Set 2

51. A business pays the same fixed amount to a supplier on the first day of every month.

Which banking service is most suitable?

A bank draft
B direct debit
C standing order
D credit transfer

52. A buyer sends an enquiry to a seller. The seller replies with prices and delivery terms. The buyer then decides to purchase the goods.

Which document should the buyer send next?

A delivery note
B invoice
C order
D quotation

53. A business exports urgent, high-value, low-weight medical equipment overseas.

Which method of transport is most suitable?

A air freight
B canal transport
C pipeline
D sea freight

54. What is the main commercial advantage of containerisation?

A It avoids the need for insurance.
B It reduces handling and damage to goods.
C It removes all customs duties.
D It guarantees payment from overseas buyers.

55. A trader deliberately fails to tell the insurance company that his warehouse has faulty wiring. The warehouse later catches fire.

Which insurance principle has been broken?

A contribution
B indemnity
C subrogation
D utmost good faith

56. A business insures stock worth $120 000 for $90 000. A fire causes damage of $40 000. The insurance policy contains an average clause.

How much compensation will the business receive?

A $10 000
B $30 000
C $40 000
D $90 000

57. A government charges $50 duty on each imported refrigerator.

What type of duty is this?

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

58. A country places a complete ban on imports from another country.

Which protectionist measure is being used?

A embargo
B quota
C subsidy
D tariff

59. A company exports goods worth $600 000 and imports goods worth $750 000. It exports services worth $300 000 and imports services worth $100 000.

What is the balance of trade in goods?

A $150 000 deficit
B $150 000 surplus
C $50 000 deficit
D $50 000 surplus

60. Using the information in Question 59, what is the balance on goods and services?

A $50 000 deficit
B $50 000 surplus
C $150 000 deficit
D $200 000 surplus

61. A wholesaler buys goods for $20 each and sells them to retailers at a mark-up of 40%. The retailer sells to consumers at a margin of 30%.

What is the final selling price?

A $28.00
B $36.40
C $40.00
D $46.67

62. A retailer sells goods for $750. The margin is 25%.

What is the cost price?

A $187.50
B $562.50
C $600.00
D $937.50

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.

63. A trader buys goods for $5000. He wants a mark-up of 20% but then gives a trade discount of 10% on the list price.

What is the actual selling price?

A $4500
B $5400
C $5500
D $6000

64. Which statement about cash discount is correct?

A It is deducted before trade discount.
B It is offered for buying in large quantities.
C It is offered for prompt payment.
D It is shown as part of cost price.

65. Which document is sent by the seller when the buyer has been undercharged?

A credit note
B debit note
C delivery note
D enquiry

66. A retailer receives goods but some are damaged. The retailer returns them to the supplier.

Which document is the supplier most likely to issue?

A credit note
B invoice
C order form
D quotation

67. Which service is most likely provided by a factor?

A buying debts from a business
B giving travel advice to exporters
C moving goods through customs
D storing goods before duty is paid

68. Which type of warehouse is most useful for imported goods on which duty has not yet been paid?

A bonded warehouse
B cold-storage warehouse
C regional distribution centre
D retailer’s stockroom

69. Which reason best explains why a manufacturer may prefer to sell through wholesalers?

A Wholesalers always sell at lower prices than retailers.
B Wholesalers break bulk and reduce the manufacturer’s storage needs.
C Wholesalers prevent all bad debts.
D Wholesalers remove the need for advertising.

70. Which pair contains only aids to trade?

A advertising and insurance
B farming and banking
C manufacturing and transport
D retailing and warehousing

71. Which activity is part of home trade?

A exporting cotton
B importing machinery
C retailing groceries locally
D selling insurance to foreign firms

72. Which activity is foreign trade?

A a wholesaler selling to a local retailer
B a shopkeeper selling to a local consumer
C a manufacturer selling goods to another country
D a farmer selling wheat to a local mill

73. A business wants to protect itself against customers not paying debts.

Which service would be most suitable?

A advertising agency
B debt factoring
C self-service retailing
D vending machine

74. Which insurance principle prevents a person from making a profit from a loss?

A contribution
B indemnity
C insurable interest
D proximate cause

75. A fire damages a shop. The fire was caused by lightning. The insurance company pays compensation because lightning was the direct cause of the loss.

Which principle applies?

A contribution
B indemnity
C proximate cause
D subrogation

76. After paying compensation for a stolen car, an insurance company takes ownership of the recovered car.

Which principle applies?

A contribution
B indemnity
C subrogation
D utmost good faith

77. Which statement best describes a premium?

A the amount paid by the insured to obtain insurance cover
B the amount paid by the insurer after a loss
C the value of damaged stock after a fire
D the value of all assets owned by a business

78. A business sells goods on credit for $12 000. It offers 5% cash discount if payment is made within 10 days. The customer pays within 10 days.

How much is received?

A $600
B $11 400
C $12 000
D $12 600

79. Which payment method allows money to be transferred directly between bank accounts without using cash or cheques?

A bank giro credit
B cash on delivery
C open cheque
D traveller’s cheque

80. Which cheque is safest for sending by post?

A bearer cheque
B crossed cheque
C open cheque
D stale cheque

81. Which statement about a debit card is correct?

A It allows the customer to buy now and pay later.
B It allows payment directly from the customer’s bank account.
C It is used only for international trade.
D It always gives interest-free credit.

82. Which statement about trade credit is correct?

A It is credit given by a retailer to a final consumer only.
B It is credit given between businesses.
C It is a loan from a bank to a business.
D It is the same as hire purchase.

83. A customer buys a laptop by paying a deposit and then instalments. Ownership transfers only after the final instalment is paid.

Which type of credit is this?

A credit card
B extended credit
C hire purchase
D overdraft

84. Which statement about informal credit is correct?

A It is usually arranged between friends, relatives or small local traders.
B It always involves a written contract with a bank.
C It is only used in international trade.
D It requires ownership to remain with the seller until the final instalment.

85. Which service is provided by a retailer rather than a wholesaler?

A breaking bulk for other businesses
B clearing production lines
C selling goods in small quantities to final consumers
D storing large quantities for manufacturers

86. A manufacturer wants to sell specialist industrial machines overseas but does not know the foreign market.

Which intermediary would be most useful?

A export agent
B local street trader
C vending machine operator
D consumer co-operative

87. Which type of retailer is most likely to have low prices, large car parks and be located outside town centres?

A department store
B hypermarket
C market stall
D speciality shop

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.

88. Which disadvantage is most likely for a small-scale retailer compared with a large supermarket?

A inability to give personal service
B lack of flexibility in opening hours
C lower buying power
D no direct contact with customers

89. Which advantage does a large-scale retailer usually have over a small-scale retailer?

A ability to buy in bulk and gain discounts
B ability to avoid all fixed costs
C ability to remove all competition
D ability to operate without stock

90. A shop allows customers to scan and pay for goods without a cashier.

Which retail development is this?

A click and collect
B loyalty scheme
C self-service checkout
D showrooming

91. A business advertises that its washing machine uses less electricity than competitors’ models.

Which type of advertising is mainly being used?

A collective advertising
B informative advertising
C persuasive advertising
D public service advertising

92. Several firms in the same industry jointly advertise the benefits of drinking milk.

What type of advertising is this?

A collective advertising
B competitive advertising
C direct mail advertising
D point-of-sale advertising

93. Which advertising medium is most suitable for targeting customers in one small local area at low cost?

A cinema advertisement
B international television
C local newspaper
D national billboard campaign

94. Which communication method is best when immediate two-way discussion is needed between managers in different countries?

A email
B fax
C video conferencing
D written report

95. Which communication method gives a permanent written record but may not be suitable for urgent discussion?

A telephone call
B video conference
C written report
D face-to-face conversation

96. A firm transports crude oil from a port to an inland refinery.

Which transport method is most suitable?

A air
B pipeline
C rail passenger service
D road courier

97. Which transport method is usually most suitable for bulky, low-value goods moved long distances overseas?

A air
B motorcycle courier
C sea
D taxi

98. Which problem is most associated with road transport?

A it cannot provide door-to-door delivery
B it is affected by traffic congestion
C it is only suitable for liquid goods
D it cannot carry small loads

99. A business stores ice cream before delivering it to supermarkets.

Which type of warehouse is most suitable?

A bonded warehouse
B cold-storage warehouse
C public warehouse
D transit warehouse

100. Which statement about warehousing is correct?

A It allows goods to be stored until they are needed.
B It removes the need for transport.
C It is only used by manufacturers.
D It guarantees that goods will be sold.

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.

51. C — standing order

• A standing order is used for a fixed regular payment.

• Since the same amount is paid every month, standing order fits best.

• Direct debit is usually for variable payments.

52. C — order

• Enquiry = buyer asks for terms.

• Quotation = seller replies with prices and delivery terms.

• Order = buyer confirms they want to buy the goods.

• So the next document is an order.

53. A — air freight

• Medical equipment is urgent, high-value and low-weight.

• Air freight is expensive but fast and suitable for valuable goods.

• Sea freight is cheaper but too slow.

54. B — It reduces handling and damage to goods

• Containerisation keeps goods packed in standard containers.

• This reduces loading/unloading time, damage and theft.

• It does not remove insurance, customs duty or payment risk.

55. D — utmost good faith

• Utmost good faith means all important facts must be honestly disclosed.

• Faulty wiring increases risk of fire.

• Hiding it breaks utmost good faith.

56. B — $30 000

• Actual stock value = $120 000

• Insured value = $90 000

• Loss = $40 000

• Compensation = insured value / actual value × loss

• Compensation = 90 000 / 120 000 × 40 000

• Compensation = $30 000

57. C — specific duty

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

• Here it is $50 per refrigerator.

• Ad valorem duty would be a percentage of value.

58. A — embargo

• An embargo is a complete ban on trade with another country.

• A quota only limits quantity.

• A tariff is a tax.

59. A — $150 000 deficit

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

• = $600 000 – $750 000

• = $150 000 deficit

60. B — $50 000 surplus

• Total exports = goods exports + service exports

• = $600 000 + $300 000 = $900 000

• Total imports = goods imports + service imports

• = $750 000 + $100 000 = $850 000

• Balance = $900 000 – $850 000

• = $50 000 surplus

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.

61. C — $40.00

• Wholesaler cost = $20

• Mark-up 40% = $8

• Wholesaler sells to retailer for $28

• Retailer margin = 30%

• Margin means profit is 30% of selling price.

• Therefore cost is 70% of selling price.

• Selling price = 28 / 0.70

• = $40

62. B — $562.50

• Selling price = $750

• Margin = 25% of selling price

• Profit = 25% × 750 = $187.50

• Cost price = 750 – 187.50

• = $562.50

63. B — $5400

• Cost = $5000

• Mark-up 20% = $1000

• List price = $6000

• Trade discount 10% = $600

• Actual selling price = $6000 – $600

• = $5400

64. C — It is offered for prompt payment

• Cash discount is given to encourage quick payment.

• Trade discount is given for bulk buying or to trade customers.

• Trap: cash discount is not the same as trade discount.

65. B — debit note

• If the buyer has been undercharged, the seller needs to increase the amount owed.

• A debit note is used to charge extra.

• A credit note reduces the amount owed.

66. A — credit note

• Damaged goods are returned.

• The seller reduces the amount owed by the buyer.

• This is done using a credit note.

67. A — buying debts from a business

• A factor provides debt factoring.

• The factor buys the business’s debts and collects money from debtors.

• This gives the business quicker cash.

68. A — bonded warehouse

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

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

69. B — Wholesalers break bulk and reduce the manufacturer’s storage needs

• Wholesalers buy in large quantities.

• This clears production lines for manufacturers.

• They then break bulk for retailers.

70. A — advertising and insurance

• Advertising and insurance are both aids to trade.

• Farming is production.

• Manufacturing is production.

• Retailing is trade, not an aid to trade.

71. C — retailing groceries locally

• Home trade means buying and selling within the same country.

• Retailing groceries locally is internal/home trade.

72. C — a manufacturer selling goods to another country

• Selling goods to another country is exporting.

• Exporting is foreign trade.

73. B — debt factoring

• Debt factoring protects against customers delaying or failing to pay.

• The factor may take responsibility for collecting debts.

• This improves cash flow.

74. B — indemnity

• Indemnity means insurance restores the insured to the financial position before the loss.

• It prevents profit from insurance.

• Insurance compensates; it does not reward. Classic exam trap.

75. C — proximate cause

• Proximate cause means the direct/main cause of the loss.

• Here lightning directly caused the fire damage.

• So the insurer pays because the proximate cause is covered.

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.

76. C — subrogation

• Subrogation gives the insurer the right to take over the insured item after compensation.

• If the stolen car is recovered after payment, the insurance company may claim it.

77. A — the amount paid by the insured to obtain insurance cover

• Premium = payment made by the insured to the insurer.

• Compensation/claim = amount paid by the insurer after a loss.

78. B — $11 400

• Credit sale = $12 000

• Cash discount = 5%

• Discount = 5% × 12 000 = $600

• Amount received = 12 000 – 600

• = $11 400

79. A — bank giro credit

• Bank giro credit transfers money directly into another bank account.

• It avoids cash and cheques.

80. B — crossed cheque

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

• It is safer to send by post than an open/bearer cheque.

• An open cheque can be cashed more easily if stolen.

81. B — It allows payment directly from the customer’s bank account

• A debit card takes money directly from the customer’s account.

• A credit card allows buy now, pay later.

82. B — It is credit given between businesses

• Trade credit is credit allowed by one business to another.

• Example: wholesaler allows retailer 30 days to pay.

83. C — hire purchase

• Hire purchase involves deposit + instalments.

• Ownership transfers only after the final instalment.

• Until then, the seller can repossess the goods if payments are missed.

84. A — It is usually arranged between friends, relatives or small local traders

• Informal credit is not usually arranged through banks.

• It may be based on trust or personal relationship.

85. C — selling goods in small quantities to final consumers

• Retailers sell directly to final consumers.

• Wholesalers mainly sell to retailers or other businesses.

86. A — export agent

• An export agent helps a manufacturer sell goods overseas.

• Useful when the manufacturer lacks knowledge of foreign markets.

87. B — hypermarket

• Hypermarkets are large stores, often out-of-town.

• They have large car parks and low prices due to bulk buying.

88. C — lower buying power

• Small retailers usually buy in smaller quantities.

• They cannot obtain the same bulk discounts as supermarkets.

• This may force them to charge higher prices.

89. A — ability to buy in bulk and gain discounts

• Large-scale retailers can buy huge quantities.

• This gives them economies of scale and trade discounts.

90. C — self-service checkout

• Customers scan and pay without a cashier.

• This is self-service checkout.

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.

91. C — persuasive advertising

• The advert compares the product with competitors.

• It tries to persuade customers that this washing machine is better.

• Informative advertising gives basic facts; this one is selling superiority.

92. A — collective advertising

• Collective advertising is done by several firms in the same industry.

• They promote the product category, not one brand only.

• Example: “Drink more milk.”

93. C — local newspaper

• A local newspaper targets one small local area.

• It is cheaper than national television or national billboards.

94. C — video conferencing

• Managers in different countries need immediate two-way discussion.

• Video conferencing allows real-time communication with visual contact.

• Email gives a written record but is slower for discussion.

95. C — written report

• A written report gives a permanent record.

• But it is not suitable for urgent two-way discussion.

96. B — pipeline

• Crude oil is a liquid bulk product.

• Pipelines are suitable for moving oil from ports to refineries.

97. C — sea

• Sea transport is best for bulky, low-value goods over long overseas distances.

• It is slow but cheap per unit.

98. B — it is affected by traffic congestion

• Road transport can provide door-to-door delivery.

• But it is affected by traffic, accidents and road conditions.

99. B — cold-storage warehouse

• Ice cream needs low temperatures.

• Cold-storage warehouses are used for frozen/perishable goods.

100. A — It allows goods to be stored until they are needed

• Warehousing bridges the time gap between production and consumption.

• It does not remove transport or guarantee sales.

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.