Set 4

151. A trader sells goods for $7200 after allowing a trade discount of 20%. The buyer also received a cash discount of 10%.

What was the original list price?

A $8000
B $9000
C $10 000
D $11 250

152. A business has sales of $150 000, opening stock of $12 000, purchases of $90 000 and closing stock of $18 000.

What is the gross profit?

A $42 000
B $60 000
C $66 000
D $84 000

153. Using the information in Question 152, what is the rate of stock turnover?

A 5 times
B 6 times
C 7.5 times
D 10 times

154. A retailer buys goods for $36 each and wants a margin of 25%.

What selling price should be charged?

A $45
B $48
C $54
D $60

155. A wholesaler sells goods to a retailer for $64 after adding a mark-up of 60%.

What was the wholesaler’s cost price?

A $25.60
B $38.40
C $40.00
D $102.40

156. A shop sells goods for $2400. The goods cost $1500. Expenses are $500.

What is the net profit?

A $400
B $900
C $1400
D $1900

157. A consumer buys furniture on hire purchase. Cash price is $1500. Deposit is 10%. There are 15 monthly instalments of $110.

How much extra is paid using hire purchase?

A $150
B $300
C $1650
D $1800

158. A retailer buys goods with a list price of $8000. The supplier gives 15% trade discount and 5% cash discount. The retailer pays late.

How much does the retailer pay?

A $6460
B $6800
C $7600
D $8000

159. A business imports goods costing US $45 000. The exchange rate changes from £1 = US $1.50 to £1 = US $1.25 before payment.

How many more pounds are needed?

A £6000
B £7500
C £30 000
D £36 000

160. A country exports visible goods worth $80m and imports visible goods worth $110m. It exports invisible services worth $55m and imports invisible services worth $20m.

What is the balance on goods and services?

A $30m deficit
B $5m surplus
C $35m surplus
D $55m deficit

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.

161. Which document is sent by a seller to inform the buyer that goods are being sent?

A advice note
B credit note
C enquiry
D statement of account

162. Which document is used by a buyer to ask a seller about price, availability and delivery terms?

A enquiry
B invoice
C order
D quotation

163. A customer receives a document from a seller showing goods bought, price, discount, delivery charge and total amount due.

Which document is this?

A credit note
B invoice
C order form
D receipt

164. A buyer has returned goods because they were overcharged.

Which document will reduce the amount owed?

A credit note
B debit note
C delivery note
D quotation

165. Which document is proof that payment has been received?

A delivery note
B invoice
C receipt
D statement of account

166. Which method of communication is most suitable for sending a legally important original signed contract overseas?

A courier service
B loudspeaker announcement
C social media post
D telephone call

167. Which method of communication allows immediate visual discussion between branches in different countries?

A email
B letter
C video conferencing
D written report

168. Which is the main disadvantage of using telephone communication for an important business agreement?

A it cannot be used over long distances
B it gives no automatic written record
C it is always slower than letters
D it cannot provide immediate feedback

169. Which communication method is most suitable for a detailed formal report to shareholders?

A text message
B telephone call
C written report
D video call

170. A business sends promotional messages to thousands of customers by email. Many messages are ignored or treated as junk.

Which disadvantage is shown?

A delay in sea transport
B lack of storage space
C spam filtering and customer irritation
D shortage of retail display space

171. A bank allows a business to withdraw more money than it has in its current account for a short period.

Which banking service is this?

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

172. A business wants a bank-guaranteed cheque to pay a supplier.

Which method is most suitable?

A bank draft
B cash discount
C direct debit
D open cheque

173. A customer authorises a gas company to take different amounts from the customer’s bank account each month.

Which payment method is used?

A direct debit
B standing order
C trade credit
D traveller’s cheque

174. A retailer pays wages directly into employees’ bank accounts.

Which banking service is most likely used?

A credit transfer
B debit card
C hire purchase
D letter of credit

175. Which statement about an overdraft is correct?

A It is a long-term loan secured only on imported goods.
B It allows temporary borrowing from a current account.
C It is used only by consumers buying cars.
D It guarantees payment to an exporter.

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.

176. A customer buys a refrigerator using extended credit.

Which statement is most likely correct?

A ownership passes only after the final instalment
B the customer pays later but may own the goods immediately
C the seller always keeps the goods until full payment
D the customer cannot use the goods before final payment

177. Which type of credit is most suitable for a business buying stock from a supplier and paying after 30 days?

A consumer credit
B hire purchase
C informal credit
D trade credit

178. Which is a disadvantage to a retailer of allowing customers to buy on credit?

A fewer customers can afford goods
B increased risk of bad debts
C lower chance of repeat purchases
D no sales records are needed

179. A customer uses a credit card to buy a laptop and pays the full balance before the due date.

Which statement is correct?

A interest is usually avoided
B ownership remains with the credit card company
C the shop receives no payment
D the customer must pay a deposit first

180. A person borrows money from a friend without a formal written agreement.

Which type of credit is this?

A extended credit
B hire purchase
C informal credit
D trade credit

181. A trader insures machinery worth $75 000 for $50 000. A flood causes damage of $30 000. The policy contains an average clause.

How much compensation is paid?

A $20 000
B $30 000
C $50 000
D $75 000

182. A trader insures a warehouse against fire. A fire starts because of a lightning strike and damages stock.

Which principle decides whether the claim is valid?

A contribution
B insurable interest
C proximate cause
D subrogation

183. A business insured the same stock against fire with two insurers. A fire occurs and both insurers share the claim.

Which principle applies?

A contribution
B indemnity
C subrogation
D utmost good faith

184. A person sells a car after insuring it. The new owner crashes the car, but the original policyholder tries to claim.

Why will the claim fail?

A no contribution
B no insurable interest
C no premium
D no subrogation

185. Which principle requires the insured to reveal all material facts?

A contribution
B indemnity
C subrogation
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.

186. Which is most likely to be an uninsurable risk?

A fire damaging a factory
B loss caused by falling consumer demand
C theft from a shop
D vehicle accident during delivery

187. Which term describes the amount paid by the insurer after a valid claim?

A compensation
B premium
C proposal
D quotation

188. Which document is completed before insurance is accepted and asks questions about the risk?

A claim form
B cover note
C proposal form
D receipt

189. Which type of transport is best for moving large quantities of grain across oceans?

A air
B pipeline
C sea
D taxi

190. Which transport method is best for delivering furniture from a local shop directly to a customer’s house?

A air freight
B road transport
C sea transport
D pipeline

191. Which is a disadvantage of rail transport compared with road transport?

A cannot carry heavy goods
B cannot carry goods long distances
C less flexible routes
D slower than walking

192. Which is the main advantage of road transport for retailers?

A door-to-door delivery
B lowest cost for all overseas cargo
C no traffic delays
D no need for drivers

193. A firm imports frozen meat.

Which storage facility is most suitable before distribution?

A bonded and cold-storage warehouse
B ordinary office
C public library
D showroom

194. Which statement best describes a public warehouse?

A It is available for use by different businesses for a charge.
B It is used only by one private manufacturer.
C It stores only goods after final sale to consumers.
D It replaces insurance for stored goods.

195. Which function of warehousing is most useful when goods are produced all year but demanded mainly in one season?

A breaking bulk
B seasonal storage
C issuing bank drafts
D setting import quotas

196. Which retail business is owned and controlled by customers for their mutual benefit?

A chain store
B consumer co-operative
C department store
D hypermarket

197. Which type of retailer sells through many branches under the same ownership and name?

A chain store
B hawker
C mail order
D vending machine

198. Which retailer is most likely to sell many different departments of goods under one roof in a town centre?

A department store
B market stall
C mobile shop
D vending machine

199. Which retailer has no fixed shop and moves from place to place selling goods?

A department store
B hawker
C hypermarket
D supermarket

200. Which statement is most accurate about consumer protection?

A It allows sellers to give false information if prices are low.
B It helps consumers obtain goods that are safe and correctly described.
C It removes the need for competition between retailers.
D It protects only manufacturers from customers.

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.

151. C — $10 000

• Final amount paid = $7200

• Cash discount = 10%, so $7200 is 90% of price after trade discount.

• Price after trade discount = 7200 / 0.90 = $8000

• Trade discount = 20%, so $8000 is 80% of list price.

• List price = 8000 / 0.80 = $10 000

• Trap: work backwards in reverse order.

152. C — $66 000

• Cost of goods sold = opening stock + purchases – closing stock

• = 12 000 + 90 000 – 18 000

• = $84 000

• Gross profit = sales – cost of goods sold

• = 150 000 – 84 000

• = $66 000

153. B — 6 times

• Average stock = (opening stock + closing stock) / 2

• = (12 000 + 18 000) / 2

• = $15 000

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

• = 84 000 / 15 000

• = 5.6 times

• Closest option = 6 times

154. B — $48

• Cost price = $36

• Margin = 25%

• Margin is based on selling price.

• So cost is 75% of selling price.

• Selling price = 36 / 0.75

• = $48

155. C — $40.00

• Selling price = $64

• Mark-up = 60%

• Selling price = 160% of cost

• Cost price = 64 / 1.60

• = $40

156. A — $400

• Sales = $2400

• Cost of goods = $1500

• Gross profit = $900

• Expenses = $500

• Net profit = 900 – 500

• = $400

157. B — $300

• Cash price = $1500

• Deposit = 10% × 1500 = $150

• Instalments = 15 × 110 = $1650

• Total hire purchase price = 150 + 1650 = $1800

• Extra paid = 1800 – 1500

• = $300

158. B — $6800

• List price = $8000

• Trade discount = 15% × 8000 = $1200

• Price after trade discount = $6800

• Retailer pays late, so no cash discount.

• Amount paid = $6800

159. A — £6000

• Amount owed = US $45 000

• Old rate: £1 = US $1.50

• Pounds needed originally = 45 000 / 1.50 = £30 000

• New rate: £1 = US $1.25

• Pounds needed now = 45 000 / 1.25 = £36 000

• Extra pounds needed = £36 000 – £30 000

• = £6000

160. B — $5m surplus

• Visible exports = $80m

• Invisible exports = $55m

• Total exports = $135m

• Visible imports = $110m

• Invisible imports = $20m

• Total imports = $130m

• Balance = 135m – 130m

• = $5m 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.

161. A — advice note

• An advice note tells the buyer that goods have been sent.

• Delivery note confirms delivery.

• Invoice asks for payment.

162. A — enquiry

• An enquiry is sent by a buyer to ask about price, availability, delivery and terms.

• Quotation is the seller’s reply.

163. B — invoice

• An invoice shows goods bought, prices, discounts, delivery charges and total amount due.

• It is sent by the seller to the buyer.

164. A — credit note

• A credit note reduces the amount owed.

• It is used when goods are returned, damaged or overcharged.

165. C — receipt

• A receipt is proof that payment has been received.

• Invoice asks for payment; receipt confirms payment.

166. A — courier service

• A legally important original signed contract must physically reach the receiver.

• Courier service is safer and faster than ordinary post.

• Telephone/social media cannot send the original signed document.

167. C — video conferencing

• Video conferencing gives immediate visual and spoken communication.

• It is suitable for branches in different countries.

168. B — it gives no automatic written record

• Telephone is fast and allows immediate feedback.

• But it does not automatically provide written evidence of what was agreed.

169. C — written report

• A report is formal, detailed and permanent.

• It is suitable for shareholders.

170. C — spam filtering and customer irritation

• Promotional emails may be ignored, blocked or treated as spam.

• Too many messages can annoy customers.

171. B — overdraft

• An overdraft allows a business to withdraw more than it has in its current account.

• It is usually short-term borrowing.

172. A — bank draft

• A bank draft is guaranteed by the bank.

• It is safer for the supplier than an ordinary cheque.

173. A — direct debit

• Direct debit is used for regular payments where the amount may vary.

• Gas bills often vary monthly.

174. A — credit transfer

• Credit transfer moves money directly into another person’s bank account.

• It is commonly used for wages and salaries.

175. B — It allows temporary borrowing from a current account

• Overdraft = short-term borrowing through a current account.

• It is flexible but interest is charged on the amount overdrawn.

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.

176. B — the customer pays later but may own the goods immediately

• Extended credit allows payment over a longer period.

• Unlike hire purchase, ownership may pass immediately depending on agreement.

• Hire purchase is the one where ownership passes after the final instalment.

177. D — trade credit

• Trade credit is credit between businesses.

• Example: retailer buys stock now and pays supplier after 30 days.

178. B — increased risk of bad debts

• Credit may increase sales.

• But some customers may delay payment or fail to pay.

• That creates bad debts.

179. A — interest is usually avoided

• If the full credit card balance is paid before the due date, interest is usually not charged.

• If payment is late, interest may apply.

180. C — informal credit

• Borrowing from a friend without a formal written agreement is informal credit.

• It is based mainly on trust.

181. A — $20 000

• Actual value = $75 000

• Insured value = $50 000

• Loss = $30 000

• Compensation = insured value / actual value × loss

• = 50 000 / 75 000 × 30 000

• = $20 000

182. C — proximate cause

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

• The insurer checks whether the direct cause, lightning/fire, is covered.

183. A — contribution

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

• Insurers share the compensation.

• The insured cannot claim full compensation from both.

184. B — no insurable interest

• After selling the car, the original policyholder no longer suffers financial loss if it crashes.

• No financial interest = no valid claim.

185. D — utmost good faith

• Utmost good faith requires full and honest disclosure of all material facts.

• Hiding important risk details can make the policy invalid.

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.

186. B — loss caused by falling consumer demand

• Falling demand is a business risk.

• It is not normally insurable.

• Fire, theft and accidents are insurable risks.

187. A — compensation

• Compensation is paid by the insurer after a valid claim.

• Premium is paid by the insured to buy insurance.

188. C — proposal form

• A proposal form is completed before insurance is accepted.

• It asks questions about the risk so the insurer can decide the premium and terms.

189. C — sea

• Grain is bulky and moved in large quantities.

• Sea transport is suitable for heavy/bulky cargo across oceans.

190. B — road transport

• Furniture needs delivery directly to the customer’s house.

• Road transport gives door-to-door delivery.

191. C — less flexible routes

• Rail transport follows fixed routes and timetables.

• Road transport is more flexible and can deliver door-to-door.

192. A — door-to-door delivery

• Road transport can collect from supplier and deliver directly to retailer.

• This is its biggest advantage.

193. A — bonded and cold-storage warehouse

• Frozen meat is imported, so duty/customs may be involved.

• It is also perishable/frozen, so cold storage is needed.

• Best answer = bonded + cold-storage.

194. A — It is available for use by different businesses for a charge

• A public warehouse can be rented by different traders.

• It is not owned for use by only one firm.

195. B — seasonal storage

• Some goods are produced all year but demanded mainly in one season.

• Warehousing stores them until the season of demand.

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.

196. B — consumer co-operative

• A consumer co-operative is owned and controlled by consumers.

• It operates for members’ mutual benefit.

197. A — chain store

• Chain stores have many branches under the same ownership and name.

• They usually sell similar goods in each branch.

198. A — department store

• A department store sells many types of goods in different departments under one roof.

• It is often located in a town/city centre.

199. B — hawker

• A hawker has no fixed shop.

• Hawkers move from place to place selling goods.

200. B — It helps consumers obtain goods that are safe and correctly described

• Consumer protection prevents false descriptions, unsafe goods and unfair practices.

• It protects buyers from being misled or exploited.

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.