KCSE Business Studies Topical Questions and Answers

Firms are interdependent in decision making. Firms keenly observe each others’ actions/decision hence acting in any way triggers counter reactions (from other firm s).
Firms deal in products that are homogenous or similar. The products are close substitutes of each other and are only differentiated in terms of aspects like colour/packaging/shapes/pricing/branding.
Firms may engage in non-price competition/collusive oligopoly. The firms under oligopoly may avoid price wars hence only compete via other means like aggressive advertising/after sales services/market segmentation/fixing quotas.
Unpredictability of behaviour/uncertainty since firms under oligopoly keep reacting to market changes differently/actions taken by other firms within the market may take others by surprise.
The market is made up of a few large firms since such firms operating under oligopoly tend to have a large capital outlay/make extensive use of modem technology in their production activities/control substantial share of the market.
There are limiting factors such as large capital investment required to be a player in this market/the level of technology involved may keep off possible entrants into the market/intimidation/collusion.
Firms may engage in price wars/rivalry/cut throat competition which may lead to survival/collapse of some firms.
May lead to price rigidity/kinked demand occasioned by fear of other firms’reactions.
There may be price leadership where the dominant firm dictates the market price/rules the market.

Explain five features of oligopoly. (10 marks)

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The following trial and balance relates to business of Mali Ngumu traders as at 30th June 2008.

8/11/2021

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The following trial and balance relates to business of Mali Ngumu traders as at 30th June 2008.

Required:

(a) Prepare a trading profit and loss account as at 30th June 2009. (8mks)

(b) Calculate the following ratios:- (4mks)

(i) Rate of return on capital

(ii) Margin

(iii) Quick ratio

(iv) Rate of stock return over

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Discuss four factors that determine the level of a country’s national income

8/11/2021

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Discuss four factors that determine the level of a country’s national income (10mks)

Four factors that determine the level of a country’s national income.

The quality and quantity of factors of production e.g labour supply, capital available and size of natural resources.
Level of technology i.e. advanced technology lead to production of high quality goods and vice versa.
Size of population - high population leads to a high national income since most resources will be exploited.
Political stability - creates a conducive environment for the exploitation of resources.
Attitude of the people towards work- a country whose people have a culture of liking work attain a high level of national income.

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What are the reasons why many Kenyans are unemployed?

8/11/2021

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Describe six causes of unemployment in Kenya (12mks)

Six causes of unemployment in Kenya

Rapid population growth that surpasses the growth of the economy
In appropriate education system in the country.
Seasonality in production especially in agricultural and tourism.
Lack of capital for investment in order to generate job opportunities.
Rural-urban migration – Most labour moving to urban in search of employment.
Low demand for goods and services leading to little investment hence few employment opportunities.
Trade unions pressurizing for high salaries forcing employers to reduce their investments or use machines in production.
Use of an appropriate methods of production e.g use of machines such as ATM and Cranes.

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Describe the following types of unemployment:

5/11/2021

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Describe the following types of unemployment:

(i) Disguised unemployment (2mks)

Disguised unemployment - this is where more workers are employed than are necessary in an organization. Under this circumstance, dismissal of some of the workers will not cause the overall output of the organization to fall.

(ii) Seasonal unemployment (2mks)

Seasonal unemployment - it arises as a result of the seasonality of work. It occurs where production is not continuous e.g in the agricultural sector, many people are employed to prepare farms for planting, but after planting is done, such workers have no further work to do until harvest time. They remain unemployed for the period in between. After harvesting, they again remain unemployed until the land will need preparation for next planting.

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List four advantages of credit sales to a seller

5/11/2021

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List four advantages of credit sales to a seller. (4mks)

Four advantages of credit sale to a seller.

The seller is able to create goodwill with his customers.
Selling on credit increases the businessman’s profit due to increased sales.
Goods sold on credit are usually sold at high prices, meaning higher profits to the seller.
The seller is able to increase his sales volume.

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State four consequences of eliminating wholesalers from the chain of distribution

5/11/2021

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State four consequences of eliminating wholesalers from the chain of distribution. (4mks)

Four consequences of eliminating wholesalers from the chain of distribution.

Manufactures may be forced to open up additional distribution outlets, which might increase their costs thereby lowering their profits.
The removal of wholesalers will in effect decrease the cost of distribution, hence higher profits to the producers.
Producers will not specialize since they will also be carrying out the distribution function, hence they will not enjoy the economic advantage of specialization.
Prices may be unstable in their absence since they help in stabilizing prices by storing large quantities of the produce.
Producers may need to establish additional storage facilities, which were previously provided by wholesalers, hence requiring them to raise more capital.
Retailers will be forced to buy in bulk thereby requiring them to have more capital, which may not be available.
Retailers may be forced to pay cash thereby requiring them to increase their capital base.
Manufacturers may be forced to break bulk, since the retailers may not be able to buy in large quantities.
Retailer may be forced to establish warehouse, which would require additional investment.

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Highlight four factors that may hinder the expansion of small scale business enterprises.

5/11/2021

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Highlight four factors that may hinder the expansion of small scale business enterprises. (4mks)

Four factors that may hinder the expansion of small scale business enterprises

Inadequate capital may cause a business to remain small because without capital a business may not be able to expand.
Lack of entrepreneurial skills may hinder the expansion of the business.
Lack of adequate security may discourage businessmen from expanding their business to avoid incurring high losses in case of a robbery.
Low purchasing power of consumers/the size of market is small.
Employment of unskilled labour causes poor performance which leads to the stagnation of a business.
Small businesses face stiff competition from larger and well-established businesses forcing them to remain small.
Most small-scale businesses are located in rural areas, where the infrastructure is poor, a situation that hinder their expansion.
The subsistence lifestyle of consumers in rural areas leads to low business activity which inhibits the growth of the small businesses in the rural areas.
Poor lending policies.

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Indicate with a tick in the relevant column whether each of the following business transactions will increase or decrease the capital account balance.

5/11/2021

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Indicate with a tick in the relevant column whether each of the following business transactions will increase or decrease the capital account balance. (3mks)

(a) Increase
(b) Decrease
(c) Decrease

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On 1 May 2012, Nyaboke Traders had sh.160, 000 in cash and sh. 30, 000 bank overdraft. During the month, the following transactions took place.

5/11/2021

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On 1 May 2012, Nyaboke Traders had sh.160, 000 in cash and sh. 30, 000 bank overdraft. During the month, the following transactions took place.

May 20 received a cheque for sh. 90, 000 from a debtor
25 Paid telephone bills sh. 5, 000 in cash
30 Withdrew Sh. 40, 000 from bank for office use
From the above information prepare Nyaboke Trader cash book and balances it off. (4mks)

Solution

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The following balances were extracted from the books of Anyang wholesalers for the year ended 31 December, 2010

5/11/2021

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The following balances were extracted from the books of Anyang wholesalers for the year ended 31 December, 2010

Sh.
Sales………………………………………800, 000
Purchases…………………………………420, 000
Opening stock (1.1.2010) …………90, 000
Closing stock (31.12.2010)……………50, 000
Debtors……………………………………130, 000
Creditors…………………………………90, 000

Calculate (4mks)

(a) Margin

(b) Current ratio

(c) Rate of turnover

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The following balances were obtained from the books of Ole Nkanai Traders for the month ended 29 February 2012.

5/11/2021

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The following balances were obtained from the books of Ole Nkanai Traders for the month ended 29 February 2012.

Sh.
Purchases………… 24, 000
Sales……………… 420, 000
Equipment………… 120, 000
Furniture………… 300, 000
Debtors………… 60, 000
Creditors……… 20, 000
Expenses……… 140, 000
Capital………… 420, 000

Prepare a Trial balance of Ole Nkanai Traders for the month ended 29 February 2012. (5mks)

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Outline four circumstances that lead to a trader declining in giving credit facilities to customers

5/11/2021

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Outline four circumstances that lead to a trader declining in giving credit facilities to customers. (4mks)

Circumstances leading to a trader declining in giving credit facilities to customers

Incase of unreliable customers/uncredit worthy customers.
Where stock level is too low.
Where customer has doubtful character.
Where customer order for goods beyond the ability of the seller.
When it is a business policy.
Where customers provide for longer credit period.
When the rate of stock turn-over is high

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​BUSINESS STUDIES FORM 3 PAPER 1 TERM 1 2022 MODEL28092022001

Explain five features of oligopoly.

​The following trial and balance relates to business of Mali Ngumu traders as at 30th June 2008.

​Required:

(a) Prepare a trading profit and loss account as at 30th June 2009. ​ (8mks)

​(b) Calculate the following ratios:- (4mks)

​(i) Rate of return on capital

​(ii) Margin

​(iii) Quick ratio

​(iv) Rate of stock return over

​Discuss four factors that determine the level of a country’s national income (10mks)

Describe six causes of unemployment in Kenya (12mks)

​Describe the following types of unemployment:

​(i) Disguised unemployment (2mks)

​(ii) Seasonal unemployment (2mks)

​List four advantages of credit sales to a seller. (4mks)

State four consequences of eliminating wholesalers from the chain of distribution. (4mks)

Highlight four factors that may hinder the expansion of small scale business enterprises. (4mks)

​Indicate with a tick in the relevant column whether each of the following business transactions will increase or decrease the capital account balance. (3mks)

​On 1 May 2012, Nyaboke Traders had sh.160, 000 in cash and sh. 30, 000 bank overdraft. During the month, the following transactions took place.

Solution

​The following balances were extracted from the books of Anyang wholesalers for the year ended 31 December, 2010

​Calculate (4mks)

(a) Margin

​(b) Current ratio

(c) Rate of turnover ​

​The following balances were obtained from the books of Ole Nkanai Traders for the month ended 29 February 2012.

​Prepare a Trial balance of Ole Nkanai Traders for the month ended 29 February 2012. (5mks)

Outline four circumstances that lead to a trader declining in giving credit facilities to customers. (4mks)

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BUSINESS STUDIES FORM 3 PAPER 1 TERM 1 2022 MODEL28092022001

The following trial and balance relates to business of Mali Ngumu traders as at 30th June 2008.

Required:

(a) Prepare a trading profit and loss account as at 30th June 2009. (8mks)

(b) Calculate the following ratios:- (4mks)

(i) Rate of return on capital

(ii) Margin

(iii) Quick ratio

(iv) Rate of stock return over

Discuss four factors that determine the level of a country’s national income (10mks)

Describe the following types of unemployment:

(i) Disguised unemployment (2mks)

(ii) Seasonal unemployment (2mks)

List four advantages of credit sales to a seller. (4mks)

Indicate with a tick in the relevant column whether each of the following business transactions will increase or decrease the capital account balance. (3mks)

On 1 May 2012, Nyaboke Traders had sh.160, 000 in cash and sh. 30, 000 bank overdraft. During the month, the following transactions took place.

The following balances were extracted from the books of Anyang wholesalers for the year ended 31 December, 2010

Calculate (4mks)

(b) Current ratio

(c) Rate of turnover

The following balances were obtained from the books of Ole Nkanai Traders for the month ended 29 February 2012.

Prepare a Trial balance of Ole Nkanai Traders for the month ended 29 February 2012. (5mks)