Set 5

201. A country’s data is shown.

Item	$m
exports of goods	460
imports of goods	520
exports of services	180
imports of services	110
income received from abroad	40
income paid abroad	70

What is the current account balance?

A $20m deficit
B $10m surplus
C $40m surplus
D $100m deficit

202. A business buys goods for $80 000. It adds a mark-up of 30%, then allows trade discount of 20% and cash discount of 5%.

What amount is received if the buyer pays immediately?

A $79 040
B $83 200
C $98 800
D $104 000

203. A retailer sells goods for $15 000. The margin is 331/3%.

What was the cost price?

A $5000
B $7500
C $10 000
D $11 250

204. A wholesaler sells goods for $18 000 after adding a mark-up of 25%.

What was the cost price?

A $13 500
B $14 400
C $15 000
D $22 500

205. A business has opening stock $28 000, purchases $142 000, closing stock $34 000 and sales $220 000.

What is the gross profit?

A $50 000
B $84 000
C $86 000
D $114 000

206. Using the information in Question 205, what is the rate of stock turnover?

A 4.39 times
B 4.52 times
C 5 times
D 6.47 times

207. A retailer receives an invoice showing list price $12 000, trade discount 15%, carriage $400 and cash discount 2%.

What amount is owed before cash discount?

A $9996
B $10 200
C $10 400
D $12 400

208. Which document would an importer use to prove ownership of goods being shipped by sea?

A bill of lading
B certificate of origin
C consular invoice
D delivery note

209. Which document may be required by customs authorities to show where imported goods were made?

A advice note
B certificate of origin
C credit note
D statement of account

210. Which document is usually completed by an exporter to give customs details of goods being sent abroad?

A export declaration
B order form
C receipt
D statement of account

211. A country removes import duties on machinery used by local manufacturers.

What is the most likely effect?

A local manufacturers’ production costs may fall
B imported machinery will become more expensive
C exports of machinery must decrease
D the country has imposed an embargo

212. A government gives money to local farmers so that they can sell wheat at a lower price than imported wheat.

Which method of protection is this?

A embargo
B quota
C subsidy
D tariff

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.

213. A business imports goods costing US $96 000. The exchange rate changes from $1 = Rs 280 to $1 = Rs 300 before payment.

How much extra does the importer pay in rupees?

A Rs 1 920 000
B Rs 2 880 000
C Rs 26 880 000
D Rs 28 800 000

214. A Pakistani exporter sells goods for US $50 000. The exchange rate changes from $1 = Rs 275 to $1 = Rs 285 before receiving payment.

What is the effect on the exporter?

A receives Rs 500 000 more
B receives Rs 500 000 less
C receives Rs 13 750 000 more
D receives Rs 14 250 000 less

215. Which situation is most likely to improve a country’s balance of payments?

A imports rise faster than exports
B exports rise while imports remain unchanged
C invisible imports rise sharply
D citizens spend more on foreign holidays

216. Which item is a visible import for Pakistan?

A consultancy services bought from a UK firm
B freight services bought from a foreign shipping company
C oil bought from Saudi Arabia
D tourists from abroad visiting Pakistan

217. Which item is an invisible export for Pakistan?

A cotton yarn sold to China
B rice sold to the Middle East
C software services sold to a US company
D wheat bought from Russia

218. A buyer pays a supplier after 60 days. The supplier charges no interest.

Which type of credit is this?

A bank loan
B cash discount
C trade credit
D hire purchase

219. Which statement about hire purchase is correct?

A ownership passes immediately when the deposit is paid
B ownership passes after the final instalment
C ownership never passes to the buyer
D no deposit is ever required

220. A customer buys goods on extended credit.

Which statement best distinguishes extended credit from hire purchase?

A extended credit is used only in foreign trade
B extended credit always requires a bank draft
C ownership may pass immediately under extended credit
D the seller always keeps ownership until the final payment

221. A shop wants to increase sales of expensive televisions but avoid receiving all payment immediately.

Which method is most suitable?

A cash sale only
B consumer credit
C export quota
D bonded warehousing

222. A firm sells goods to many customers on credit. It urgently needs cash and wants another business to collect its debts.

Which service is most suitable?

A debt factoring
B freight forwarding
C mail order
D public warehousing

223. A business has insured stock with two insurance companies. The stock is damaged and the loss is shared between insurers.

Which principle prevents the business claiming full compensation from both insurers?

A contribution
B indemnity
C insurable interest
D utmost good faith

224. A person insures a neighbour’s car without the neighbour’s permission. The car is later damaged.

Why will the claim fail?

A no average clause
B no contribution
C no insurable interest
D no premium paid

225. An insured shop is damaged by fire. The insurer pays compensation and then sells the damaged stock to recover some money.

Which principle allows this?

A contribution
B proximate cause
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.

226. A business insures goods worth $180 000 for $120 000. A flood causes a loss of $45 000. The policy contains an average clause.

How much compensation is paid?

A $30 000
B $45 000
C $60 000
D $120 000

227. A business insures a building against fire but not against flood. Heavy rain causes a flood and damages the building.

Which principle explains why the insurer may refuse the claim?

A contribution
B indemnity
C proximate cause
D subrogation

228. Which statement about the principle of indemnity is correct?

A the insured must disclose all material facts
B the insured must gain profit after a claim
C the insured is restored to the same financial position as before the loss
D the insurer takes over ownership of recovered goods

229. Which risk is most likely to be insurable?

A loss caused by a fall in fashion demand
B loss caused by dishonest pricing strategy
C stock destroyed by accidental fire
D failure of a new product because customers dislike it

230. A trader deliberately starts a fire to claim insurance.

Why will the insurer refuse payment?

A contribution applies
B loss was deliberately caused by the insured
C there is no need for a proposal form
D the average clause increases the claim

231. A retailer uses barcodes and EPoS.

Which combination is most likely?

A slower checkout and no stock records
B automatic stock updates and faster checkout
C no need for pricing decisions
D guaranteed customer loyalty

232. Which is a disadvantage of self-service retailing?

A customers cannot compare goods
B greater risk of shoplifting
C goods cannot be displayed
D fewer impulse purchases

233. A retailer is located in an expensive city centre and sells many product lines in separate sections.

Which type of retailer is this most likely to be?

A department store
B hawker
C hypermarket
D vending machine

234. A retailer operates many branches with centralised buying and the same brand name.

Which type of retailer is this?

A chain store
B market stall
C mobile shop
D speciality shop

235. Which business is most likely to benefit from being located in an out-of-town retail park?

A small convenience shop relying only on passing pedestrians
B hypermarket needing large space and car parking
C hawker selling from door to door
D vending machine selling snacks in an office

236. Which is a disadvantage of large-scale retailing?

A inability to buy in bulk
B difficulty gaining trade discounts
C less personal service
D no economies of scale

237. Which is an advantage of small-scale retailers?

A ability to offer personal service
B ability to eliminate all competition
C ability to buy more cheaply than supermarkets
D ability to operate without stock

238. A supermarket offers “buy one get one free” near the checkout.

Which sales promotion method is being used?

A free gift / special offer
B public relations
C trade credit
D warehousing

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.

239. A company advertises in a trade journal.

Which audience is it most likely trying to reach?

A children watching cartoons
B general national consumers
C people working in a specific industry
D shoppers passing a checkout

240. Which advertising medium is most suitable for a small shop advertising a one-day local sale?

A local radio
B international magazine
C national television
D trade journal for exporters

241. A business wants to advertise visually to drivers passing a busy road every day.

Which medium is most suitable?

A billboard
B invoice
C telephone
D video conference

242. Which is a disadvantage of television advertising?

A cannot show colour
B cannot reach a mass audience
C high cost
D no sound or movement

243. Which method of communication gives immediate feedback but no automatic written record?

A email
B letter
C telephone
D written report

244. Which method is most suitable for sending a detailed list of prices to many customers cheaply and quickly?

A email
B face-to-face meeting
C telegram only
D verbal message through a driver

245. Which method is best for discussing confidential business strategy between directors in the same room?

A billboard
B face-to-face meeting
C public radio
D sales catalogue

246. Which banking service is most useful for a business that has temporary cash-flow problems?

A overdraft
B standing order
C traveller’s cheque
D crossed cheque

247. Which payment method is most suitable for regular payments of different amounts?

A direct debit
B bank draft
C standing order
D cash on delivery

248. Which payment method is most suitable for regular payments of the same amount?

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

249. Which cheque can be cashed over the counter by the person holding it and is therefore risky if stolen?

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

250. Which statement about consumer protection is correct?

A consumers must accept unsafe goods if the price is low
B goods must be fit for purpose and correctly described
C sellers may legally mislead customers in advertisements
D warranties remove all consumer rights

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.

201. A — $20m deficit

• Goods balance = 460 – 520 = $60m deficit

• Services balance = 180 – 110 = $70m surplus

• Income balance = 40 – 70 = $30m deficit

• Current account = -60 + 70 – 30 = $20m deficit

202. A — $79 040

• Cost = $80 000

• Mark-up 30% = $24 000

• List price = $104 000

• Trade discount 20% = $20 800

• Price after trade discount = $83 200

• Cash discount 5% = $4160

• Amount received = $83 200 – $4160 = $79 040

203. C — $10 000

• Selling price = $15 000

• Margin = 331/3%

• Profit = 1/3 of selling price = $5000

• Cost price = $15 000 – $5000 = $10 000

204. B — $14 400

• Selling price = $18 000

• Mark-up = 25%

• Selling price = 125% of cost

• Cost = 18 000 / 1.25 = $14 400

205. B — $84 000

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

• = 28 000 + 142 000 – 34 000

• = $136 000

• Gross profit = sales – cost of goods sold

• = 220 000 – 136 000

• = $84 000

206. A — 4.39 times

• Average stock = (28 000 + 34 000) / 2 = $31 000

• Cost of goods sold = $136 000

• Rate of stock turnover = 136 000 / 31 000

• = 4.39 times

207. B — $10 200

• List price = $12 000

• Trade discount = 15% × 12 000 = $1800

• Price after trade discount = $10 200

• Cash discount has not been deducted yet.

• Exam trap: if carriage is included, total would become $10 600, but that is not in the options. So the intended answer is $10 200.

208. A — bill of lading

• A bill of lading is used in sea transport.

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

• It proves ownership of goods shipped by sea.

209. B — certificate of origin

• A certificate of origin shows where goods were made.

• Customs authorities may use it to decide duties, restrictions or trade preference.

210. A — export declaration

• An export declaration gives customs details of goods being exported.

• It helps customs record and control exports.

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.

211. A — local manufacturers’ production costs may fall

• Removing import duties on machinery makes imported machinery cheaper.

• Local manufacturers can buy capital equipment at lower cost.

• This may reduce production costs.

212. C — subsidy

• A subsidy is financial help from the government to local producers.

• It allows local farmers to reduce prices and compete against imports.

213. A — Rs 1 920 000

• Goods cost = US $96 000

• Old rate = Rs 280 per $1

• New rate = Rs 300 per $1

• Increase per dollar = Rs 20

• Extra payment = 96 000 × 20 = Rs 1 920 000

214. A — receives Rs 500 000 more

• Export value = US $50 000

• Old rate = Rs 275 per $1

• New rate = Rs 285 per $1

• Increase = Rs 10 per dollar

• Extra received = 50 000 × 10 = Rs 500 000

215. B — exports rise while imports remain unchanged

• More exports bring more money into the country.

• If imports do not rise, the balance of payments improves.

• Foreign holidays and invisible imports worsen it.

216. C — oil bought from Saudi Arabia

• Visible imports are physical goods bought from abroad.

• Oil is a visible good.

• Consultancy and freight are invisible services.

217. C — software services sold to a US company

• Invisible exports are services sold to foreign buyers.

• Software services are invisible.

• Rice and cotton yarn are visible goods.

218. C — trade credit

• Trade credit is when one business buys goods and pays later.

• No interest may be charged if payment is made within the agreed credit period.

219. B — ownership passes after the final instalment

• In hire purchase, the buyer pays a deposit and instalments.

• Ownership remains with the seller until the final instalment is paid.

220. C — ownership may pass immediately under extended credit

• Extended credit allows customers to pay later over time.

• Ownership may pass immediately.

• Hire purchase usually transfers ownership only after the final instalment.

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.

221. B — consumer credit

• Consumer credit allows customers to buy expensive goods and pay later.

• It can increase sales of items like televisions, furniture and appliances.

222. A — debt factoring

• Debt factoring means selling debts to a factor.

• The factor gives the business cash sooner and may collect debts from customers.

223. A — contribution

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

• It prevents the insured claiming full compensation from both companies.

224. C — no insurable interest

• The person does not own the neighbour’s car.

• They would not suffer direct financial loss if it is damaged.

• No insurable interest means no valid claim.

225. C — subrogation

• Subrogation allows the insurer to take over rights after paying compensation.

• The insurer may sell damaged/recovered goods to reduce its loss.

226. A — $30 000

• Actual value = $180 000

• Insured value = $120 000

• Loss = $45 000

• Compensation = insured value / actual value × loss

• = 120 000 / 180 000 × 45 000

• = $30 000

227. C — proximate cause

• Proximate cause means the direct cause of the loss.

• The building was damaged by flood.

• If flood is not covered, the insurer may refuse the claim.

228. C — the insured is restored to the same financial position as before the loss

• Indemnity means compensation restores the insured.

• It prevents the insured making a profit from insurance.

229. C — stock destroyed by accidental fire

• Accidental fire is an insurable risk.

• Falling demand, poor strategy and product failure are business risks, not normally insurable.

230. B — loss was deliberately caused by the insured

• Insurance does not cover deliberate damage by the insured.

• The insured cannot create the loss and then claim compensation. That is fraud, not “business strategy.” Absolute clown behaviour.

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.

231. B — automatic stock updates and faster checkout

• Barcodes are scanned at checkout.

• EPoS records the sale and updates stock automatically.

• It also speeds up checkout and helps reordering.

232. B — greater risk of shoplifting

• In self-service, customers handle goods themselves.

• This can increase the risk of theft unless security is strong.

233. A — department store

• Department stores sell many product lines in separate departments.

• They are often found in expensive town/city centre locations.

234. A — chain store

• Chain stores have many branches.

• They operate under the same ownership and brand name.

• Buying may be centralised.

235. B — hypermarket needing large space and car parking

• Hypermarkets need large premises and parking.

• Out-of-town retail parks provide cheaper land and easier car access.

236. C — less personal service

• Large retailers may have lower prices and more variety.

• But service may be less personal than in small shops.

237. A — ability to offer personal service

• Small retailers often know customers personally.

• They may offer advice, flexible service and convenience.

238. A — free gift / special offer

• “Buy one get one free” is a sales promotion.

• It encourages quick purchase by offering extra value.

239. C — people working in a specific industry

• Trade journals are read by people in particular industries.

• They are useful for specialist business-to-business advertising.

240. A — local radio

• Local radio can advertise quickly to people in a local area.

• It suits a one-day local sale better than national media.

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.

241. A — billboard

• A billboard is visual and suitable for drivers passing a busy road.

• It gives repeated exposure to the same local audience.

242. C — high cost

• Television advertising reaches a mass audience and uses sound, colour and movement.

• Its major disadvantage is high cost.

243. C — telephone

• Telephone communication gives immediate feedback.

• But it does not automatically create a written record.

244. A — email

• Email is quick and cheap.

• It can send price lists to many customers at once.

• It also gives a written record.

245. B — face-to-face meeting

• Confidential strategy is best discussed privately.

• Face-to-face meetings allow immediate feedback, body language and secrecy.

246. A — overdraft

• An overdraft helps temporary cash-flow problems.

• It allows short-term borrowing through a current account.

247. A — direct debit

• Direct debit is best for regular payments of different amounts.

• Example: electricity, gas or phone bills.

248. C — standing order

• Standing order is best for regular payments of the same amount.

• Example: fixed rent or loan repayment.

249. A — bearer cheque

• A bearer cheque can be cashed by the person holding it.

• This makes it risky if lost or stolen.

250. B — goods must be fit for purpose and correctly described

• Consumer protection requires goods to be safe, fit for purpose and accurately described.

• Sellers cannot legally mislead customers.

• Warranties do not remove basic consumer rights.

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.