting or handling cash.
(vi) Promotes Banking Activities: Using cheques encourages people to deposit money in banks, which promotes savings and banking habits. It also allows banks to monitor transactions, provide statements, and facilitate financial planning.
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(8i)
Receipts: A receipt is a written or printed document acknowledging that a payment has been received. It serves as proof of payment for goods or services purchased and usually includes details such as the date, amount paid, payer, and purpose of the payment.
(8ii)
Quotation: A quotation is a formal statement issued by a seller to a potential buyer, indicating the price at which goods or services can be supplied. It usually includes details such as product description, quantity, price, terms of payment, and validity period.
(8iii)
Proforma Invoice: A proforma invoice is a preliminary bill sent by a seller to a buyer before the actual supply of goods or services. It provides an estimated cost, terms of sale, and other important details to help the buyer make payment or arrange for import/export formalities.
(8iv)
Debit Note: A debit note is a document issued by a buyer to a seller or by a seller to a customer to indicate that a certain amount is owed. It is often used to request an adjustment for undercharged goods, returned items, or other discrepancies in invoices.
(8v)
Credit Note: A credit note is a document issued by a seller to a buyer, acknowledging that a certain amount has been credited to the buyer’s account. It is usually issued when goods are returned, overcharged, or when an allowance is granted, and it serves to adjust the buyer’s outstanding balance.
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(9a)
Money is any generally accepted medium of exchange that can be used to buy goods and services, pay debts, and store value. It serves as a unit of account and facilitates trade by overcoming the limitations of barter.
(9b)
(i) Medium of Exchange: Money allows people to trade goods and services easily without relying on the barter system, which requires a double coincidence of wants. For example, a farmer can sell maize for money and then use that money to buy clothes or tools.
(ii) Measure of Value: Money provides a standard unit to price goods and services, making it easier to compare the worth of different items. This helps buyers and sellers make fair transactions.
(iii) Store of Value: Money can be saved and kept for future use without losing significant value, allowing individuals and businesses to plan and accumulate wealth. Unlike perishable goods, money retains its usefulness over time.
(iv) Standard of Deferred Payment: Money makes it possible to settle debts over time. People can borrow or lend money, and repayments can be made in agreed sums, which facilitates credit transactions and long-term contracts.
(v) Portability: Money is easy to carry and transport, unlike bulky commodities used in barter. This makes it convenient for trade and everyday transactions.
(vi) Liquidity: Money is highly liquid, meaning it can be quickly converted into goods and services without loss of value. This allows individuals and businesses to access resources immediately when needed.
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(10a)
Division of labour is the breaking down of a production process into a number of smaller tasks, with each worker specializing in one particular task to increase efficiency, reduce time wastage and improve output.
(10b)
(i) Land: This refers to all natural resources provided by nature such as soil, forests, minerals, rivers and sunlight which are used for production. It is the foundation for agricultural and industrial activities, and its reward is rent.
(ii) Labour: This refers to the human mental and physical efforts applied in producing goods and services. It involves both skilled and unskilled workers including farmers, engineers, teachers and factory workers. Its reward is wages or salaries.
(iii) Capital: This refers to man-made assets used in production such as machines, tools, equipment, vehicles, buildings and money invested in businesses. It increases the efficiency of production, and its reward is interest.
(iv) Entrepreneurship: This refers to the ability of an individual to organize the other factors of production, take business risks, make decisions and manage resources to achieve production goals. The entrepreneur bears risks and expects gains. Its reward is profit.
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