Business Studies Paper 1 Questions and Answers - Nyeri Mocks 2021 Exams

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  1. State four service offered by a commercial bank to its customer (4mks)
  2. Outline four goals of development to a country (4mks)
  3. List four sources of public finances (4mks)
  4. Name the basic concepts in population described in the statements given below (4mks)
    1. Population size that is adequate for the pull utilization of available resources in a country
    2. The average number of births per one boy and woman in a gear
    3. When a country is experiencing higher death rates than birth rates
    4. Were a bigger proportion of the population is comprised of people who are above 55 years old
  5. State four benefit of a bonded warehouse to the government (4mks)
  6. Highlight four benefit of personnel selling to a trade (4mks)
  7. Highlight four factors that may cause the supply curve to shift to the right (4mks)
  8. Outline four measures that a country can take to reduce the level of inflation (4mks)
  9. Outline four characteristics of an efficient tax system. (4mks)
  10. State the meaning of the following form of sales as used in international trade (4mks)
    1. L O C O
    2. C I F
    3. F A S
    4. F O Q
  11. The following information was extracted from the books of Leila Traders on 31st July 2016
      Details     Sh
     Capital 90,000
    Fixed Assets 80,000
    Cash in hand 20,000
    Current liabilities 20,000
    Stock 20,000
    Net profit 15,000
    Drawings 5,000
    1. Capital owned (2mks)
    2. Acid test ratio (2mks)
  12. Highlight four circumstances under which a firm may be located near the source of raw materials (4mks)
  13. Give four assumptions that are associated with perfect completion (4mks)
  14. The equation below relate to quantity demanded and quality supplied at the equilibrium point
    Qde =4p + 50
    Qse = 8p +30
    Determine the equilibrium price and quantity (4mks)
  15. Outline four features of liners in sea transport (4mks)
  16. List four characteristics of money (4mks)
  17. State four reasons why it may be necessary for a country to control imports (4mks)
  18. Outline four features of economic resources (4mks)
  19. State four methods used by government to control inflation (4mks)
  20. Give four reasons why government levy taxes on their citizens (4mks)
  21. Outline four benefits to a trader who operate a small retail outlet (4mks)
  22. Give four uses of a three-column cash book. (4mks)
  23. State four features of a good filing system (4mks)
  24. State four advantages that a business gets by maintain a current bank account (4mks)
  25. State four features of a chain store (4mks)


  1. Services offered by commercial bank to its customers
    • Acceptance of deposits
    • Safeguarding valuable items
    • Advancing loans and overdrafts
    • Advisory services on financial matters
    • Trustee service
  2. Goals of development to a country
    • Alleviation of poverty
    • Provision of security
    • Alleviation of unemployment
    • Improvement of infrastructure
    • Alleviation of illiteracy
    • Maintenance of political sustainability .
  3. Sources of public finance
    • Taxes
    • Loans
    • Fines
    • Licences
    • Fees
    • Treasury bonds and bills.
  4. Basic concepts of population
    1. Optimum population
    2. Fertility rate/birth rate
    3. Declining population
    4. Ageing population
  5. Benefits of a bonded warehouse to the government
    • Source of data for planning purposes
    • Source of revenue
    • Enable check of quality for goods
    • Enable verification of documents for goods transit
  6. Benefits of personal selling to a trader
    • Its personal nature, nothing is persuasive as personal communication.
    • Flexible, marketer is able to meet the needs of each individual.
    • Through asking and answering questions the sales person is able to clarify issues.
    • Sales person can demonstrate the use of a product.
    • Gives the buyer an opportunity to negotiate.
  7. Factors that may cause the supply curve to shift to the right
    • Reduced cost of production
    • Bumper harvest
    • Increase in the price of complementary goods
    • Government incentives
    • Reduced prices of substitute goods
    • Improved production methods.
    • Entry of new firms to the market.
  8. Measures that a country can take to reduce the level of inflation.
    • Increase in income taxes to reduce the disposable income available to consumers
    • Reduce government expenditure
    • Introduce compulsory saving schemes
    • Reduced exports
    • Enforce wage guidelines
    • Increase interest rates on loans
  9. Characteristics of an efficient tax system
    • Equity
    • Economical
    • Convenient
    • Certainty
    • Flexibility
    • Diversity
    • Difficult to evade
  10. Meaning of the following forms of sales
    • L O C O – The price of goods quoted at the exporters warehouse/premises.
    • C I F – Cost insurance and Freight included up to the port of entry
    • F A S – Free alongside shop- Cost incurred on goods up to the point where they are ready to be loaded into ship.
    • F O Q – Free on Quay – means the price quoted included all costs incurred up to the quay.
    1. Capital owned
      Capital owned = Initial capital + Net profit – drawing
      90,000 + 15,000 – 5,000
      = 100,000
    2. Acid Test ratio
      Acid test ratio = Current Assets – Stock
                                   Current liabilities
      40,000 – 20,000 = 1:1
  12. Circumstances under which a firm may be located near the source of raw materials
    • When raw materials are heavy and bulky and makes cost of transport high.
    • The nature of raw materials
    • Perishable raw materials
    • If the raw materials are bulky
    • If the raw materials are in the same location with the markets.
    • If it is the government policy.
  13. Assumptions associated with perfect competition
    • Large number of sellers and buyers exist in the market
    • Production of identical (homogenous ) products by different firms.
    • There is no government interference.
    • There is free entry and exit from the industry
    • Uniformity of buyers and sellers
  14. Equilbrium Price and Quantity
    • Where Qde = 4p + 50 and Qse = 8p + 30
      4p + 50 = 8p +30
      50-30 = 8p-4p
      5= p
      Equilibrium Price = 5
      Equilibrium Quantity = (5 x 4) + 50 = 70
  15. Features of liner
    • Ferry passengers or cargo
    • Follow a regular timetable or schedule
    • Call at ports at regular intervals.
    • Follow a regular route.
    • Form associations and conferences to protect themselves against unfair competition.
    • Charge fixed freightage and fare regardless of demand.
  16. Characteristics of Money
    • Must have general acceptability
    • Should be limited in supply
    • Should be divisible into smaller units
    • Should be portable.
    • Should be durable enough to last a long time.
    • Should be stable
    • Should be easily recognisable.
  17. Reasons why it is necessary for a country to control imports
    • In order to protect the infant domestic industries.
    • To avoid dumping of goods into the country.
    • To correct balance of payment deficit
    • In order to raise revenue
    • To protect key industries.
  18. Features of economic resources
    • They are limited in supply.
    • They have monetary value
    • They have ability to create utility when combined.
    • They are unevenly distributed from region to region, country to country etc.
    • Some can be transferred from one person to another.
  19. Methods of controlling inflation
    • High taxation
    • Encouraging the public to save their money
    • Monetary policy whereby the government reduces the amount of money in circulation.
    • Credit squeeze through the central bank.
    • Administrative control.
  20. Reasons why government levies taxes on citizens
    • To raise government revenue
    • To discourage consumption of certain commodities
    • To discourage dumping
    • To protect local industries from foreign competition.
    • To discourage location of firms in certain areas.
    • To bridge the gap between the rich and the poor.
  21. Benefits of operating a small retail outlet
    • Small capital required
    • Personal attention is given to customers
    • Operations are flexible
    • There are fewer legal formalities.
    • Profits do no have to be shared
    • Decision making is faster
    • Business secrets can be maintained.
  22. Use of a three column cash book
    • Records income received in cash or through the bank.
    • Records payments in cash or through bank .
    • Details discounts allowed and discount received.
    • Show the opening and closing cash and bank balances.
  23. Features of a good filing system
    • Should occupy less space (ie) should be compatible
    • Should be simple and easy to understand (simplicity)
    • Should protect documents from hazard such as theft, water fire and pests
    • Should be capable of expansion(elastic)
    • System should be appropriate to the organisation requirement
    • The initial and maintenance costs should be affordable by the organisation.
    • Should be cost effective.
  24. Advantages of a current account
    • Bank overdraft can be enjoyed.
    • Money can be deposited any time.
    • Withdrawals can be made anytime.
    • No minimum balance is required
    • Cheque facilities are provided for making payment
  25. Features of a chain store
    • Branches are coordinated from a head office.
    • Have standardised prices in all branches.
    • Purchasing of stock is done collectively for all branches
    • Advertising is done collectively for all branches.

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