KCSE Business Studies Topical Questions and Answers

Apart from selling shares, explain five sources of finance for a public limited company. (10 marks)

19/12/2020

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Sources of finance for a public limited company

Sources of finance for a public limited company apart from the sale of shares include:

Borrowing from financial institutions in the form of loans, bank overdraft and mortgage.
Trade credit.
Buying goods for re-sale on credit so as to pay at a later date
Hire purchase.
Buying goods and paying for them on installment basis.
Debentures.
Borrowing from members of the public for which interest is paid at a fixed rate and over a predetermined period of time.
Sale and leaseback.
Selling an asset like a building and then hiring it back for a specified period of time.
Retained profits.
Profits made are not shared out as dividends but ploughed back into the business.
Discounting bills of exchange.
Receiving payment from financial institutions at a discount against bills of exchange before their maturity.
Use of reserves / provisions.
The company may make use of funds set aside for depreciation, tax and bad debts to finance its day to day operations.

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Discuss circumstances under which a partnership may be dissolved.

17/12/2020

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Discuss circumstances under which a partnership may be dissolved.

Circumstances under which a partnership may be dissolved include:

Expiry of time or accomplishment of purpose. Where the partnership was formed for a definite time or a particular purpose, the expiry of time and accomplishment of purpose terminates the partnership.
Mutual agreement among partners - where the partners agree among themselves to terminate the partnership.
Bankruptcy of a general partner - where a court declares the value of one of the general partner’s property insufficient to settle his or her debts.
Change in law that makes the operations of the partnership illegal.
Permanent inability of a general partner to perform or fulfil his part of the partnership agreement either as a result of disease, insanity or death.
Internal dissension among partners - where partners disagree irreconciliably, then the partnership may be terminated.
Persistent losses in operation - where the business has continued to operate at a loss, then it is terminated.
Fraud, mistake or misrepresentation - where the partnership was formed under fraud, mistake or misrepresentation, a Court of Law may order its dissolution.

Discuss circumstances under which a partnership may be dissolved.

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Discuss factors that may be considered when choosing a method for promoting a product.

17/12/2020

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Discuss factors that may be considered when choosing a method for promoting a product.

Factors to consider when choosing a method of promoting a product include:

Cost of the method. The organization should choose a promotion 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. The organization must choose a method that appeals to the relevant target group.
Speed of the medium or method in relation to urgency of the message. The organization should choose a method that will reach the customers within the desired time frame.
Nature of the product. Different methods may be chosen depending on the nature of the product e.g. technical products may require demonstrations best achieved through personal selling.
Nature of the message. The organization should choose a method that will best present the various aspects of the message.

Discuss factors that may be considered when choosing a method for promoting a product.

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A farmer’s house valued at Ksh. 1,200,000 was insured against fire for Ksh. 900,000 under the “with average clause”. Fire occurred and damaged the house causing a loss of Ksh. 500,000. Determine the value of compensation due to the farmer.

17/12/2020

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A farmer’s house valued at Ksh. 1,200,000 was insured against fire for Ksh. 900,000 under the “with average clause”. Fire occurred and damaged the house causing a loss of Ksh. 500,000. Determine the value of compensation due to the farmer..

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Explain the procedure for making an insurance claim.

17/12/2020

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Explain the procedure for making an insurance claim.

Procedure for making an insurance claim
Notifying the insurer of the loss suffered.
Filling a claim form from the insurer.
Carrying out investigation to determine or ascertain the cause of loss.
Insurance company making a report.
Determination and payment of the claim.

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Explain circumstances under which containerization may be used to transport goods.

17/12/2020

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Explain circumstances under which containerization may be used to transport goods.

Circumstances under which containerization may be used to transport goods include:

Where bulky goods are imported. Bulky goods are usually transported by sea where containers are used.
Where specialized equipment are available for handling containers.
Where container terminals are available - containerization require container terminals which are specially built to handle them.
Where specialized means of transport like railways are available.
Where security of goods need to be guaranteed. Goods of very high value and those that are risky require high level of security which is guaranteed by containers.
Where skilled personnel are available. The handling of containers require specially trained workers to handle and manage them.

Explain circumstances under which containerization may be used to transport goods.

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State four benefits that a trader may get by advertising products in a newspaper.

17/12/2020

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State four benefits that a trader may get by advertising products in a newspaper.

Benefits that accrue to a trader who advertises products in a newspaper include:

wide coverage - message can reach a lot of people
evidence of the message exists
graphical details can be included
a trader has a chance to compete with other traders
a trader has a chance of increasing sales.

State four benefits that a trader may get by advertising products in a newspaper.

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Outline four circumstances in which a trader may use oral communication.

17/12/2020

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Outline four circumstances in which a trader may use oral communication.

Circumstances in which a trader may use oral communication include:

when there is need to negotiate a deal
when there is need to explain the use and features of a product
when there is need for immediate feedback
when there is need to give an immediate compliment
when selling over the counter

Outline four circumstances in which a trader may use oral communication.

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Explain four reasons for which traders observe ethical practices in product promotion. (8 marks)

17/12/2020

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Reasons for which traders observe ethical practices in product promotion

Reasons for which traders observe ethical practices in product promotion include:

To avoid misleading the consumers by not making false claims about their products.
To ensure that consumers are not offended by not making use of appeals that go against their cultural values.
To avoid exploiting certain vulnerable groups like children since they lack the knowledge and experience to understand and evaluate the purpose of persuasive appeals.
To avoid negative influence on the consumers’ values and lifestyles that may lead to immorality and ill health like glorifying the image of alcohol and cigarettes.
To avoid portraying rival businesses negatively in an attempt to capture the market or gain undue advantage.
To create a positive image reputation of business hence maintaining customer loyalty.
To abide by the laws of the country to avoid law suits/conflicts/frictions with law enforcement agencies s/government.

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State four benefits that a farmer may get by transporting produce to the market by road.

17/12/2020

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State four benefits that a farmer may get by transporting produce to the market by road.

Benefits that a farmer may get by transporting her produce to the market by road include:

Relatively flexible
Relatively cheap .
Relatively available
Relatively fast
Variety of means of road transport

State four benefits that a farmer may get by transporting produce to the market by road.

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Outline four circumstances under which a co-operative society may be dissolved.

16/12/2020

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Outline four circumstances under which a co-operative society may be dissolved.

Circumstances under which a co-operative society may be dissolved include:
by Government order

where the co-operative continuously make losses
where stipulated majority of members agree to dissolve it
by a court order
where the co-operative society has achieved objectives for which it was formed

Outline four circumstances under which a co-operative society may be dissolved.

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State three features of an insurable interest.

16/12/2020

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State three features of an insurable interest.

Features of insurable interest include:

presence of property rights or interest
potential insurable risk must be present
the property must have monetary value
the insurable risk must be legal
there must be the possibility of suffering financial loss incase of a risk happening

State three features of an insurable interest.

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Outline four malpractices by traders against which consumers may need protection by the government.

16/12/2020

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Outline four malpractices by traders against which consumers may need protection by the government.

Malpractices by traders against which consumers may need protection by the government include:

selling of contraband goods
overcharging
selling under weight goods
selling expired goods
giving misleading information about the product
hoarding

Outline four malpractices by traders against which consumers may need protection by the government.

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Amina operates a fleet of Public Service Vehicles (PSVs).Explain five possible risks she can insure her business against.

16/12/2020

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Amina operates a fleet of Public Service Vehicles (PSVs).Explain five possible risks she can insure her business against.

Possible risks that Amina can insure her business against include:

She can insure vehicles and other assets, against accidents.
Fire — vehicle and other assets can be insured against fire.
Cash in transit — can insure against loss of cash in transit to and from the bank.
Pilferage Can insure against loss of cash and other valuables through theft by employees.
Occupational hazards — employees can be insured against physical harm while on duty.
Third party claims — can insure against injuries to third parties emanating from the fleet.
Theft and burglary to cover the vehicles and other property against unauthorised or forceful access to the property.
Loss of profit and consequential loss due to business interruptions.

Amina operates a fleet of Public Service Vehicles (PSVs).Explain five possible risks she can insure her business against.

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Explain three factors that should be considered when choosing a means of transport.

16/12/2020

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Explain three factors that should be considered when choosing a means of transport.

Factors that should be considers in the choice of a means of transport include:

The nature of the commodity to be transported .Some goods are such that they can only be transported using a particular means of transport.
Cost — the commodity to be transported should have a sale value that is able to meet the cost of the means of transport chosen.
Urgency/speed — how urgently the commodity is required at the destination often dictates the means of transport chosen.
Reliability. Chose a means that is certain to deliver without fail.
The geographical distance to be covered. Some means of transport may not take goods to faraway places while some are not convenient over short distances.
Security. Chose a means that is less prone to damage, loss or theft.
Flexibility. Chose a means that is able to deliver door to door services.

Explain three factors that should be considered when choosing a means of transport.

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Explain five ways of making face-to-face communication effective.

16/12/2020

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Explain five ways of making face-to-face communication effective.

Ways of making face to face effective include:

Clarity of the message so as to avoid misunderstanding and ambiguity.
Use of non-verbal cues to clarify verbal messages.
Communicating parties being close to each other
Communicating parties use of a common language thus enhancing understanding of the message.
Making the message concise and brief to avoid unnecessary detail.
Good listening and being attentive
Positive attitude between the communicating parties
Use of simple language and non technical terms to make it easy for the receiver to understand.
Courtesy and respect between the sender and the receiver to avoid hostilities.
Tone variation to break monotony and sustain interest

Explain five ways of making face-to-face communication effective.

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Describe five principles that distinguish co-operative societies from other forms of business organizations.

16/12/2020

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Describe five principles that distinguish co-operative societies from other forms of business organizations.

Principles that distinguish co-operative societies from other forms of business organizations include:
Democratic control. Decisions are made by members on a one-man-one-vote basis.
Voluntary membership:-members are affiliated to co-operatives freely and may also exit freely.
Political/religious neutrality. Co-operative societies are not supposed to favour, align or identify with any political or religious grouping.
Co-operation with other co-operatives. They do this in order to share ideas and experiences at different levels.
Limited interest on share capital. The capital paid is meant for running the society’s affairs rather than generating interest.
Promotion of education to members. The co-operatives are obliged to educate their staff. management and the members in general.
Repayment of dividends. They distribute their surplus on a prorate basis.
Offer of utmost service to members. They are formed to carter for members interests and welfare.
Limited number of shares to be held by any single member. This is to avoid dominance or control of the business by one or just a few members.

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Commodities A and B are substitutes. Using two diagrams, explain how an increase in the supply of commodity A will affect the equilibrium price and quantity demanded of commodity B.

16/12/2020

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Commodities A and B are substitutes. Using two diagrams, explain how an increase in the supply of commodity A will affect the equilibrium price and quantity demanded of commodity B.

Highlight four challenges that a person may encounter when using a cellphone (mobile phone).

16/12/2020

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Highlight four challenges that a person may encounter when using a cellphone (mobile phone).

Challenges that may be faced when using a cell-phone (mobile phone) include:

May be damaging to the ears.
Are relatively expensive.
Calls or messages sent may be tapped.
Its use may be limited where there is lack of network.
May not be used under certain circumstances e.g. banking halls, public service
vehicles etc.
Possibility of loss of handset to thieves
Relatively expensive to operate
Requires constant charging
Prone to misuse
May experience network congestion

Highlight four challenges that a person may encounter when using a cellphone (mobile phone).

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State four circumstances under which one may decide to start a personal business.

16/12/2020

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State four circumstances under which one may decide to start a personal business.

Circumstances under which one would decide to start a personal business include:

Where there is need to create employment.
Where additional income is needed.
Where there is need to apply business skills acquired.
Where there is need to invest surplus hinds.
Where one has a business idea to implement.
where one wants to become his own boss
Where there is a market niche/gap
Where there is need to use one’s talents or hobbies
Where there is need to make use of space and time

State four circumstances under which one may decide to start a personal business.

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State four reasons why flower exporters would transport their produce by air rather than by sea.

16/12/2020

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State four reasons why flower exporters would transport their produce by air rather than by sea.

The flower exporter would choose air transport over sea due to the following reasons:

Air transport is faster than sea transport.
Flowers and perishable require faster means.
Flowers have a very high per unit value
Security of air transport is relatively high.
Flowers are light in weight
Flowers are not bulky.

State four reasons why flower exporters would transport their produce by air rather than by sea.

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State four services that a wholesaler may offer to a manufacturer.

16/12/2020

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State four services that a wholesaler may offer to a manufacturer.

Services that a wholesaler may offer to a manufacturer include:

Links the manufacturer with the retailers.
Breaks bulk on behalf of manufacturer.
Provides storage on behalf of manufacturer.
Provides working capita! when they pay for goods.
Assists in the distribution of goods.
Promotes the products on behalf of the manufacturer.
Relieves the manufacturer of risks like price fluctuations,expiry of goods offers valuable information about the goods

State four services that a wholesaler may offer to a manufacturer.

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Explain five demerits that a country may stiffer when the government becomes a major investor in business. (10 marks)

16/12/2020

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Demerits that a country may stiffer when the government becomes a major investor in business

Demerits that a country may suffer when the government becomes a major investor in business include:

Discourage private investment. The move may discourage private investment due to unfair competition and acquisition of monopoly powers/unfavorable laws.
Poor quality goods and services. The quality of goods and services may be compromised due to lack of competition. Government employees also lack enthusiasm since there is no profit motive.
Limited choices for consumers. Where the government is the only provider of good/service, consumers may be denied a variety to choose from.
Inefficiency. Leading to low/poor productivity/continuous loss, Burden to tax payers. The investments may drain public resources by increasing government expenditure in situations where the enterprise is not able to sustain itself (burdening tax payers).
Lack of accountability/transparency/corruption. Managers of government-run businesses tend to misappropriate and embezzle public funds/ misuse public funds.
Unstable management. Government-run businesses are prone to frequent changes in their management occasioned by changing political leadership.
Political interference/patronage. Appointment of cronies/nepotism and unethical practices may lead to social discontent.
Bureaucracy/red tape. Leading to rigidity/slow response to market changes.

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State four reasons why the government should create an enabling environment for investors.

15/12/2020

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State four reasons why the government should create an enabling environment for investors.

Reasons why the government should create an enabling environment to investors include:

To minimize cost of doing business
To open new areas hitherto neglected by investors
To expand the tax base and hence increase revenue
To enhance economic development in the country
To promote public-private sector relationship
To create employment opportunities .
To increase the level of national income/increase economic growth
To avail a variety of goods and services
To enhance modem technology and skills
To encourage utilization of local resources
To earn foreign exchange
To encourage healthy completion among investors

State four reasons why the government should create an enabling environment for investors.

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The manager of Tasa Limited constantly walks around various departments. State four merits of this style of management.

15/12/2020

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The manager of Tasa Limited constantly walks around various departments. State four merits of this style of management.

Merits of Management by Walking around (MBWA) include:

Manager has first-hand information on the goings - on in the organization,
Manager has instant feedback from the workers.
Manager can tackle issues as they arise
Manager can enhance interpersonal relations with the workers.
Subordinates avoid idleness and work as they feel the presence of the manager.
Manager can give relevant comments on performance/rewards/motivation
Manager can identify absenteeism/lateness
It controls misuse of resources.

The manager of Tasa Limited constantly walks around various departments. State four merits of this style of management.

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Sources of finance for a public limited company

Discuss circumstances under which a partnership may be dissolved.

Discuss factors that may be considered when choosing a method for promoting a product.

A farmer’s house valued at Ksh. 1,200,000 was insured against fire for Ksh. 900,000 under the “with average clause”. Fire occurred and damaged the house causing a loss of Ksh. 500,000. Determine the value of compensation due to the farmer..

Explain the procedure for making an insurance claim.

Explain circumstances under which containerization may be used to transport goods.

State four benefits that a trader may get by advertising products in a newspaper.

Outline four circumstances in which a trader may use oral communication.

Reasons for which traders observe ethical practices in product promotion

State four benefits that a farmer may get by transporting produce to the market by road.

Outline four circumstances under which a co-operative society may be dissolved.

State three features of an insurable interest.

Outline four malpractices by traders against which consumers may need protection by the government.

Amina operates a fleet of Public Service Vehicles (PSVs).Explain five possible risks she can insure her business against.

Explain three factors that should be considered when choosing a means of transport.

Explain five ways of making face-to-face communication effective.

Describe five principles that distinguish co-operative societies from other forms of business organizations.

Commodities A and B are substitutes. Using two diagrams, explain how an increase in the supply of commodity A will affect the equilibrium price and quantity demanded of commodity B.

​​Related Business Studies Quiz and Answers on Forms of Business Units Form 2 Level

Highlight four challenges that a person may encounter when using a cellphone (mobile phone).

State four circumstances under which one may decide to start a personal business.

State four reasons why flower exporters would transport their produce by air rather than by sea.

State four services that a wholesaler may offer to a manufacturer.

Demerits that a country may stiffer when the government becomes a major investor in business

State four reasons why the government should create an enabling environment for investors.

The manager of Tasa Limited constantly walks around various departments. State four merits of this style of management.

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Related Business Studies Quiz and Answers on Forms of Business Units Form 2 Level