Designed to test your understanding of commercial institutions and trade procedures, this 2007 paper examines business ownership forms, commercial banking operations, warehousing, and international trade balance adjustments. Key topics heavily represented across the questions encompass partnership structures and liquidations, balance sheet interpretation and capital calculations, as well as marketing and advertising strategies. As you prepare, make sure to read the explanations for every question to reinforce your grasp of both theoretical definitions and applied financial mathematics.
Topics in this paper
The pivot on which the wheel of commerce rotates is
A student might select taxation or tariff because they relate to the business environment, but these are government fiscal instruments rather than the core exchange mechanism. Trade, defined as the exchange of goods and services, serves as the foundation of commerce and drives all economic activities. Common mistake: Confusing government revenue mechanisms with the fundamental activity that drives commerce.
A distinguishing characteristic of labour is that it is
A student might mistakenly choose constant or expensive, assuming workers maintain fixed routines or high wages universally. Labour is mobile, meaning workers can move between different jobs, industries, or geographic locations to meet changing market demands. Common mistake: Assuming labour is a static factor of production tied permanently to a single location.
Land as a factor of production does not vary in
A student might think quality or cost does not vary, but these fluctuate frequently with location and improvements. Land as a factor of production does not vary in quantity, meaning its total natural supply is strictly limited and cannot be increased by human effort. Common mistake: Confusing the fixed physical quantity of land with its changing economic productivity or quality.
Which of the following services does a lawyer render?
A student might mistakenly select commercial services, confusing professional practice with trade and distribution. A lawyer provides direct services, such as personalized legal advice or courtroom representation, delivered directly to the client. Common mistake: Classifying professional personal services under commercial trade categories.
The partner that only contributes part of the capital used in the formation and running of a business is known as
A student might confuse this with a passive or dormant partner, but those terms describe lack of management participation rather than partial capital contribution. A dormant partner contributes capital but does not participate in managing the business operations. Common mistake: Mixing up the terminology for partners who provide capital without daily management involvement.
One major advantage of a credit and thrift cooperative is that
A student might select option A, C, or D, but cooperatives focus primarily on internal member benefits rather than government lobbying or unique voting structures. One major advantage of a credit and thrift cooperative is that it encourages saving habits, fostering financial discipline among members. Common mistake: Overlooking the primary thrift objective of encouraging regular member savings.
A form of ownership which exploits the strengths of one partner to remedy the weaknesses of the other is a
A student might select joint partnership, confusing a general partnership with a specialized collaborative arrangement. A joint venture combines partners’ respective strengths to address individual weaknesses, typically formed for a specific project. Common mistake: Confusing general business partnerships with project-specific joint ventures.
At the collapse of a business enterprise, the person appointed to dispose of the assets is called
A student might mistakenly choose a broker or auctioneer, who facilitate normal sales rather than formal enterprise dissolution. A liquidator is specifically appointed during business collapse to sell off assets in order to settle outstanding debts and close the business. Common mistake: Confusing general sales agents with the legal role responsible for winding up a company.
Entrusting the management of a company to the courts to enable the settlement of the company’s obligations is an indication of
A student might select distress or liquidation, which describe financial symptoms or the final asset-selling phase rather than court-supervised management. Entrusting the management of a company to the courts to enable the settlement of the company’s obligations is an indication of bankruptcy. Common mistake: Confusing the legal state of bankruptcy protection with complete business liquidation.
The financial instrument for borrowing in which collateral is usually more than the amount borrowed is
A student might select convertible securities or trust certificates, which involve equity conversion or fiduciary management rather than heavy asset-backed borrowing. A mortgage bond is a financial instrument for borrowing in which the required collateral is usually valued higher than the amount borrowed. Common mistake: Forgetting that mortgage bonds require over-collateralization to protect the lender.
Awarding scholarships and sponsoring sports by a business organization are examples of
A student might choose marketing strategy or public relations, thinking these acts are purely for commercial gain. Awarding scholarships and sponsoring sports by a business organization are examples of social responsibility, contributing to community welfare. Common mistake: Misinterpreting community welfare initiatives as direct sales or advertising tactics.
The difference between total current assets and total current liabilities of a business is known as
A student might select quick ratio or liquidity ratio, which are expressed as proportions rather than absolute monetary differences. Working capital, calculated as total current assets minus total current liabilities, measures a business’s short-term liquidity. Common mistake: Confusing liquidity ratios with absolute working capital values.
Using the balance sheet: Liabilities (N) - Capital 140, Opening capital 350, Add Net profit 80, Current liabilities 800; Assets (N) - Fixed 1000, Debtors 200, Bank 70, Cash 50, Total 1,370. What is the capital employed?
A student might choose option C or D by confusing total assets with capital employed or pulling current liabilities incorrectly. Capital employed is calculated by subtracting current liabilities from total assets, which gives 1,370 minus 800, resulting in N570. Common mistake: Using the wrong asset-liability combination when calculating capital metrics.
Using the balance sheet: Liabilities (N) - Capital 140, Opening capital 350, Add Net profit 80, Current liabilities 800; Assets (N) - Fixed 1000, Debtors 200, Bank 70, Cash 50, Total 1,370. What is the capital owned?
A student might select option A, C, or D by misreading the balance sheet components for owner's equity. Capital owned is calculated by adding the net profit to the opening capital, which is 350 plus 80, resulting in N430. Common mistake: Confusing total capital owned with fixed assets or liabilities.
One of the reasons why wholesaling must continue is that
Distractor check: Students might choose option B, thinking that wholesalers manipulate product availability to drive up market competition, which is incorrect. Reasoning to the answer: Wholesalers function by acting as a link between producers and shop owners, effectively streamlining the distribution process. Common mistake: Confusing the logistical function of connecting supply chain levels with market manipulation.
A merchant wholesaler is best described as a
Distractor check: Candidates could easily select broker or factor since they are also commercial middlemen, but those terms describe agents who do not take title to goods. Reasoning to the answer: A merchant wholesaler functions by purchasing goods in bulk quantities, holding them in storage, and subsequently selling them onward to retail merchants. Common mistake: Forgetting that merchant wholesalers take ownership of the goods they handle, unlike agents.
A proforma invoice is sent to inform a buyer about the
Distractor check: A student might lean toward options A or D because invoices usually deal with goods, but those specific attributes are confirmed during delivery or final billing. Reasoning to the answer: A proforma invoice acts as a preliminary quote that supplies the prospective buyer with detailed price information before any formal commitment. Common mistake: Mistaking a preliminary pricing document for a final delivery receipt detailing quantities and quality.
The balance of payments of countries is
Distractor check: Option A looks tempting because trade figures are prominent, but it describes only visible trade rather than the full economic picture. Reasoning to the answer: The balance of payments serves as a systematic financial record capturing all transactions that occur among different countries throughout a specific timeframe. Common mistake: Assuming the balance of payments only tracks physical imports and exports instead of all international financial exchanges.
The major procedures in the purchase and sale of goods are enquiry
Distractor check: Students might pick option B or D by dropping standard commercial steps like quotation or enquiry, but trade relies on a logical sequence. Reasoning to the answer: The standard commercial transaction begins with an enquiry, moves through a quotation and a purchase order, and concludes with an invoice. Common mistake: Overlooking the initial information-gathering stages when outlining the chronological steps of buying and selling.
Mr. Awala offers a trade discount of 5%, a quantity discount of 3% for purchases above 1,000 units, and a cash discount of 2/10 net 30. The selling price is N100 per unit. Mr. Bacus purchased 1,500 units on credit and paid within 10 days. What is the cash discount receivable by Mr. Bacus?
Distractor check: A student might choose option B or C by miscalculating the cumulative chain of discounts or applying percentages incorrectly to the base amount. Reasoning to the answer: Begin by computing the gross cost as 1,500 units multiplied by N100 to get N150,000. Next, deduct the 5% trade discount (N7,500) and the 3% quantity discount (N4,500) from the gross cost, leaving a net amount of N138,000. Finally, calculate the cash discount as 2% of the net amount, yielding N2,760 because payment was completed within 10 days. Common mistake: Failing to subtract trade and quantity discounts sequentially before calculating the final cash discount percentage.
Now practice in exam mode
You've studied the answers — now test yourself under real exam conditions with the timer running.
Start JAMB Commerce 2007 QuizStudy JAMB Commerce offline — no data needed
Get the JAMB app for Commerce and every other subject — practice anywhere, even with no internet connection.