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Table of Content
- General Overview
- The Nature of the Examination
- The Summary of the Paper
- Paper 1
- Paper 2
Business Management 2000 WASSCE-Past Questions and Answers-is an e-learning content. This e-learning content has been designed to help students to pass their business management exams. There are a lot of help that we can offer you as far as your studies is concerned. Also, have you had challenges trying to learn, write or pass your WAEC BM paper? If the answer is yes, then I can assure you that educareguide is here to help and guide you.
We are here to encourage you that you can easily pass this subject. Firstly, we have a lot of links to assist you to get enough details. Truly, this will help you to gain enough knowledge and understanding to pass your examination. Secondly, we have materials on various topics, sub-topics relating to this subject area. Therefore, our site is very helpful to Senior High School Student across the West African sub-region. Notably, these countries are Nigeria, Ghana, Sierra Leone, The Gambia and Liberia. Moreover, these students rely on our guide and pass the WASSCE Business Management Examination. In detail, check the questions and the answers just below.
The Nature of the Examination
There are two Papers in the examination, (and these are Paper 1 and Paper 2). In detail, there are two sections in the Paper 1 (i.e. Section A and Section B). Section A is an Objective Test and Section B is a Case Study. There are 50 questions in the Objective test, and the Case Study has some question under it for you to answer. Finally, there are 10 questions in the Paper 2. They are asked to tests the student’s general understanding of the various topics under business management.
The Summary of the Paper
The WASSCE Business management Paper for 2000 can summarized below:
- 2000 WASSCE Business Management Paper One – Section A;
- 2000 WASSCE Business Management Paper One – Section B;
- 2000 WASSCE Business Management Paper Two
Business Management 2000 WASSCE-Past Questions and Answers- Paper 1 – Section A
Let me show you how to find the answers to the Business Management Questions – Paper 1, Section A. To clarify that, when you read a question, just click on this symbol (˅) that follows the question. After doing so, the answer will drop down for you. In fact, it is a very simple task. However, for the purposes of evaluating yourself, you may want to answer the before reviewing the suggested answer (or solution)
- While organizational plans may differ in focus, they all concern achieving A is the answer -Business Management 2000 WASSCE
- high profits
- human resource development
- improved marker share
- long and short-term goals
- To say that a business is a separate legal entity means that the B is the answer -Business Management 2000 WASSCE
- liability of members is limited to the amount of capital contributed.
- business exists as an artificial person distinct from its members.
- business is run by people different from its members.
- objectives of the business are separate from the objectives of the members.
- Financial institutions generally find it difficult to lend money to sole traders because B is the answer -Business Management 2000 WASSCE
- they are small
- they lack collateral security
- one person bears all losses
- they do not operate on the stock exchange.
- One major importance of small-scale retail businesses is that C is the answer -Business Management 2000 WASSCE
- they buy in bulk and sell through wholesalers.
- they sometimes manufacture and provide wholesale facilities.
- they buy in bulk and sell in smaller units to consumers.
- they are the main source of finance to manufacturers.
- Corporate social responsibility must address issues related to C is the answer -Business Management 2000 WASSCE
- business ethics
- public health and safety
- incentive schemes for employees
- the environment
- employee development
- I, II and IV only
- I, III and IV only
- I, IV and V only
- III, IV and V only
- The management function that deals with division of work and assignment of responsibility is C is the answer -Business Management 2000 WASSCE
- Which of the following management functions ensure that decisions arrived at under planning are carried out? B is the answer -Business Management 2000 WASSCE
- Goal-setting, directing and controlling.
- Directing, organizing and controlling.
- Strategic decision-making, controlling and directing.
- Coordinating, controlling and objective setting.
- The management function which determines what results an organization will achieve is A is the answer -Business Management 2000 WASSCE
- Decision-making in business basically involves D is the answer -Business Management 2000 WASSCE
- planning how to achieve objectives.
- producing the right quality of goods and services
- selecting the right calibre of workers.
- choosing a course of action from among alternatives.
- Decision-making is a series of steps that run from clearly identifying a problem to B is the answer -Business Management 2000 WASSCE
- implementing and assessing action.
- choosing an alternative.
- weighing a series of alternatives.
- analysing the problem.
- If a particular situation occurs often, what type of managerial decision would be used to deal with it? B is the answer -Business Management 2000 WASSCE
- Basic decision
- Programmed decision
- Non-programmed decision
- Strategic decision
- A good office layout ensures all the following except B is the answer -Business Management 2000 WASSCE
- better supervision of work
- punctuality at work.
- a better communication system.
- uninterrupted flow of work.
- Filing can be described as the process that ensures. D is the answer -Business Management 2000 WASSCE
- proper handling of documents.
- reproduction of documents for distribution to staff.
- recording of letters in the mail register.
- process of arranging and storing records for ease of reference.
- The system by which all departments of an organization keep their records at one place is known as C is the answer -Business Management 2000 WASSCE
- departmental filing.
- general filing.
- centralized filing.
- organizational filing.
- Which of the following is not a business attribute expected of a secretary? D is the answer -Business Management 2000 WASSCE
- Sound general education.
- Good human relations.
- Good appearance.
- If a letter must be read by several people in an office, it is advisable to use a D is the answer -Business Management 2000 WASSCE
- form letter.
- routing slip.
- cross reference.
- circular letter.
- All the services rendered by the post office are found in the A is the answer -Business Management 2000 WASSCE
- Post Office Guide.
- Post office dictionary.
- Postal regulations book.
- Telephone directory.
- The officer who is in-charge of the share register in a company is the D is the answer -Business Management 2000 WASSCE
- Personnel Manager
- Managing Director
- Chief Accountant
- Company Secretary
- The framework of jobs and departments that defines positions and relationships among individuals and groups aimed at achieving organization objectives is D is the answer -Business Management 2000 WASSCE
- human behaviour.
- organizational chart.
- organizational structure.
- A manager who involves subordinates in the decision-making process is B is the answer -Business Management 2000 WASSCE
- an autocratic leader
- a democratic leader
- a laissez-faire leader
- a sympathetic leader
- Decentralization involves B is the answer -Business Management 2000 WASSCEB
- Concentrating decision-making at a central point.
- Shifting decision-making from a central point to local levels.
- Sharing decision-making between the central and local levels.
- Discouraging personnel at the local level from taking part in decision-
- Which of the following is not an advantage of decentralization? C is the answer -Business Management 2000 WASSCE
- Participation in decision-making is encouraged.
- There is reduction in the chain of command.
- Policy implementation is not uniform among the decentralized units.
- It improves the communication system.
- Grievances of employees channelled to management for redress is an example of C is the answer -Business Management 2000 WASSCE
- diagonal communication.
- downward communication.
- upward communication.
- horizontal communication.
- When a form of communication is official and well-structured it is referred to as A is the answer -Business Management 2000 WASSCE
- formal communication.
- informal communication.
- grapevine communication.
- unofficial communication.
- Communication along official lines between two managers of the same status in an organization is B is the answer -Business Management 2000 WASSCE
- vertical communication.
- horizontal communication.
- informal communication.
- diagonal communication.
- A agrees to buy B’s BMW car, which is being offered for sale. Two days later the car was stolen from B’s garage. The contract between A and B has therefore become D is the answer -Business Management 2000 WASSCE
- Which of the following is not an example of invitation to treat? A is the answer -Business Management 2000 WASSCE
- A deed
- Price list
- When two parties to a contract agree to end the contract, it is known as D is the answer -Business Management 2000 WASSCE
- discharge of contract by frustration.
- discharge of contract by performance.
- offer and acceptance.
- discharge of contract by agreement.
- A del credere agent charges his principal extra commission for A is the answer -Business Management 2000 WASSCE
- assuming the risk of any debts.
- acting on behalf of his principal.
- refunding secret profits.
- preventing loss.
- An agent owes his principal a duty of good faith. This means that the agent Should B is the answer -Business Management 2000 WASSCE
- have faith and confidence in his principal.
- not let his interest conflict with that of his principal.
- make maximum profit for his principal,
- take good decisions on behalf of the principal.
- Which of the following is not a negotiable instrument? C is the answer -Business Management 2000 WASSCE
- Treasury bill
- Promissory note
- Postal order
- Which of the following is not a barrier to international trade? B is the answer -Business Management 2000 WASSCE
- Language differences.
- Low volume of exports.
- Use of different currencies.
- Different legal systems.
- Which of the following is not a characteristic of money? A is the answer -Business Management 2000 WASSCE
- Medium of exchange.
- An advantage of money over barter is that it A is the answer -Business Management 2000 WASSCE
- facilitates comparison of values.
- redistributes wealth.
- prevents inflation.
- is more durable.
- Which of the following is not a source of revenue? D is the answer -Business Management 2000 WASSCE
- Foreign aid and grants
- Court fines
- Sale of government property
- Tax refund
- The periodic payment that an insured make to the insurer is known as B is the answer -Business Management 2000 WASSCE
- insurance fee.
- The person who has bought insurance protection is known as C is the answer -Business Management 2000 WASSCE
- an agent.
- the insurer.
- the policy holder.
- an actuary.
- The intangible aspects of a computer such as instructions, commands, procedures, programmes are known as C is the answer -Business Management 2000 WASSCE
- computer hardware.
- operating system.
- computer software.
- central processing unit.
- An exact duplicate of a written document can be transmitted between two distant points through a D is the answer -Business Management 2000 WASSCE
- dictating machine.
- microfilming equipment
- fax machine.
- The main reason why office documents are microfilmed is that B is the answer -Business Management 2000 WASSCE
- reference is faster.
- it saves space.
- films are cheaper.
- microfilms are easily filed.
- Health and safety in a business organization is one of the primary functions of a B is the answer -Business Management 2000 WASSCE
- Quality control department.
- Personnel department.
- Production department.
- Standards Board.
- Which of the following will be indicated in job description? A is the answer -Business Management 2000 WASSCE
- Duties to be performed.
- Appearance and age.
- Educational requirements.
- Skill and experience.
- Training cost may increase in a firm with B is the answer -Business Management 2000 WASSCE
- a stable workforce.
- high labour turnover.
- a highly motivated workforce.
- good conditions of service.
- Record of past performance of employees can best be obtained from D is the answer -Business Management 2000 WASSCE
- personal interviews.
- library research.
- personal files.
- The totality of features and characteristics of a product that bear on the ability to satisfy consumer needs is product B is the answer -Business Management 2000 WASSCE
- A broad group of products intended essentially for the same uses and possessing reasonably characteristics is A is the answer -Business Management 2000 WASSCE
- product line.
- product mix.
- product development.
- product life cycle.
- The type of advertising that aims at making consumers believe that a particular product is the best in the market is A is the answer -Business Management 2000 WASSCE
- persuasive advertising.
- informative advertising.
- competitive advertising.
- sales promotion.
- At which stage in a product life cycle does imitation of the product sets in? B is the answer -Business Management 2000 WASSCE
- Introductory stage.
- Growth stage.
- Maturity stage.
- Decline stage.
- One of the main processes involved in establishing a business in Ghana is D is the answer -Business Management 2000 WASSCE
- getting a partner.
- advertising the business.
- insuring the business.
- registering the business.
- The term stakeholders of a business refers to D is the answer -Business Management 2000 WASSCE
- shareholders of the company.
- the consumers of the company’s product.
- people who lend money to the business.
- all those interested in the actions of the b
I’m sure you are going to evaluate your performance with regards to the objective questions above. Let me emphasize again that the answers to the objective questions can be found by clicking on the symbol (˅) just after the question.
Business Management 1997 WASSCE-Past Questions and Answers- Paper 1 – Section B
This section of the examination is made up of essay-type questions. That normally require you to mostly, state and explain your various points. As I have always said, it is better to first answer the questions on your own before referring to the answer from the drop-down symbol.
Let me show you how to find the answers to the Business Management Questions – Paper 1, Section B. When you read a question, just click on this symbol (˅) beside it, and the answer will drop down for you. It is a very simple task.
Read the following case carefully and answer the questions that follow.
GODGIFT COMPANY LIMITED
The Godgift Company Limited had over the years moved from a sole proprietorship to a Limited liability Company specializing in the production of toys in Tema.
Hitherto, the Managing Director, Mr. Lawson, had effectively managed the affairs of the company. The new management of the company turned the tide of progress after the death of Mr. Lawson. Mr. Adams Quayson, the new managing director and his team of managers, though good planners and organizers, did very little to influence the workforce to contribute their quota towards the attainment of the objectives of the company.
Management would not seek workers opinion on any decision making: neither did they increase their salaries for three years contrary to the provisions in the collective bargaining agreement. Tension ensued between management and workers, which spilled over to affect worker motivation and subsequently culminated in the production of defective toys.
Although the managing director talked the issue over with the head of quality control department, this yielded no positive result because of the uncooperative attitudes of workers in his outfit.
The open plan office layout of Godgift’s rented premises was such that office furniture and equipment occupied 15.5 square metres of the floor space when in fact with good re-organization about 10 square metres of. the office space could have been used and the rest of the floor space used to accommodate workers of the annex. The rent paid for the office accommodation was ¢1,200,000.00 per square metre per year.
1. (a) What does it mean to say that the new management team was good planners and organisers?
Good planning involves forecasting or looking into the future, setting objectives and goals and also determining the course of action for achieving the set goals and objectives.
The new management team were good planners because they were good at looking or predicting the future, setting objectives and goals and determining a course of action which is necessary for the effective and efficient accomplishment of the set goals and objectives.
A good organizer is someone who involves himself in the identification of tasks and the activities to achieve the objectives of the organization, obtaining the necessary resources, grouping the tasks into departments, assigning the tasks to individuals and groups and delegating them the necessary authority to carry out their operations. The new management team were good organisers because they were able to effectively and efficiently perform this function.
1. (b) State and explain two management functions in which the new management proved ineffective.
Directing/leadership: – Directing involves the use of influence to motivate employees to achieve the organization’s goals. It involves making workers to do their work through communication, motivation, supervision and guidance. The new management team exhibited an autocratic leadership style. They did not seek workers’ opinions on issues and workers were not allowed to participate in decision making. Workers’ morale therefore went down so low and this resulted in the production of defective toys.
- Controlling: – it involves setting performance standards, measuring results and comparing it with the standards whilst corrective measures are applied to remedy any deviation of performance from standards. It is thus, the process through which managers ensure that actual activities conform to planned activities. The new management was equally ineffective in the performance of their controlling function. They failed to control the quality of their products. This means that actual activities did not conform to planned activities and thus, resulting in the production of defective toys.
2. Was the new management right for not increasing workers salaries? Why?
The new management was wrong in doing so. They did not adhere to the provisions outlined in the collective bargaining agreement. The collective bargaining agreement provides the modalities for salary increase.
3. (a) Briefly explain the term open office.
An open office is an office, which is not partitioned. It is a situation where all staff and departments of an organization are kept and controlled in one large room.
3. (b) How much accommodation cost per month would be saved for reorganization the layout?
Calculation - Cost saved for reorganising the Layout:
The floor space occupied before the reorganisation
The floor space occupied afer the reorganisation
Floor space saved after reorganisattion (15.5-10)
Rent paid for the office accommodation was
¢1,200,000.00 per square metre per year:
Cost of Office space saved per month would be:
Since the area saved after the reorganisation is
5.5m2, the cost saved for the reorganisation would be
100,000 x 5.5
The answer then would be
Therefore, the cost saved for the reorgnisation is
Business Management 2000 WASSCE-Past Questions and Answers- Paper 2
1. (a) What is office layout?
Office layout is the using of the total space required to provide the best practical and convenient arrangement of the furniture and equipment in the office in order to achieve the maximum output of work.
1. (b) What are the advantages that a business would derive from a well-planned office layout?
- A well-planned office layout encourages better communication.
- It also leads to the promotion of efficiency and effectiveness of flow of work.
- It also promotes better supervision of work.
- It promotes economy on the use of available floor space.
- A good office layout may also lead to increased morale of staff.
2. (a) Explain the term centralization of authority.
Centralization is a situation where the authority to make decision is concentrated in the hands of the top hierarchy of an organisation. In this case, only the people at top management have the power to make decision in the organisation.
2. (b) State four advantages and four disadvantages of centralization of authority.
Centralization ensures faster decision-making because they are taken at the top without the need to refer them to the units or departments.
It is less expensive to operate because there is less duplication of personnel, machines, tools and other resources.
It is very easy to co-ordinate the activities of the various departments.
- It involves few senior executives of the company and their skills and experience will lead to quality decisions.
It does not encourage top-level executive to delegate authority and the result is that subordinates may become frustrated.
It over-burdens top management in terms of their workload and prevents them from having enough time to concentrate on more strategic issues.
It does not consider differences or variations in local conditions.
- It finally stifles subordinates initiative because they have to refer every decision to the top for decision-making.
3. (a) State and explain four factors that may influence the choice of a medium of communication between organizations.
- Cost involved: – The choice of a medium is dependent on the cost of the medium. E.g. a manager may opt to communicate through email messaging instead of telephone, because email messaging is cheaper.
- Urgency of the message: – An urgent message calls for a fast medium of communication, e.g., a telephone may be used.
- Confidentiality of the message: – Where the message to be communicated is secret or highly confidential, it will be appropriate to use face-to-face communication.
- Safety of the message: – When the safety of the message is paramount, a written communication medium may be used.
- Facilities available to both sender and recipient: – Where both the sender and recipient have certain facilities, e.g., telephone, facsimile, internet etc. then one of these may be chosen as a medium.
3. (b) Identify two sources of grapevine information in an organization.
- Waste paper basket
- Confidential papers left unattended to on desks or computers.
- Careless (accidental) remarks.
- Loud voices form behind closed doors.
4. (a) Explain the term marketing concept.
The marketing concept gives recognition to the fact that the consumer should be the central focus of a firm’s total marketing strategy. That is to say, all activities undertaken by the company towards the marketing of its products or services should he directed towards the customer.
Under the concept, all activities of a business should be directed first and foremost to find out what customers want, the way they want it, how and when they want it and at what price and how to meet such demand at a reasonable level of profit.
The satisfaction of the consumer is of great importance and as a result, he is said to be a “king’ in marketing. The concept therefore means that an organization aims all its efforts at satisfying its customers at a profit.
4. (b) Give reasons why new products introduced into a market may fail.
Wrong or poor timing of the introduction of the product on the market.
- Lack of effective promotional activities to inform consumers about the existence of the product on the market.
Excessive competition among producers of a particular product.
Poor pricing resulting from high cost of production may lead to high unit price. This will lead to low sales volume and thus less profits.
Inadequate or poor distribution outlets is another factor that may lead to new product failure, e.g., inappropriate use of channels and channel members.
- Inadequate research to identify or establish consumer preference for the product before production on large scale might also lead to the failure of a new product introduced into the market.
5. State and explain five ways by which an agency relationship can be terminated.
Termination of any agency refers to the various methods or ways by which the relationship between an agent, principal and third parties can come to an end.
Circumstances under which an agency relationship can be terminated include:
An agency can come to an end by This occurs when the parties agree to release each other from the contractual obligations. It may occur when each party withdraws his original agreement.
It could also be terminated by That is by the completion of the transaction or when each party performs his side of the agreement under the contract.
An agency relationship could be terminated on the death of either the agent or principal.
- It could be terminated by When an agent renounces the authority given to him by his principal, the agency is said to be terminated.
The agent gives notice to the principal and withdraws his services.
- The destruction of the subject matter of the agency could also terminate the
- Where the agency is entered into for a definite period
, it terminates by the expiration of the period stipulated in the contract.
Where one party to the agency, that is either the agent or the principal is insane, the agency is said to be terminated.
- Finally the revocation of the authority of the agent by the principal can terminate the agency. If the revocation is a breach of the principals’ contract with the agent, he will be liable to pay damages for the loss of the agents’ commission
6. Describe four monetary tools which the central bank can use to regulate the supply of money in the country.
- The Bank Rate: – The bank rate is the pivot of all interest rates because all interest rates depend on it. The interest rate charged by the commercial banks depends on the bank rate. The bank rote is the minimum rate of interest that the central bank charges on loans and advances granted to commercial banks and for rediscounting bills of exchange. If the bank rate were high, all other rates of interest would be high and vice versa. . If the central bank wants to reduce money supply, it raises the bank rate so that commercial banks would be discouraged from borrowing more. If the bank rate is high, commercial banks will also raise the interest rate on loans they grant to their customers and thus deter them from borrowing. On the other hand if the central bank wants to increase the money supply, the bank rate would be reduced.
Effectiveness of this policy mostly depends on the business atmosphere. If there is lucrative business activities, businessmen will still borrow from the commercial banks irrespective of the rate of interest and hence commercial banks will also go to the central bank to borrow money no matter the level of the bank rate.
- Open Market Operation: – The most important tool that the central bank has for influencing the supply of money is the purchase and sale of government bonds and other securities in the open market and this is known as open market operation. To reduce the money supply, the central bank sells securities to the commercial banks and the public. Customers of the commercial banks who want to buy the securities will draw cheques on the commercial banks thereby reducing the reserves of the commercial banks. Through this process money moves from the public through the commercial banks to the central bank thereby reducing money in circulation. The central bank buys securities from the commercial banks and the public when it wants to increase money in circulation. This will increase the cash vault in commercial banks, and thus enables them grant loans and advances to the public and hence increase money supply.
The effectiveness of this policy depends largely on the level of monetization, that is existence of the money and capital markets. If money and capital markets are developed in the economy the policy will be effective and vice versa. This is the most ineffective instrument in the developing countries because the level of monetization and education is low.
- The Cash Ratio: – This is the minimum percentage of commercial banks deposit (cash reserve requirements) which is expected to be kept with the central bank. To reduce the supply of money the central bank raises the cash ratio, so that the commercial banks are legally obliged to deposit a huge percentage of their cash with the central bank. This will reduce the cash in the vault of commercial banks and thereby making them unable to grant more credit to the public. The reverse is true if the central bank wishes to increase money supply
The effectiveness of this policy depends on whether the commercial banks have enough short-term securities or not. If they have, it implies that they can easily sell them to the central bank to get some cash and make the policy ineffective. Besides, due to the dominance of expatriate banks, the policy may not be effective in the least developed countries.
Special Deposit: – Quite apart from the constant deposits, the commercial banks are legally obliged to keep with the central bank a special percentage of their deposit. When special deposits are kept with the central bank, the amount of money left with commercial banks is reduced and as a result their ability to give loans also reduces. The weapon is very effective because the central bank call for a huge percentage or the commercial banks deposits as special deposits thereby reducing tremendously the cash in their vault and hence checking their ability to give more However, the problem posed by the foreign banks may hinder the effective operation of this policy.
- Directives: – Directives are in the form of instructions given by the central bank to the commercial banks regarding the direction of their loans and advances. It tells the commercial banks where their loans should go and the percentage they should grant. For example, the central bank may direct that so much should be given to the Agricultural and Industrial sectors but nothing to private businessmen. The effectiveness of this policy depends on government’s interference and availability of collateral securities. This policy has been ineffective due to lack of supervision which enables the commercial banks flout the directives.
7. (a) Despite the advantages of internal trade some countries still restrict the quantity of imports into their countries. State and explain four reasons why countries indulge in import restrictions.
NB: Refer to 1999 (School Candidates) Paper Two, Question 10(a) for suggested solution.
7. (b) Describe two ways by which import restrictions may be done.
NB: Refer to 1999 (School Candidates) Paper Two, Question 10(b) for suggested solution.
8. Explain the following:
- Job description
- Job specification
- Job rotation
- Fringe benefits
- Job Description: – It specifies the duties and requirements of the job. This is a broad statement describing the purpose, scope, duties and responsibilities of a particular job. It states the title and location of the job, grade/salary level of the job, limits of authority, number of subordinates, physical working conditions, machines, tools and equipment used, product or service produced etc. It typically portrays job contents. In short, it summarizes all the basic tasks that are required to be performed on a job. A job description is what the worker does.
- Job Specification: – It sets forth the specific skills and training of the people hired to perform the job functions. It refers to the skills, knowledge and qualities needed to do the job. It is the human characteristics required to do a particular job. These human characteristics include: Age, educational background, training received, interests, working experience, communication skills, human relations skills, judgement and initiative, and physical efforts and skills required. Job specification therefore describes the physical qualities and characteristics needed to perform the job. A job specification is who the worker is.
- Job Rotation: – To overcome potential boredom a worker’s tasks can be regularly changed so that they spent a certain amount of time on one task before being moved onto another. It is therefore a job design that systematically moves employees from one job to another, thereby increasing the number of different tasks an employee performs without increasing the complexity of anyone job e.g. a mechanic may install windshields for a week and front bumpers the next. In short, it is the process of assigning employees to different tasks or jobs on a temporary basis.
- Fringe Benefits: – These are non-financial rewards given to employees in addition to actual pay for job done. It is a package that includes items such as health care, transportation facilities, canteen facilities, legal aids, granting of loans, scholarship schemes, child care, paid vacation etc.
9. (a) What is an Insurance Premium?
An insurance premium is a periodic payment from an insured to the insurer for the protection of an insured’s property by the insurer. It is therefore the amount or sum that is paid to the insurance company in order to be insured.
9. (b) Mention and explain the basic principles on which insurance operates.
Utmost good faith (Uberrima Fide): – This is a principle which requires both the insured and the insurer in an insurance contract to make full disclosure of all material facts. The insured must answer all questions put to him by the insurer in truthfulness without hiding any material fact and the insurer too must explain to the insured the terms of the insurance concerning the exact cover. Failure on both parties to do this will render the contract null and void.
Insurable interest: – The basis of this principle is that the one insuring (owner) must suffer a loss or damage on the happening of the event stipulated in the contract. To have an insurable interest, one must be in danger of suffering some loss or incurring some liability should the thing concerned be destroyed or damaged in anyway. Therefore, one can insure his own life and property but not that of his friend. This principle therefore prevents policyholders from profiting out of the insurance company.
Indemnity: – This principle refers to the restoration of the insured to his former position or as nearly as possible but not over. The concept of indemnity as regards to insurance is that, the insured party should be put to the exact financial position he would have occupied if an accident had not occurred.
Subrogation: – The word “subrogate” means “to step into the place of’. Under this principle, after the insurance company has paid compensation on a property, it has the right to takeover the property concerned, so that the insured does not make a gain through the process.
Contribution:- According to this principle, an insured who has taken one insurance policy with more than one insurer (insurance company) cannot be compensated by all of them separately in the event of an accident but rather they are to contribute to compensate him or restore him to the position in which he was before the accident.
- Proximate Cause: – This principle says that if we insure against a certain eventuality (risk), we are entitled to compensation only if that eventuality is the immediate cause of the loss. Anything excluded from the contract which turns out to be the proximate cause of an unfortunate event would not make the insurance company liable. In simple terms, proximate cause is a situation where an insured cannot claim compensation if a property which he has insured against tire has been stolen.
10. Give five reasons for the dominance of sole proprietorship in West Africa despite the advantages of limited liability company.
Easy formation: – It is easy to set up a sole proprietorship business because there is no law requiring the registration of such business.
Autonomy: – It is less subjected to legal and governmental controls and thus the owner is free to do whatever he likes.
Low capital requirement: – Capital required to start a sole proprietorship business is small as compared to that of a company.
Enjoyment of profit alone: – Under this form of business, the owner enjoys the profit alone.
Enjoyment of privacy: – He enjoys a high degree of privacy in the sense that business plans are mostly kept secret, that is, he is under no obligation to –reveal information about the business.
Quick decisions taken.
- Low expertise/managerial requirement.
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