Business Studies Questions and Answers - Form 3 Term 2 Opener Exams 2022

Questions

Instructions

• This paper consist of two sections; A&B
• Answer ALL questions in section A (60MARKS)
• Answer any TWO questions in section B (40MKS)

SECTION A

1. State whether the following activities would satisfy basic or secondary wants. (4mks)
   

   Activity	Want
   Buying clothes for the family
   Reading books
   Entertaining the Governor
   Building a house

2. State the type of partner described in each of the following statements. (4 mks)
   1. Under 18 years of age___________________________
   2. Does not take active part in running of the business __________________
   3. Has unlimited liability____________________________
   4. Allows his/her name to be used as if he/she is a partner________________________
3. Name four methods of determining price of a product in a market. (4 mks)
4. State four roles of Nairobi Stock Exchange market. (4mks)
5. State four factors influencing an increase in demand of a product. (4 mks)
6. Give four channels for distributing locally manufactured goods. (4 mks
7. Highlight four advantages of a bonded warehouse to the government. (4 marks)
8. State four negative implications of overpopulation. (4mks)
9. State four factors that an entrepreneur would consider before investing in a business opportunity (4mks)
10. The following information was obtained from the books of Prime Suppliers for the year ended 31st Dec 2021.
    Drawings 70,000
    Profit 150,000
    Additional investment 50,000
    Capital 01/01/2020 240,000
    Calculate Prime Supplier’s capital as at 31st Dec 2021. (4mks)
11. State four factors to consider when giving credit to a customer. (4mks)
12. State four advantages of joining Savings and Credits Co-operative Society(SACCO). (4mks)
13. Roho Safi Merchants had the following balances for the end of the trading period on 31st Dec 2020.
    Cash 40,000
    Creditors 140,000.
    Premises 400,000
    Fixtures 180,000
    Bank loan 160,000
    Vehicles 100,000
    Debtors 70,000
    Prepare Roho Safi Merchants balance sheet as at 31st Dec 2020. (4mks)
14. State four factors that determine the size of a firm. (4mks)
15. State four essential elements of communication. (4mks)

SECTION B

16.         
    1. Explain five roles of the Nairobi stock exchange market. (10 mks)
    2. Explain five factors to consider when selecting means of transport. (10mks)
17.  
    1. Explain five factors that lead to an increase in national income. (10mks)
    2. Describe the procedure of taking an insurance policy. (10mks)
18.  
    1. Explain five roles of intermediaries in the chain of distribution. (10mks)
    2. Explain five advantages of sole proprietorship form of business. (10mks)
19.  
    1. Explain five external environment factors that positively affects business operations. (10mks)
    2. Explain five ways in which the government of Kenya may reduce the level of unemployment. (10mks)

Marking Scheme

1. State whether the following activities would satisfy basic or secondary wants. (4mks)
   

   Activity	Want
   Buying clothes for the family	Basic
   Reading books	Secondary
   Entertaining the Governor	Secondary
   Building a house	Basic

2. State the type of partner described in each of the following statements. (4 mks)
   • Under 18 years of age_____minor
   • Does not take active part in running of the business passive/dormant/sleeping/silent
   • Has unlimited liability_general
   • Allows his/her name to be used as if he/she is a partner_nominal/quasi
3. Name four methods of determining price of a product in a market. (4 mks)
   • demand and supply
   • Haggling/bargaining
   • Auction
   • tendering
4. State four roles of Nairobi Stock Exchange market. (4mks)
   • Facilitates buying of shares-
   • Facilitates selling of shares
   • Safeguarding investors’ interests
   • Provides useful information
   • Assist companies to raise capital
   • Creation of employment
   • Raising revenue for the government.
   • Availing a variety of securities
   • Fixing of prices
   • Measures a country’s economic progress
   • Promotes the culture of saving
5. State four factors influencing an increase in demand of a product. (4 mks)
   • The price of a product
   • The buyer’s income
   • Government policy
   • The population
   • Tastes, fashions and preferences
   • The distribution of incomes
   • Future expectations of price changes
   • The weather
   • Price of related products
6. Give four channels for distributing locally manufactured goods. (4 mks
   (The channel must start with local producer and end with local consumer.)
7. Highlight four advantages of a bonded warehouse to the government. (4 marks)
   Advantages of Bonded warehouse to the Government
   • The government gets revenue by levying duty on the goods
   • The government is able to control the entry of harmful goods
   • The government is able to verify the documents for goods in transit
   • The government is able to check on the quantity, quality and the nature/type of goods imported.
   • The government is able to check on illegal goods entering the country.
8. State four negative implications of overpopulation. (4mks)
   • Overutilization of resources
   • High dependency ratio
   • High rate of unemployment
   • Environmental degradation
   • Increased crime rates
9. State four factors that an entrepreneur would consider before investing in a business opportunity (4mks)
   • Availability of raw materials
   • Availability of market
   • Competition
   • Government policy
10. The following information was obtained from the books of Prime Suppliers for the year ended 31st Dec 2021.
    • Drawings 70,000
    • Profit 150,000
    • Additional investment 50,000
    • Capital 01/01/2020 240,000
    • Calculate Prime Supplier’s capital as at 31st Dec 2021. (4mks)
      Capital=I.C+A.I+P-D
      (240,000+50,000+150,000)-(70,000)
      440,000-70,000=370,000
11. State four factors to consider when giving credit to a customer. (4mks)
    • Credit worthiness
    • Availability of stock
    • Amount of goods the customer wants
    • Frequency at which the customer buys
    • Repayment period
12. State four advantages of joining Savings and Credits Co-operative Society(SACCO). (4mks)
    • Helps members to save
    • One gets loans at a lower interest rate
    • Offers a variety of loan facilities
    • Offer investment education to the members
    • One earns through dividends
13. Roho Safi Merchants had the following balances for the end of the trading period on 31st Dec 2020.
    Cash 40,000
    Creditors 140,000.
    Premises 400,000
    Fixtures 180,000
    Bank loan 160,000
    Vehicles 100,000
    Debtors 70,000
    Prepare Roho Safi Merchants balance sheet as at 31st Dec 2020. (4mks)
    Capital= assets-liability
    (400,000+180,000+100,000+70,000+40,000)-(160,000+140,000)
    790,000-300,000=490,000
    

    Roho safi traders Balance sheet Ast at 31st dec 2020
    Assets		capital+ liabilities
    Premises Fixtures Vehicles Cash Debtors	400 000 180 000 100 000 40 000 70 000	capital Creditors Bank loan	490 000 140 000 160 000
    	790 000		790 000

14. State four factors that determine the size of a firm. (4mks)
    • Level of output/volume of output
    • Number of employs in the firm
    • Floor area covered by the premises
    • Size of the market controlled by the firm
    • Capital invested
    • Methods of production adopted
    • Sales of volume
15. State four essential elements of communication. (4mks)
    • Sender
    • Message
    • Receiver
    • feedback
16.   
    1. explain five roles of the Nairobi stock exchange market. (10 mks)
       • Facilitates buying of shares- it provides a conducive environment to investors who want to buy shares in different companies.
       • Facilitates selling of shares- it creates a market for those who wish to sell their shares.
       • Safeguarding investors’ interests- it monitors the performance of the already quoted companies and those found not meeting expectations are struck off. Companies who want to be quoted must also attain a certain standard of performance.
       • Provides useful information- it provides timely, accurate and reliable information to investors which enable them to make decisions on the investments to make. The information is passed on through mass media and stock brokers.
       • Assist companies to raise capital- it assists companies to raise capital by creating an environment through which companies issue new shares to members of the public in an IPO.
       • Creation of employment- it creates employment for those who facilitate the buying and selling of shares eg stock brokers, stock agents etc.
       • Raising revenue for the government- the government earns revenue by collecting fees and other levies/ dues from activities carried out in the stock exchange market.
       • Availing a variety of securities- it avails a variety of securities from which an investor can choose from. The market therefore satisfies needs of various investors eg investors who wish to buy from different companies can do so in the market.
       • Fixing of prices- the stock exchange market is in a position to determine the true market value of the securities through the forces of demand and supply. This is of great importance to both the buyer and the seller.
       • Measures a country’s economic progress- the performance of securities in the stock exchange market may be an indicator of a country’s economic progress e.g a constant rise in prices and volumes of securities traded within a given period of time would indicate that the country’s economy is positively growing.
       • Promotes the culture of saving- it provides investors with opportunities to channel their excess funds. Such people act as role models to other members of the society who may emulate them thereby promoting a saving culture.
    2. Explain five factors to consider when selecting means of transport. (10mks)
       • Cost; The cost of transporting a good should be reasonable; except where other factors should be considered such as need for quick delivery. Otherwise should be proportional to the value of goods transported.
       • Nature of goods; The nature of goods should be considered when choosing a means of transport. For example, perishable goods require a fast means. Similarly, heavy and bulky goods require a means of transport convenient for such goods e.g. trains and ship.
       • Reliability; The means chosen should be able to deliver the goods to the required place at the right time and in the right form.
       • Urgency; For goods that are urgently required, the fastest means available should be chosen.
       • Safety and Security; The means chosen should ensure that the goods on transit are secure against loss, theft or physical damages.
       • Distance; Some means of transport are suitable for long distances while others are suitable for short distances. If goods are to be transported for long distances, air, sea or railway transport would be appropriate, otherwise roads would be suitable for short distances.
       • Availability of means; The means of transport to be selected should be based on its availability. For example, where there is only one means of transport, it would be the only one to be chosen.
       • Flexibility; This is the ability of means of transport to be manipulated to suit the convenience of the transporter. Where flexibility is required, then the means that would provide such should be chosen. For example a matatu is usually more flexible than an aeroplane.
       • Terminals; Some means of transport may have their terminals near the transporter than others. In this case, the transporter should choose the means whose terminals are conveniently accessible to facilitate loading and offloading of goods.
       • Value of goods to be transported- goods of high value require special handling and high security during transportation.
17.       
    1. Explain five factors that lead to an increase in national income. (10mks)
       • State of technology. A country with high level of technology will produce goods in large volumes hence high national income.
       • Political stability. Countries which are relatively stable politically experience high production hence high national income level.
       • Accuracy of accounting systems. If the methods used to gather data are accurate, then the overall statistical figures will the accurate hence reliable.
       • Entrepreneurship
       • Labour supply
       • Availability of land..i.e all natural resources e.g water,minerals and climate
       • Attitude of citizens towards work
       • Foreign investment
    2. describe the procedure of taking an insurance policy. (10mks)
       • Filing a proposal form the potential insured discloses all relevant materials /facts concerning the property or life to be covered
       • Determination of premium the proposer calculates the monthly premium tallying into account the material facts disclosed in the proposal form
       • Payment of first premium- upon acceptance of the insurer to cover the risks ,the insured is asked to pay the first premium
       • Issuance of cover note/binder-it serves as evidence that the insured is covered
       • Issuance of the policy-its issued within 30 days and contains all the terms and conditions of the cover
18.  
    1. explain five roles of intermediaries in the chain of distribution. (10mks)
       • Accumulating bulk
       • Breaking bulk
       • Reducing transaction between producers and consumers
       • Risk taking
       • Providing finance
       • Passing information
       • Product promotion
       • Transport and storage
       • Availing goods to consumers
       • Providing a variety
    2. explain five advantages of sole proprietorship form of business. (10mks)
       • The capital required to start the business is small hence anybody who can spare small amounts of money can start one.
       • Few formal/legal procedures are required to set up this business
       • Decision making and implementation is fast because the proprietor does not have to consult anybody
       • The trader has close and personal contact with customers. This helps them in knowing exactly what the customers need and hence satisfying those needs
       • A sole proprietor is able to assess the credit-worthiness of his or her customers because of close personal relationship. Extending credit to a few carefully selected customers reduce the probability of bad debts.The trader is accountable to
       • him/herself
       • A sole trader is able to keep the top secrets of the business operations
       • He/she enjoys all the profit
       • A sole proprietorship is flexible. One can change the nature or even the location of business as need arises
19.        
    1. Explain five external environment factors that positively affects business operations. (10mks)
       • Favorable economic environment e,g increase in consumer’s income which increases their ability to buy goods and services
       • High population…provides a ready market for goods and services
       • Advancement in technology e.g in production methods which leds to production of goods and services that are of high quality
       • Favorable cultural environment e.g a culture that accepts the products in the msrket
       • Positive legal-political environment…e.g political stability and favorable business laws and policies
       • Reduced business competition… the business should compete favorably
       • Favorable physical environment e.g good infrastructure such as roads, favorable climate
    2. Explain five ways in which the government of Kenya may reduce the level of unemployment. (10mks)
       • Encourage employment creation in the private sector…e,g private companies so as to expand the job market
       • Adopting policies that encourage the use of labour intensive methods of production e,g ban use of tea plucking machines so as to secure jobs for the laborers who plucks tea by hands.
       • Adopting a relevant education system…e.g CBC which trains learners more on creating jobs/self employment rather than training to get employed.
       • Diversification of economic activities e.g establishing manufacturing industries apart from agricultural activities alone.
       • Increasing government expenditure e.g on projects that creates jobs
       • Rural development e.g rural electrification
       • Encouraging direct foreign investment…this creates more jobs
       • Encouraging the use of local resources e.g the jua kali sector
       • Population control e.g control rapid population which leads to mass unemployment