Set 3

101. A business wants to transfer a large sum of money safely to a supplier in another country. The supplier wants guaranteed payment before dispatching the goods.

Which method is most suitable?

A cash on delivery
B letter of credit
C open cheque
D standing order

102. A retailer buys goods for $24 000. The supplier offers 20% trade discount and 5% cash discount if paid within 10 days. The retailer pays within 10 days.

How much does the retailer pay?

A $18 240
B $19 000
C $19 200
D $22 800

103. A manufacturer sells goods to a wholesaler at $75 each. The wholesaler sells to retailers at a mark-up of 20%. The retailer sells to consumers at a margin of 25%.

What is the final consumer price?

A $90
B $112.50
C $120
D $125

104. Which situation best shows specialisation by process?

A a country producing most of the world’s tea
B a worker fitting only tyres on a car production line
C a shop selling only sports equipment
D a farmer growing wheat and rice

105. A company imports goods from Japan. The invoice is in yen. Between ordering and payment, the importer’s currency falls in value against the yen.

What is the effect on the importer?

A imports become cheaper
B imports become more expensive
C exports become more expensive to foreign buyers
D no effect because the invoice was already issued

106. A trader imports goods costing €60 000. The exchange rate changes from $1 = €0.80 to $1 = €0.75 before payment is made.

How many more dollars are needed to pay for the goods?

A $5000
B $7500
C $80 000
D $85 000

107. Which statement about a bill of lading is correct?

A It is issued only for air transport.
B It is a document of title for goods shipped by sea.
C It is used only in home trade.
D It is a request for payment after goods are delivered.

108. Which document is used to claim payment from an insurance company after a loss?

A claim form
B cover note
C debit note
D policy

109. Which insurance document gives temporary evidence of insurance before the policy is issued?

A claim form
B cover note
C proposal form
D renewal notice

110. Which principle of insurance is shown when an insurer refuses to pay because the loss was caused by an excluded risk?

A contribution
B indemnity
C proximate cause
D subrogation

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.

111. A business has stock worth $200 000 but insures it for $120 000. A fire destroys stock worth $50 000. The policy contains an average clause.

How much compensation will be paid?

A $20 000
B $30 000
C $50 000
D $120 000

112. A shopkeeper takes out insurance against theft. Later, goods are stolen by employees, but employee theft was not included in the policy.

Why may the insurer refuse compensation?

A no insurable interest
B no indemnity
C no proximate cause covered by the policy
D no contribution

113. A supermarket uses data from loyalty cards.

Which benefit is most likely?

A it can study customers’ buying habits
B it can avoid paying suppliers
C it can remove all competition
D it can guarantee all stock will sell

114. Which is the best example of direct services?

A banking
B hairdressing
C manufacturing
D warehousing

115. Which is the best example of commercial services?

A doctor treating patients
B teacher giving lessons
C transport company delivering goods
D farmer growing cotton

116. A business has opening stock of $18 000, closing stock of $22 000 and cost of goods sold of $160 000.

What is the rate of stock turnover?

A 7.27 times
B 8 times
C 8.89 times
D 10 times

117. A retailer buys goods for $480 and sells them at a margin of 40%.

What is the selling price?

A $672
B $720
C $800
D $960

118. A retailer sells goods for $960 at a mark-up of 20%.

What is the cost price?

A $768
B $800
C $840
D $1152

119. Which statement about margin and mark-up is correct?

A Margin is calculated on cost price, mark-up is calculated on selling price.
B Margin is calculated on selling price, mark-up is calculated on cost price.
C Both are always calculated on cost price.
D Both are always calculated on selling price.

120. A trader sells goods for $5000 after allowing a trade discount of 20%. The cash discount is then 10%.

What was the original list price if the customer paid within the cash discount period?

A $4500
B $5625
C $6250
D $6944

121. A retailer wants to compare profit from sales before deducting expenses.

Which figure should be calculated?

A gross profit
B net profit
C rate of stock turnover
D working capital

122. Which advantage of e-commerce is most likely for consumers?

A they can inspect all goods physically before buying
B they can shop at any time
C they always avoid delivery charges
D they always receive goods immediately

123. Which disadvantage of e-commerce is most likely for retailers?

A increased need for physical display space only
B risk of online fraud and security problems
C no need for advertising
D inability to reach foreign customers

124. Which payment method is most likely used for online shopping?

A debit card
B open cheque
C traveller’s cheque
D postal order

125. A consumer orders goods online but collects them from the retailer’s branch.

Which service is used?

A click and collect
B mail order
C mobile shop
D showrooming

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.

126. A customer examines a laptop in a shop, asks staff questions, then buys the same model cheaper from an online retailer.

Which term describes this?

A click and collect
B e-commerce
C self-service
D showrooming

127. Which statement about vending machines is correct?

A They require large numbers of sales staff.
B They provide 24-hour selling in suitable locations.
C They are suitable only for expensive bulky goods.
D They allow customers to bargain over prices.

128. A retailer uses self-service. Which advantage is most likely for the retailer?

A fewer checkout and display costs in all cases
B customers may buy more while moving around the store
C no stock control is needed
D all theft is prevented

129. A business sells goods in large quantities to retailers and gives trade credit.

What type of business is it most likely to be?

A broker
B consumer co-operative
C wholesaler
D vending machine operator

130. Which function of a wholesaler is most useful to a small retailer with limited storage space?

A branding goods
B breaking bulk
C mining raw materials
D producing goods

131. Which function of a wholesaler is most useful to manufacturers with limited warehouse space?

A cash discount to consumers
B clearing production lines
C personal advice to final consumers
D self-service checkout

132. Which intermediary negotiates a sale but does not usually own the goods?

A broker
B hypermarket
C retailer
D wholesaler

133. Which agent is most likely to sell goods at auction for a principal?

A auctioneer
B del credere agent
C forwarding agent
D insurance broker

134. A business exports mangoes. The goods are perishable, high-value and needed quickly by the foreign buyer.

Which transport method is most suitable?

A air
B canal
C pipeline
D sea

135. A business exports coal in very large quantities over a long distance.

Which transport method is most suitable?

A air
B courier
C sea
D taxi

136. Which advantage does rail transport usually have over road transport?

A better for door-to-door delivery of small parcels
B cheaper for heavy goods over long land distances
C no need for terminals
D unaffected by fixed routes

137. Which disadvantage is most associated with sea transport?

A high cost for bulky cargo
B limited carrying capacity
C slow speed
D unsuitable for international trade

138. A business sends small urgent documents across a city.

Which transport method is most suitable?

A canal
B motorcycle courier
C pipeline
D sea freight

139. Which statement about containerisation is correct?

A It increases handling of individual goods.
B It helps transfer goods between road, rail and sea more easily.
C It is used only for liquid goods.
D It removes the need for ports.

140. A business stores imported goods while they are waiting for customs clearance.

Which type of warehouse is most suitable?

A bonded warehouse
B cold-storage warehouse
C retailer’s stockroom
D showroom

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.

141. Which warehouse is most suitable for fruit before it is supplied to supermarkets?

A bonded warehouse
B cold-storage warehouse
C furniture warehouse
D raw material store

142. Which function of warehousing helps to stabilise prices?

A allowing goods to be stored when supply is high and released when needed
B reducing the need for advertising
C replacing all forms of transport
D guaranteeing payment by customers

143. A firm advertises a new product by giving factual details about its price, features and where it can be bought.

Which type of advertising is mainly used?

A collective
B competitive
C informative
D persuasive

144. A firm advertises that its soap washes better than a rival brand.

Which type of advertising is mainly used?

A collective
B informative
C persuasive
D public service

145. A group of orange growers jointly advertise the health benefits of oranges without naming one brand.

Which type of advertising is this?

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

146. Which advertising medium is most suitable for reaching a specific list of business customers?

A direct mail
B national television
C roadside billboard
D cinema advertising

147. Which advertising medium is most suitable for showing movement, sound and colour to a mass audience?

A catalogue
B newspaper classified advert
C television
D trade journal

148. Which advertising medium is most suitable for advertising machinery to firms in a specialised industry?

A children’s magazine
B local radio
C trade journal
D vending machine

149. Which statement about advertising is most accurate?

A Advertising always creates needs.
B Advertising can increase demand but may increase business costs.
C Advertising is only used by retailers.
D Advertising removes the need for packaging.

150. A business wants immediate spoken feedback from a customer in another city.

Which method of communication is most suitable?

A email
B letter
C telephone
D written report

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.

101. B — letter of credit

• A letter of credit is used in international trade.

• It gives the exporter a bank-backed guarantee of payment.

• The exporter can safely dispatch goods knowing payment will be made if conditions are met.

• Open cheque and standing order do not give the same international payment security.

102. A — $18 240

• Original price = $24 000

• Trade discount = 20% × 24 000 = $4800

• Price after trade discount = $24 000 – $4800 = $19 200

• Cash discount = 5% × 19 200 = $960

• Amount paid = $19 200 – $960 = $18 240

• Trap: cash discount is calculated after trade discount.

103. C — $120

• Manufacturer sells to wholesaler = $75

• Wholesaler mark-up = 20% of 75 = $15

• Wholesaler selling price = $90

• Retailer margin = 25%

• Margin is based on selling price.

• So $90 = 75% of final selling price

• Final selling price = 90 / 0.75 = $120

104. B — a worker fitting only tyres on a car production line

• Specialisation by process means one worker does only one stage of production.

• Fitting tyres only is one process in car manufacturing.

105. B — imports become more expensive

• If the importer’s currency falls in value, more local currency is needed to buy the same foreign currency.

• So the Japanese yen payment becomes more expensive for the importer.

106. A — $5000

• Goods cost = €60 000

• Original rate: $1 = €0.80

• Dollars needed originally = 60 000 / 0.80 = $75 000

• New rate: $1 = €0.75

• Dollars needed now = 60 000 / 0.75 = $80 000

• Extra dollars needed = $80 000 – $75 000 = $5000

107. B — It is a document of title for goods shipped by sea

• A bill of lading is used in sea transport.

• It acts as a receipt, contract of carriage and document of title.

• It is not used only after delivery.

108. A — claim form

• A claim form is completed when the insured wants compensation after a loss.

• A policy gives details of the insurance contract.

• A cover note is temporary proof of insurance.

109. B — cover note

• A cover note gives temporary evidence of insurance.

• It is used before the full insurance policy is issued.

110. C — proximate cause

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

• If that cause is excluded from the policy, the insurer may refuse payment.

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.

111. B — $30 000

• Actual stock value = $200 000

• Insured value = $120 000

• Loss = $50 000

• Average clause compensation = insured value / actual value × loss

• = 120 000 / 200 000 × 50 000

• = $30 000

112. C — no proximate cause covered by the policy

• The goods were stolen by employees.

• But employee theft was not covered by the policy.

• The direct cause of loss was therefore not an insured risk.

113. A — it can study customers’ buying habits

• Loyalty cards collect data about what customers buy.

• Supermarkets use this to plan promotions, stock levels and targeted offers.

114. B — hairdressing

• Direct services are services given directly to consumers.

• Hairdressing is a direct personal service.

• Banking, transport and warehousing are commercial services.

115. C — transport company delivering goods

• Commercial services help trade take place.

• Transport is an aid to trade/commercial service.

• Doctor and teacher are direct services.

116. B — 8 times

• Average stock = opening stock + closing stock / 2

• Average stock = (18 000 + 22 000) / 2 = $20 000

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

• = 160 000 / 20 000

• = 8 times

117. C — $800

• Cost price = $480

• Margin = 40%

• Margin is based on selling price.

• Therefore cost is 60% of selling price.

• Selling price = 480 / 0.60 = $800

118. B — $800

• Selling price = $960

• Mark-up = 20%

• Selling price = 120% of cost

• Cost = 960 / 1.20

• = $800

119. B — Margin is calculated on selling price, mark-up is calculated on cost price

• Mark-up = profit / cost price × 100

• Margin = profit / selling price × 100

• This is one of the nastiest Commerce calculation traps.

120. D — $6944

• Final amount received = $5000

• Cash discount was 10%, so $5000 is 90% of the price after trade discount.

• Price after trade discount = 5000 / 0.90 = $5555.56

• Trade discount was 20%, so $5555.56 is 80% of list price.

• List price = 5555.56 / 0.80 = $6944.45

• Closest answer = $6944

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.

121. A — gross profit

• Gross profit = sales – cost of goods sold.

• It shows profit before deducting expenses.

• Net profit is calculated after expenses.

122. B — they can shop at any time

• E-commerce allows 24-hour shopping.

• Consumers do not need to visit a physical shop.

• However, they cannot always inspect goods physically or avoid delivery charges.

123. B — risk of online fraud and security problems

• E-commerce may expose retailers to hacking, card fraud and data security risks.

• It can also create delivery and return problems.

124. A — debit card

• Debit cards are commonly used for online shopping.

• Payment is taken directly from the customer’s bank account.

125. A — click and collect

• Click and collect means ordering online and collecting from a physical branch.

• It combines e-commerce with store collection.

126. D — showrooming

• Showrooming means viewing goods in a physical shop but buying them online.

• The customer uses the shop as a “showroom” but gives the sale to another retailer.

127. B — They provide 24-hour selling in suitable locations

• Vending machines can sell goods without sales staff.

• They are useful in places such as schools, hospitals, stations and offices.

• They are usually for small, standardised goods.

128. B — customers may buy more while moving around the store

• Self-service lets customers choose goods themselves.

• This may encourage impulse buying.

• It does not remove theft or stock control problems.

129. C — wholesaler

• A wholesaler sells in large quantities to retailers.

• Wholesalers often give trade credit.

• They do not usually sell mainly to final consumers.

130. B — breaking bulk

• Breaking bulk means buying in large quantities and selling in smaller quantities.

• This helps small retailers that cannot afford or store large quantities.

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.

131. B — clearing production lines

• Wholesalers buy large quantities from manufacturers.

• This helps manufacturers clear finished goods quickly.

• It reduces manufacturers’ storage problems.

132. A — broker

• A broker brings buyers and sellers together.

• A broker negotiates but does not usually take ownership of the goods.

133. A — auctioneer

• An auctioneer sells goods by auction for a principal.

• The goods are sold to the highest bidder.

134. A — air

• Mangoes are perishable and high-value.

• Air transport is fast and suitable for urgent perishable exports.

• Sea transport is too slow.

135. C — sea

• Coal is bulky and usually low-value compared with its weight.

• Sea transport is best for very large quantities over long distances.

136. B — cheaper for heavy goods over long land distances

• Rail transport is suitable for heavy, bulky goods over long distances.

• Road transport is better for flexible door-to-door delivery.

137. C — slow speed

• Sea transport is cheap for bulky cargo.

• Its main disadvantage is that it is slow.

138. B — motorcycle courier

• Small urgent documents across a city need fast local delivery.

• Motorcycle couriers can avoid some traffic delays and deliver directly.

139. B — It helps transfer goods between road, rail and sea more easily

• Containerisation uses standard containers.

• These can move between ships, trains and lorries with less handling.

140. A — bonded warehouse

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

• It is useful while goods wait for customs clearance.

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.

141. B — cold-storage warehouse

• Fruit is perishable.

• Cold storage keeps it fresh before supply to supermarkets.

142. A — allowing goods to be stored when supply is high and released when needed

• Warehousing helps control supply over time.

• Goods can be stored when plentiful and released when demand rises.

• This helps stabilise prices.

143. C — informative

• Informative advertising gives facts about the product.

• It tells customers price, features, uses and where to buy.

144. C — persuasive

• Persuasive advertising tries to convince customers that one brand is better than another.

• Comparing soap with a rival brand is persuasive advertising.

145. A — collective advertising

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

• It promotes the product generally, not one brand.

• Example: orange growers advertising oranges.

146. A — direct mail

• Direct mail targets a specific list of customers.

• It is useful for reaching selected business customers.

147. C — television

• Television combines sound, movement and colour.

• It is suitable for reaching a mass audience.

148. C — trade journal

• Trade journals target people in a particular industry.

• They are suitable for advertising specialist machinery.

149. B — Advertising can increase demand but may increase business costs

• Advertising can attract customers and increase sales.

• But it costs money, which may raise business expenses.

• It does not always create needs or remove packaging.

150. C — telephone

• A telephone call gives immediate spoken feedback.

• It is suitable when quick two-way communication is needed.

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.