Set 1

1. A business buys goods for $48 000 and sells them at a mark-up of 25%. It allows a trade discount of 10% to retailers and a cash discount of 5% for payment within 7 days. A retailer pays within 7 days.

What amount is finally received by the business?

A $51 300
B $54 000
C $57 000
D $60 000

2. A country’s output is shown below.

Activity	Value of output
fishing	$20m
food processing	$35m
banking	$18m
teaching	$22m
mining	$15m
warehousing	$10m

What is the value of tertiary production?

A $30m
B $50m
C $85m
D $105m

3. Which chain of distribution is most likely for fresh milk sold by a local dairy farm to households through a supermarket?

A producer → consumer
B producer → retailer → consumer
C producer → wholesaler → retailer → consumer
D producer → agent → wholesaler → retailer → consumer

4. A manufacturer sells goods to a wholesaler for $18 each. The wholesaler adds a mark-up of 331/3% and sells to retailers. The retailer then sells at a margin of 20%.

What is the final selling price to the consumer?

A $24.00
B $28.80
C $30.00
D $32.00

5. Which situation shows a want rather than a need?

A buying clean water after a flood
B buying basic medicine for an illness
C buying designer shoes when basic shoes are available
D buying shelter after losing a house

6. A trader imports goods costing $4000 when $1 = Rs 280. The exchange rate later changes to $1 = Rs 300 before payment is made.

What is the effect on the trader?

A pays Rs 80 000 less
B pays Rs 80 000 more
C pays Rs 120 000 less
D pays Rs 120 000 more

7. A shop sells goods for $800 cash. On hire purchase, the customer pays a 15% deposit and 12 instalments of $65.

How much extra does the customer pay using hire purchase?

A $100
B $120
C $780
D $900

8. Which document is issued by the seller as a reply to an enquiry?

A invoice
B order
C quotation
D statement of account

9. Which aid to trade directly protects a trader from loss caused by fire?

A advertising
B banking
C insurance
D transport

10. A business has a rate of stock turnover of 8 times per year. Its average stock is $15 000.

What is its cost of goods sold?

A $1875
B $15 000
C $120 000
D $135 000

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

11. Which statement about a wholesaler is most accurate?

A A wholesaler always sells directly to final consumers.
B A wholesaler usually breaks bulk for retailers.
C A wholesaler usually produces goods for manufacturers.
D A wholesaler mainly provides personal services.

12. Which activity is part of commerce but not trade?

A selling goods in a market
B importing mobile phones
C advertising a new brand
D exporting cotton

13. A retailer buys goods for $900 and sells them for $1200.

What is the margin?

A 25%
B 30%
C 331/3%
D 75%

14. Which type of agent guarantees payment to the principal if the buyer fails to pay?

A broker
B commission agent
C del credere agent
D forwarding agent

15. Which item is most likely to appear as an invisible export?

A cotton sold abroad
B insurance services sold to foreign firms
C machinery imported from Japan
D oil bought from another country

16. A government imposes a tax of 15% on the value of imported cars.

What type of duty is this?

A ad valorem duty
B excise duty
C specific duty
D quota

17. A government limits imports of sugar to 200 000 tonnes per year.

Which method of trade protection is being used?

A embargo
B quota
C subsidy
D tariff

18. A manufacturer sends an invoice showing list price $5000, trade discount 20%, cash discount 10%.

What amount is entered as the net price before cash discount?

A $3500
B $4000
C $4500
D $5000

19. Which banking service is most suitable for paying regular monthly rent automatically?

A bank draft
B direct debit
C standing order
D traveller’s cheque

20. A shopkeeper wants to reduce the risk of accepting a cheque that may not be paid.

Which cheque should be requested?

A bearer cheque
B crossed cheque
C open cheque
D post-dated cheque

21. Which retail service allows customers to order online and collect from a physical store?

A cash and carry
B click and collect
C mail order
D vending machine

22. Which factor is most likely to improve a customer’s creditworthiness?

A colourful packaging
B high advertising expenditure
C history of paying debts on time
D large number of suppliers

23. A business sells goods for $25 000. It gives a trade discount of 12% and then a cash discount of 5%.

What is the amount received if the buyer pays immediately?

A $20 900
B $20 950
C $22 000
D $23 750

24. Which method of communication gives written proof and is fastest for sending documents overseas?

A air mail
B email
C face-to-face meeting
D telephone call

25. A firm uses just-in-time stock control.

Which aid to trade becomes especially important?

A advertising
B banking
C transport
D insurance

26. Which statement about a bonded warehouse is correct?

A Goods are stored there after import duty has been paid.
B Goods are stored there before import duty is paid.
C Goods are stored there only for retailers.
D Goods are stored there only if they are damaged.

27. Which risk is most suitable for insurance?

A loss caused deliberately by the owner
B loss caused by normal fall in demand
C loss caused by fire in a warehouse
D loss caused by poor management decisions

28. A trader insures stock worth $80 000 for only $50 000. A fire causes damage of $20 000. The policy contains an average clause.

How much compensation will the trader receive?

A $8000
B $12 500
C $20 000
D $50 000

29. Which principle of insurance states that the insured must have a financial interest in the item insured?

A contribution
B indemnity
C insurable interest
D subrogation

30. A person insures the same stock with two insurance companies. After a fire, both insurers share the compensation.

Which principle applies?

A contribution
B indemnity
C proximate cause
D utmost good faith

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

31. A country exports goods worth $900m and imports goods worth $1100m. It exports services worth $300m and imports services worth $150m.

What is the balance of trade in goods?

A $200m deficit
B $200m surplus
C $50m deficit
D $50m surplus

32. Using the information in Question 31, what is the overall balance on goods and services?

A $50m deficit
B $50m surplus
C $200m deficit
D $350m surplus

33. A British importer must pay US $72 000. The exchange rate is £1 = US $1.20.

How much does the importer pay in pounds?

A £60 000
B £72 000
C £86 400
D £120 000

34. A firm buys goods for $40 each and sells them at a margin of 20%.

What is the selling price?

A $48
B $50
C $60
D $80

35. A retailer wants to encourage repeat purchases by giving points to customers.

Which retail service is this?

A after-sales service
B loyalty scheme
C self-service
D showrooming

36. Which statement best describes showrooming?

A customers buy goods without entering a shop
B customers examine goods in a shop but buy online
C customers order online and collect in store
D customers return goods after use

37. Which type of retailer is most likely to sell a narrow range of expensive watches with expert advice?

A department store
B hypermarket
C speciality store
D supermarket

38. Which advantage is most likely gained by a consumer using a credit card?

A payment is postponed
B price is always lower
C no debt is created
D goods are always insured

39. Which payment method is most suitable for a tourist travelling abroad who wants a safer alternative to carrying cash?

A cash
B debit card only
C traveller’s cheque
D trade credit

40. Which document confirms that goods have been received by the buyer?

A advice note
B delivery note
C invoice
D statement of account

41. A seller sends a document listing all transactions with a customer during the month and the amount still owed.

What is this document?

A credit note
B invoice
C order form
D statement of account

42. Which document is used when a buyer returns faulty goods and the seller reduces the amount owed?

A credit note
B debit note
C enquiry
D quotation

43. A retailer sells goods for $600. The cost of goods sold is $420.

What is the mark-up?

A 30%
B 42.86%
C 70%
D 180%

44. Which function of a wholesaler helps manufacturers continue production without storing finished goods for long periods?

A after-sales service
B breaking bulk
C clearing production lines
D providing credit to consumers

45. Which service is provided by a forwarding agent?

A arranging transport and documentation for goods
B guaranteeing payment for goods sold on credit
C selling goods in small quantities to consumers
D producing goods for export

46. Which item would be classified as primary production?

A banking
B car manufacturing
C coal mining
D retailing

47. Which item would be classified as secondary production?

A assembling televisions
B fishing
C insurance
D teaching

48. A business uses EPoS.

Which result is most likely?

A stock records update automatically when goods are sold
B customers no longer need to pay for goods
C trade discounts are removed
D transport costs are always reduced

49. Which method is most suitable for advertising a new national brand to a mass audience?

A local noticeboard
B national television
C personal letter to one customer
D trade invoice

50. Which statement about advertising is most accurate?

A Informative advertising gives details about a product.
B Persuasive advertising is used only by wholesalers.
C Advertising is part of production.
D Advertising always reduces prices.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

1. A — $51 300

• Cost = $48 000

• Mark-up 25% = $12 000

• Selling/list price = $60 000

• Trade discount 10% = $6000

• Net price = $54 000

• Cash discount 5% = $2700

• Amount received = $54 000 – $2700 = $51 300

• Trap: cash discount is taken after trade discount, not before.

2. B — $50m

• Tertiary production = services.

• Banking = $18m

• Teaching = $22m

• Warehousing = $10m

• Total tertiary = $50m

• Fishing/mining = primary.

• Food processing = secondary.

3. B — producer → retailer → consumer

• Milk is perishable and sold through a supermarket.

• The supermarket is the retailer.

• A wholesaler is usually avoided because fresh goods need faster distribution.

4. C — $30.00

• Wholesaler buys at $18.

• Mark-up 331/3% = $6.

• Wholesaler sells to retailer at $24.

• Retailer sells at margin 20%.

• Margin means profit is 20% of selling price.

• So cost is 80% of selling price.

• Selling price = $24 / 0.8 = $30.

5. C — buying designer shoes when basic shoes are available

• A need is necessary for survival/basic living.

• Basic shoes may be needed.

• Designer shoes are extra luxury, so they are a want.

6. B — pays Rs 80 000 more

• Original payment = $4000 × Rs 280 = Rs 1 120 000

• Later payment = $4000 × Rs 300 = Rs 1 200 000

• Extra paid = Rs 80 000

• The local currency has weakened against the dollar.

7. A — $100

• Deposit = 15% of $800 = $120

• Instalments = 12 × $65 = $780

• Total hire purchase price = $120 + $780 = $900

• Extra paid = $900 – $800 = $100

8. C — quotation

• An enquiry asks about price/terms.

• A quotation is the seller’s reply giving price, discount, delivery terms, etc.

9. C — insurance

• Insurance protects against financial loss from risks such as fire, theft, accident, flood.

• Advertising, banking and transport help trade but do not compensate for loss.

10. C — $120 000

• Rate of stock turnover = cost of goods sold / average stock

• 8 = cost of goods sold / $15 000

• Cost of goods sold = 8 × $15 000 = $120 000

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

11. B — A wholesaler usually breaks bulk for retailers

• Wholesalers buy in bulk from manufacturers.

• They sell smaller quantities to retailers.

• They do not normally sell directly to final consumers.

12. C — advertising a new brand

• Commerce = trade + aids to trade.

• Advertising is an aid to trade.

• Selling, importing and exporting are trade.

13. A — 25%

• Selling price = $1200

• Cost price = $900

• Profit = $300

• Margin = profit / selling price × 100

• Margin = 300 / 1200 × 100 = 25%

• Trap: mark-up would be 300 / 900 × 100 = 331/3%.

14. C — del credere agent

• A del credere agent guarantees payment.

• If the buyer fails to pay, the agent becomes responsible to the principal.

15. B — insurance services sold to foreign firms

• Invisible exports are services sold abroad.

• Insurance is a service.

• Cotton, machinery and oil are visible goods.

16. A — ad valorem duty

• Ad valorem duty is charged as a percentage of the value of imported goods.

• Specific duty is charged as a fixed amount per unit.

17. B — quota

• A quota limits the quantity of imports.

• A tariff is a tax on imports.

• An embargo is a total ban.

18. B — $4000

• List price = $5000

• Trade discount = 20% of $5000 = $1000

• Net price before cash discount = $5000 – $1000 = $4000

• Cash discount is only deducted if payment is made quickly.

19. C — standing order

• A standing order is used for fixed regular payments.

• Rent is usually a fixed monthly amount.

• Direct debit is better for variable amounts, such as utility bills.

20. B — crossed cheque

• A crossed cheque must be paid into a bank account.

• It is safer than an open cheque.

• It does not fully guarantee payment, but it reduces risk compared with cashing it directly.

21. B — click and collect

• Customer orders online.

• Customer collects from a physical store.

• This saves delivery time or shipping charges.

22. C — history of paying debts on time

• Creditworthiness means ability and willingness to repay.

• Previous repayment history is the strongest evidence.

23. A — $20 900

• Selling price = $25 000

• Trade discount 12% = $3000

• Net price = $22 000

• Cash discount 5% = $1100

• Amount received = $22 000 – $1100 = $20 900

24. B — email

• Email is fast for overseas communication.

• It also provides written evidence.

• Telephone is fast but does not automatically provide written proof.

25. C — transport

• Just-in-time means stock arrives only when needed.

• Reliable transport becomes crucial.

• If transport fails, production/sales can stop.

26. B — Goods are stored there before import duty is paid

• A bonded warehouse stores imported goods before duty is paid.

• Duty is paid when goods are removed for sale/use.

27. C — loss caused by fire in a warehouse

• Fire is an insurable risk.

• Deliberate loss, poor management and fall in demand are not normally insurable.

28. B — $12 500

• Stock value = $80 000

• Insured value = $50 000

• Loss = $20 000

• Compensation = insured value / actual value × loss

• Compensation = 50 000 / 80 000 × 20 000

• Compensation = $12 500

29. C — insurable interest

• Insurable interest means the insured person must suffer financially if the item is lost/damaged.

• You cannot insure something that does not affect you financially.

30. A — contribution

• Contribution applies when the same risk is insured with more than one insurer.

• Each insurer shares the compensation.

• The insured cannot make a profit from insurance.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

31. A — $200m deficit

• Balance of trade in goods = visible exports – visible imports

• Goods exports = $900m

• Goods imports = $1100m

• Balance = $900m – $1100m = $200m deficit

32. A — $50m deficit

• Total exports = goods exports + service exports

• Total exports = $900m + $300m = $1200m

• Total imports = goods imports + service imports

• Total imports = $1100m + $150m = $1250m

• Overall balance = $1200m – $1250m = $50m deficit

33. A — £60 000

• Exchange rate: £1 = US $1.20

• Amount needed = US $72 000

• Pounds required = 72 000 / 1.20

• = £60 000

34. B — $50

• Cost = $40

• Margin = 20%

• Margin means profit is 20% of selling price.

• So cost is 80% of selling price.

• Selling price = 40 / 0.8 = $50

35. B — loyalty scheme

• Loyalty schemes reward repeat customers with points, discounts or rewards.

• They are designed to encourage customers to return.

36. B — customers examine goods in a shop but buy online

• Showrooming means customers use a physical shop to view the product.

• Then they buy it online, often at a lower price.

37. C — speciality store

• A speciality store sells a narrow range of goods.

• It often offers expert advice.

• Expensive watches fit this perfectly.

38. A — payment is postponed

• A credit card allows the customer to buy now and pay later.

• Debt is created.

• Interest may be charged if the balance is not paid on time.

39. C — traveller’s cheque

• Traveller’s cheques are safer than carrying cash.

• They can be replaced if lost or stolen.

• Very classic Commerce answer. Old-school but still examinable.

40. B — delivery note

• A delivery note confirms goods have been delivered.

• The buyer usually signs it as proof of receipt.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.

41. D — statement of account

• A statement of account shows transactions over a period.

• It shows invoices, payments, credit notes and the final amount owing.

42. A — credit note

• A credit note is issued by the seller to reduce the amount owed.

• It may be used for returned goods, overcharging or damaged goods.

43. B — 42.86%

• Selling price = $600

• Cost = $420

• Profit = $180

• Mark-up = profit / cost × 100

• Mark-up = 180 / 420 × 100 = 42.86%

44. C — clearing production lines

• Wholesalers buy large quantities from manufacturers.

• This clears production lines and allows manufacturers to continue producing.

45. A — arranging transport and documentation for goods

• A forwarding agent arranges movement of goods.

• This may include transport, documents, customs and shipping arrangements.

46. C — coal mining

• Primary production extracts raw materials from nature.

• Mining is primary production.

47. A — assembling televisions

• Secondary production turns raw materials/components into finished goods.

• Assembling televisions is manufacturing, so it is secondary production.

48. A — stock records update automatically when goods are sold

• EPoS scans barcodes at checkout.

• Sales are recorded.

• Stock records are updated automatically.

• This helps reordering and stock control.

49. B — national television

• A new national brand needs mass advertising.

• National television reaches a large audience quickly.

50. A — Informative advertising gives details about a product

• Informative advertising explains features, price, availability or use.

• Persuasive advertising tries to convince customers to buy.

• Advertising is an aid to trade, not production.

Written and Compiled By Sir Hunain Zia (AYLOTI), World Record Holder With 154 Total A Grades, 11 World Records and 7 Distinctions, Educate A Change.