Business Studies Paper 2 Questions and Answers - Form 3 Mid Term 2 Exams 2021

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  • This paper consists of six questions
  • All questions carry equal marks.
  • Answer any five questions.
    1. Explain five reasons why you would advise your friend against starting a sole proprietorship form of business.(10mks)
    2. Explain five measures to be taken to reduce unemployment in the country.(10mks)
    1. Outline five factors that you would consider when establishing a warehouse for imported goods.(10mks)
    2. Explain five circumstances that may influence a firm to locate its operations near the source of raw materials(10mks)
    1. Despite the development in the transport sector, human porterage is commonly used. Explain five reasons that account for this fact.(10mks)
    2. Explain five challenges for rapid population growth in a country.(10mks)
    1. Explain five reasons why the government is involved in Business Activities.(10mks)
    2. The following balances were extracted from the books of Karimi Traders on 1st January 2011.
      Capital               600,000
      Creditors           180,000
      Motor van          200,000
      Furniture           200,000
      Stock                  60,000
      Debtors               80,000
      Cash                 240,000
      The following transaction took place during the year ended 31st December 2007.
      1. Sold furniture worth ksh.60, 000 for which ksh.40, 000 cash was received and the balance was due at the end of the year.
      2. Purchasing goods worth ksh.100, 000 for which cash of ksh.70, 000 was paid and the balance was still outstanding at the end of the year.
      3. Cash ksh.10, 000 was taken from the business by the proprietor to settle the spouse hospital bill.
        Required :
        Draw Karimi Traderۥs balance sheet as at 31st December 2011 showing the items in their relevant classes.(10mks)
    1. Explain five benefits that may accrue to an organization that adopts an open office plan.(1omks)
    2. Amina operates a fleet of public service vehicles (PSVs).Explain five possible risks she can insure her business against.(10mks)
    1. Discuss five factors that may be considered when choosing a method for promoting a product.(10mks)
    2. Describe five channels of distribution of exported agricultural products.(10mks)


    1. Reasons against starting a sole proprietorship form of business
      • Unlimited liability – the sole proprietor is responsible for all the debts of the business and therefore may lose personal property incase of debts.
      • Suffering losses- The sole trader is wholly responsible for the day to day running of the business he/she suffers any losses that arise alone. This is because there is nobody to share with.
      • Fatigue –the sole proprietor is responsible for all operations of the business. He/she may be forced to work long hours which may result to both physical and mental fatigue.
      • Limited life- the existence of a sole proprietorship is to a large extent tied to the life of the owner .Incase of ill health or death of the owner he business may stop running or it may collapse altogether.
      • Lack of consultation may lead to poor or wrong decisions being made which may adversely affect the business.
      • Limited capital – since the main source of capital is the owner ,the business may not have adequate funds for expansion or even conducting its daily operations.
      • Lack of essential skills- a soleproprieter may lack some essential management skills required for the success of the business.
        Any five well explained points 5x2=10mks
    2. measures that can be taken to solve unemployment problem in a country.
      • Adopting relevant education system
      • Population control
      • Adopting policies that encourage the use of labour intensive methods of production.
      • Population control
      • Encourage employment creation in the private sector.
      • Diversification of economic activities
      • Increasing government expenditure
      • Encouraging the use of local resources.
      • Encourages direct investment.
      • Decentralization of industries.
        Any five well explained points 5x2=10mks
    1. factors that would be considered in establishing a warehouse for imported goods.
      • Modern handling facilities that the warehouse should be fitted with to ease operation.
      • Building design so as to conform with international standards of imported goods the skill of personnel to handle the goods.
      • Nearness to point of entry.
      • Existence of basic infrastructure to enhance smooth operation
      • Compliance with legal requirements
      • Storage facilitates appropriate to type of goods to be handled.
      • Documentation for proper control.
        Any five factors 5x2=10mks
    2. circumstances under which an industry firm may be located near the source of its raw materials.
      • where raw materials are bulky
      • if the firm wants to minimize cost on raw materials as the movement to the firm is minimal
      • Where constant supply of raw materials is required for continuous production
      • Where raw materials are highly perishable
      • Where it is the requirement of the government
      • if the market of the product is concentrated near the source of raw material
      • where the competition of the raw material is high to ensure easy access.
        Any five well explained points 5x2=10mks
    1. Reasons for use of human porterage.
      • Human portege is very flexible because they have no fixed timetables and can pass where they are required
      • They are readily available
      • They only require paths to operate hence low construction of way.
      • They are convenient for short distances.
      • They create employment opportunities.
      • Decreased in per capita income
      • Increased dependency ratio.
      • Reduction in savings and investments
      • Unemployment
      • Strain on social amenities
      • Uneven distribution of income
      • Environmental degration
        Any 5 2x5= 10mks well explained challenges 5x2=10mks
    1. Reasons for government involvements in business activities.
      • To provide essential goods and services
      • To protect the public from exploitation
      • To provide goods bad services that may be unattractive to private investors.
      • to create employment opportunities.
      • To enhance efficiency in operations.
        Any well explained 5 [points 5x2=10mks
    2.                                  KARIMI TRADERS
                                        BALANCE SHEET
                                     AS AT 31ST DECEMBER 2011.
                                                                                              Ksh.           Ksh.
      Fixed Assets               sh          sh           capital                 600,000
      Motor van                200,00                    less drawings       10,000
      Furniture                140,000    340,000    Net capital                              590,000
      Current assets                                        Current liabilities
      Stock                     160,000                    creditors               210,000      210,000
      Debtors                  80,000
      Account receivable
      Debtors furniture     20,000                                                                   ______
      Cash                      200,000    460,000                                                 800,000
      20 x ½=10mks
    1. Benefits of an open office plan.
      • Easy supervision of workers
      • Low construction cost
      • Easy location of workers .
      • Staff movement is minimum hence saving time
      • Low maintenance cost
      • Saving of floor space
      • Cheap to decorate
        Any 5 well explained points 5x2= 10mks
    2. possible risks that Amina can insure against.
      • Accidents that cause damage /cost to vehicles /other assets.
      • Fire – can cause less/damage /burn vehicles/other assets.
      • Cash in transits – can insure against loss in cash as it being transferred
      • Pilferage by employees/fidelity guarantee – can insure against loss of cash or goods through theft by the employees.
      • Occupational hazards /workman’s compensation employees can be insured against physical injury emanating from fleet from the business
      • Theft /burglary of the vehicle/other property through forceful entry/unauthorized access.
      • Loss of profit/consequential loss due to business interruption
      • Goods in transit – loss of goods to ./from the business
      • Loss of a key worker due to injury /death/sickness.
        5x2= 10mks
    1. Factors to consider when choosing a method of product promotion.
      • The cost of the method – the organization should choose a method that is affordable.
      • Geographical area of coverage –the organization should choose a method that will reach the customers in their various locations.
      • Target group /type of consumers /nature of the market. The organization should choose a method that appeals to the relevant target group.
      • Speed of the medium/method in relation to urgency of the message.
      • Nature of the product. Nature of the message- the organization should choose the method that would effectively serve the number of consumer available.
      • The intended ,impression , a firm may choose a medium that can best achieve the desired impression
      • Methods used by competitors.
      • Availability of the method
    2. Channels of distribution of exported agricultural products.
      • Local farmer →foreign importer→ foreign consumer
      • Local farmer→- local exporter-→ foreign importer→ foreign wholesaler-→foreign retailer→-foreign consumer
      • Local famer→- local exporter-→foreign wholesaler→ foreign retailer-→foreign consumer
      • Local farmer-→ foreign distribution agent-→ foreign wholesaler-→foreign retailer-→ foreign consumer.
      • Local farmer-→foreign importer→foreign wholesaler→-foreign consumer. 4x2=8mks

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