COMMERCE 2

REVISION QUESTIONS

CHAPTER 1 FORMS OF BUSINESS ORGANIZATIONS

1. With the aid of a diagram classify business organizations
2. Explain the formation procedure of a Private Limited Company
3. Highlight five different types of formal and statutory documents required in the formation of
a Public Limited Company
4. Describe the contents of a partnership deed that is required in the formation of a partnership
business
5. Explain five different types of preference shares
6. Explain the reasons why companies may prefer debentures as a source of finance
7. Describe the principles/characteristics of cooperative society
8. Highlight the different forms cooperative society
9. Describe reasons why government form public corporations
10. Identify five forms of incorporated business organizations both in the private and public
sector
11. Highlight the benefits of cooperative society to its members
12. Describe five types of partners in the partnership business
13. Elucidate the features of cooperative society
14. Explain the advantages of saving and credit cooperative society (SACCO) to its members
15. Highlight reasons that encourage private limited company to be converted to a public limited
company
16. Explain the characteristics of ordinary shares
17. Describe the procedure of issuing an initial public offer (IPO) for newly registered public
limited company
18. Elucidate reasons that they government may have to convert a company limited to a public
corporation
19. Describe circumstances when debentures are converted to share equity by public limited
company
20. Highlight the advantages of a producer cooperative to its members
21. Explain the challenges encountered by public corporations
22. Elucidate the problems encountered in the running of cooperatives
23. Describe the reasons why cooperative societies may face perennial shortage of capital
24. Elucidate the functions of consumer cooperative society
25. Describe the functions of wholesaler cooperative societies
26. Elucidate reasons why producer cooperatives have been particularly successful in developing
countries
27. Describe the differences of a public corporation from a joint stock company
28. Identify five types of state enterprises conducted by the by the government as public or
statutory corporations
29. Explain the functions of marketing boards set up to encourage the selling of agricultural
products
30. Elucidate the reasons for the formation of public corporations and other state enterprises
31. Describe the advantages of public corporations to a country
32. Elucidate the disadvantages of public corporations

COMMERCE II S&G LEVEL 2 EXAM REVISION QUESTIONS PREPARED BY Mr. ANTONY AMBIA 1
CHAPTER 2 FORMS OF BUSINESS EXPANSIONS
a. Highlight the characteristics of large business organizations
b. Elucidate on the factors that determine the scale of production for a large scale business
c. Explain the characteristics of the following forms of business combinations; amalgamations,
absorptions and holding company
d. Identify five types of large business organizations
e. Explain the formation of holding companies
f. Elucidate the reasons that encourage the formation of cartels
g. Highlight reasons that may cause two or more companies to merge
h. Describe the different forms of mergers
i. Elucidate the benefits of forming trusts
j. Explain five different forms of business expansions
k. Highlight the characteristics of different lines of business combination
l. Explain the features of multinational companies
m. Describes five important roles multinational companies have on a country’s economy
n. Highlight the main ways a multinational company may benefit from a country they invest in
o. Elucidate five criticisms of multinational companies
p. Elucidate the challenges encountered by multinational companies
q. Highlight the different forms of internal economies of scale
r. Elucidate circumstances that results to dis-economies of scale
s. Describe the five different forms of external economies of scale
t. Highlight five factors that influence the location of a business
u. Explain reasons that encourage localization of industry
v. Describe the disadvantages of localization of industry
w. Elucidate the factors that favor delocalization of industry
x. Highlight the disadvantages of large scale business organizations

CHAPTER 3 BUSINESS PRACTICES

a) Highlight the features of monopolist market structures
b) Elucidate the different types of oligopoly market structures
c) Distinguish a monopolistic market structure from a pure monopoly market structure
d) Differentiate a oligopolistic market structure from a perfect competition market structure
e) Explain five circumstances that convert an oligopolistic market structure to a cartel
f) Highlight the advantages of the monopolistic market structure to the buyer
g) Descried the disadvantages of the pure monopoly market structure to the buyer
h) Distinguish the monopolistic market structure from the oligopoly market structure
i) Differentiate the formation of a trust from that of a cartel
j) Highlight the advantages of the oligopolistic market to the buyer
k) Explain the disadvantages of the formation of cartel to the buyers

CHAPTER 4 BUSINESS FINANCE

1. Elucidate five important benefits of business finance
2. Highlight five factors determining the requirements of fixed capital
3. Explain the advantages of working capital to the business
4. Describe the factors affecting amount of working capital required by a business
5. Explain the different sources from which business finance can be rasised

COMMERCE II S&G LEVEL 2 EXAM REVISION QUESTIONS PREPARED BY Mr. ANTONY AMBIA 2
6. Elucidate the three sources of business finance
7. Highlight the sources of short term of business finance
8. Explain the sources of long term business finance
9. Elucidate five different types of institution investors
10. Elucidate the different categories under which the authorized capital of a company are
divided up to be described as the capital structure of a company
11. Explain the classes of capital of a company
12. Describe the three main classes of shares referred to in the articles and prospectus of the
company
13. Elucidate the distinction between debentures and shares
14. Explain the different types of debentures
15. Elucidate the advantages of underwriting shares
16. Highlight the advantages of limited companies
17. Explain the disadvantages of limited companies

CHAPTER 5 STOCK EXCHANGE

a) Elucidate the features of the stock exchange market
b) Describe the four types of speculators found in the stock exchange market
c) Explain the importance of a stock exchange market
d) Highlight the procedures for the purchase of shares in the stock exchange market
e) Highlight the advantages of a public limited company being quoted in the Nairobi stock
exchange
f) Explain terms used in the stock exchange market
i. Par value of shares
ii. Market value of shares
iii. Cum Cap
iv. Gilt edged securities
v. Contract note
vi. Options
vii. Staging
viii. Quoted companies
ix. Blue chip

Kinds of Speculators in the stock exchange market

1. Bull
This is a speculator who buys different types of shares when they are cheap in the expectations
of rise in their price in future
2. Bear
This is a stock jobber who sells shares when the prices are high on this expectation that these
prices will fall in near future and he will be able to buy them back at low prices
3. Lame duck
This happens when the bear (stock jobber) is not able to sale specific listed shares of a quoted
public limited company at a high price on a specific date because of their unavailability in the
stock market. Thus resulting to suffer financial losses because the second party refuses to
postpone the delivery
4. Stag

COMMERCE II S&G LEVEL 2 EXAM REVISION QUESTIONS PREPARED BY Mr. ANTONY AMBIA 3
This is a speculator who applies for shares of newly floated company as if he were a genuine
investor. He has no intention of becoming an actual holder of the shares but he buys the shares
with the objective of selling them above the par value to gain premium

CHAPTER 6 INFLATION
a. Elucidate the main causes of price inflation
b. Describe the causes of demand pull inflation
c. Highlight the causes of cost push inflation
d. Elucidate the causes of imported inflation
e. Explain the three main levels of inflation
f. Describe the desirable effects of price inflation to the economy of a country
g. Elucidate the negative effects of price inflation to the economy of a country
h. Explain measures taken by a government to control inflation
i. Describe the monetary policies taken by the government to control inflation
j. Highlight the measures adopted through fiscal policy by a government to control inflation
k. Elucidate the statutory measures taken by the government to control inflation in a country
l. Describe the negative impact pf hype inflation to a country
m. Explain the positive impact of deflation to the different sections of society in a country
n. Elucidate the negative effects of deflation in a country
o. Explain measures taken by the government to counteract to deflation

CHAPTER 7 INTERNATIONAL TRADE

1. Elucidate the advantages of international trade
2. Explain the disadvantages of international trade
3. Highlight the factors that may contribute to favorable terms of trade
4. Describe reasons why countries experience differences in their terms of trade
5. Highlight the different transactions that contribute to the balance of payment account
6. Elucidate factors that causes the balance of payment disequilibrium
7. Explain the measures taken to correct the balance of payment disequilibrium
8. Identify five common terms of sales used in international trade
9. Describe five different documents used in international trade
10. Highlight the contents of a commercial invoice used in international trade
11. Elucidate the purpose of a pro forma invoice used in international trade
12. Describe five objectives of the international monetary fund (IMF)
13. Explain five major functions of the World Bank (International Bank for Reconstruction and
Development)
14. Elucidate on the four stages of economic integration
15. Highlight the importance of economic integration to international trade
16. Explain the disadvantages of the free trade area to the under developed country
17. Elucidate on the different forms of trade restrictions imposed by countries to control
international trade with their boundaries
18. Describe the reasons for restrictions on international trade
19. Highlight five advantages of restrictions of international trade to a country
20. Describe the disadvantages of trade restrictions
21. Elucidate the benefits of the Export processing zones (EPZ) to a country
22. Elucidate on the functions of commodity markets in international trade

COMMERCE II S&G LEVEL 2 EXAM REVISION QUESTIONS PREPARED BY Mr. ANTONY AMBIA 4
23. Explain the different methods of financing international trade
24. Highlight the factors that influence the cost of capital required when investing in business
that are involved in international trade
25. Elucidate the important requirements to consider when packaging export goods destined for
foreign markets in international trade
26. Identify the roles of merchant banks in international trade
27. Highlight the importance of auction house in the trade of commodities in international trade
28. Elucidate the procedure of export trade
29. Describe the procedure of import trade
30. Identify the different agents relevant to complete the export and import transactions of
international trade
31. Elucidate the role of World Trade Organization (WTO) in encouraging fair play in
international trade
32. Highlight the objectives of forming the European Economic Community (EEC)
33. Describe the importance of Preferential Trade Area (PTA) to its member countries
34. Elucidate on the reasons two or more different countries would prepare and sign international
trade agreements
35. Highlight the different terms of payment used in international trade

CHAPTER 8 ELECTRONIC COMMERCE (e-commerce)

a. Elucidate on the objectives of e-commerce
b. Highlight the important features of e-commerce
c. Explain the five main types of e-commerce
d. Describe reasons for the growth of e-commerce in modern times
e. Identify the major business application areas were e-commerce are widely used
f. Highlight the advantages of e-commerce to the consumers
g. Describe the challenges encountered when performing business through e-commerce
h. Describe the benefits of e-commerce to the commercial seller of products or services
i. Identify the different business transactions that can take place through e-commerce
j. Elucidate the positive impact of e-commerce the growth trade

COMMERCE II S&G LEVEL 2 EXAM REVISION QUESTIONS PREPARED BY Mr. ANTONY AMBIA 5