1 a) Explain six reasons why a businessman would choose to operate a current account instead

of a savings account. 12mks.

b) Highlight any four circumstances under which a businessman would communicate to the

customers by letters rather than telephone. 8mks.

2.a) Discuss the main challenges/problems that face the small scale industry in Kenya today 10 mks

3.Explain the factors that a seller should take into account when choosing the best medium

for advertising his products 10mks

4.a) Explain the benefits that Kenya is likely to enjoy for being a member of the common

market for East and Southern Africa (COMESA)

b) Clearly describe the services rendered by wholesalers to growers, producers and

manufacturers 10mks

5.a) Clearly describe how the central bank limits the credit creation of the commercial banks. 10mks

b) Explain the role played by marketing boards 10mks

5. (a) The following information relates to African Retail Traders for the year ended

31st Dec 1999

Gross profit 600000

Opening stock 285000

Sales 2400000

Purchases 1830000

Expenses 360000

Net profit 240000

Closing stock 315000

Fixed assets 400000

Debtors 900000

Cash at bank 35000

Current liabilities 438000

a) Calculate

Cost of goods sold

Mark up percentage

Debtors ratio

Current ratio 12mks

b) Outline any four reasons that may lead to dissolution of a partnership business 8mks

6 . a) What arguments can be advanced for state ownership of business understandings 10mks

b) Write short notes on the following terms as used in insurance

Indemnity

Utmost good faith

Proximate cause

Insurable interest

Subrogation 10mks

Highlight any four problems that a country may experience when it has decentralized its industries. 4mks

Highlight any four characteristics of money that enables it to serve its purpose efficiently. 4mks

Explain any four problems that Kenya would experience from participating in international trade. 4mks

Outline any four importances of advertising as a sales promotion method. 4mks

Highlight any four ways in which insurance companies make profits. 4mks

Mention four of the contents in the articles of association. 4mks

In the spaces provided, name the type of business organisation described by each of the following features. 4mks

Description Business organisation

Each member has only one vote

The business enjoys perpetual succession

Each member may act on behalf of the business

Formed by an act of parliament

Identify four services that can be conveniently paid for using standing orders (bank orders) 4mks

Give any four reasons why the Kenyan government is actively involved in licencing

business activities. 4mks

Outline any four main principles of investment 4mks

Explain the meaning of the following terms. 4mks

Par value

Blue chips

Cum right or Ex-Right

Tilt Edged securities

The following is a summary of transactions for Ryan Traders for the month of April 2002.

2nd April - Commenced business with shs. 12,000 in cash and shs. 150,000 at the bank

3rd April - Made cash sales amounting to shs. 6,000

5th April - Received cash shs. 16,000 from a debtor

12th April - Paid for motor expenses shs. 7,000 in cash

13th April - Drew shs. 30,000 from bank for office use

15th April - Paid salaries in cash amounting to shs. 15,000

17th April - Bought furniture worth shs. 18,000 paying by cheque.

18th April - Paid expenses amounting to shs. 15,000 by cash

19th April - Cash sales of shs. 40,000 received by cheque

23rd April - Paid shs. 20,000 cash into the bank

25th April - Paid a creditor shs. 16,000 by cheque

You are required to prepare two-column cash book for Ryan Traders for the month of April 2002. 8mks

Highlight any four reasons why the Kenyan government finds it necessary to train businessmen. 4mks

The following balances were extracted from the books of A & B Co. as at 1st April 2002.

Capital shs. 200,000

Fixed Assets shs. 180,000

Current Assets shs. 40,000

Current Liabilities shs. 20,000

During the month, the following took place.

Goods worth 50,000 were taken away from the business for personal use.

Net profit of shs. 80,000 was realized.

Calculate capital as at 30th April 2002. 4mks

Other than advertising, mention any other four methods of sales promotion. 4mks

Highlight any four reasons why most businessmen do not prefer transferring their goods

via canals. 4mks

Alex is an employee of an advertising firm as a sales executive. He receives a salary of

Kshs. 10,000 plus commission of the following basis:-

On the first sales of shs. 100,000 - 2%

On the next shs. 200,000 - 5%

On the balance of sales - 10%

He sold an advertising space worth shs. 450,000 during the month of January 2002.

Calculate his total income for the month. 4mks

Highlight any four methods that the government can use to influence the quantity of a commodity supplied. 4mks

Indicate the type of resource represented by the following. 4mks

Type of Resource

Forest .

Road .

Doctor .

Wildlife .

Outtline any four methods of determining prices in the market.

Write short notes on the following types of partners. 4mks

Active Partners

Minor partners

Quasi partner

Outgoing partner

The office performs a fundamental role in any business organisation. Account for this statement. 4mks

Outline any four factors that an investor should consider before setting up a small scale

retail shop in a town.