2016 Business Studies paper 1
No.1..State four external factors that may negatively influence the operations of a business. (4 marks)
❖ Unfair competition.
❖ Inadequate technology.
❖ Unstable political environment.
❖ Unstable economic environment.
❖ Unfavorable legal frameworks.
❖ Unreliable supply systems.
❖ Strong consumer bargaining power.
❖ Poor physical facilities and infrastructure.
❖ Low population level.
❖ Insecurity.
❖ Unfavorable socio-cultural environment.
❖ Natural calamities.
No.2.Highlight four benefits of a business plan to an entrepreneur. (4 marks)
❖ Facilitates acquisition of loans from financial institutions and other financiers
❖ Provides guidance for opening new or expanding existing business / adaptability
❖ It acts as a management tool for the business / monitoring tool / identifies strengths
❖ It’s a tool for evaluating business performance
❖ It lays the strategy to be used in marketing the products
❖ It enhances the credibility of the business
❖ It’s a motivational tool
❖ To avoid mistakes
❖ Proper allocation of resources
❖ To determine how much resources are required e.g. labour, capital etc / source of capital
❖ Will help to identify the nature and scope of the market.
No.3.State four ways in which a good filing system may facilitate the operations of an office. (4 marks)
❖ Easy retrieval of information.
❖ Office is kept tidy.
❖ Information is preserved
for future reference.
❖ Security of documents is ensured.
❖ Facilitates quicker decision making.
❖ Ensures confidentiality of information by restricting access by unauthorized people
No.4..Highlight four activities that may be carried out in a stock exchange market. (4 marks)
❖ Buying and selling of shares.
❖ Mobilising savings for investment.
❖ Listing of companies.
❖ Issuing of new securities / raising capital.
❖ Publication of statistical information.
❖ Advising investors.
No.5.Outline four circumstances under which a co-operative society may be dissolved. (4 marks)
❖ By government order /change in the law.
❖ Where the co-operative continuously make losses.
❖ Where a stipulated majority of members agree to dissolve it .
❖ By a court order.
❖ Where the co-operative society has achieved objectives for which it was formed.
No.6.Outline four methods that the government of Kenya uses to regulate business activities. (4 marks)
❖ Licensing business activities
❖ Setting of standards
❖ Formulating of policies – enacting laws / legislation
❖ Setting quotas
❖ Enforcement of laws
❖ Imposing total ban
❖ Subsidizing businesses
❖ Taxation
❖ Price control
No.7.State four ways in which a youthful population may be useful to an economy. (4 marks)
❖ Less expenditure on social security and pension.
❖ Wider market for goods meant for the youth like clothing.
❖ Guaranteed continuous supply of labour.
❖ Flexibility and adaptability to technological changes which improve production.
❖ Faster growth of some sectors like the music, fashion and fast food industries.
❖ Increased innovation due to their adventurous nature.
No.8.Outline one circumstance under which each of the following telecommunication services may be used: (4 marks)
(i) Paging
(ii) Facsimile
(fax
(iii) Radio call.
(iv) Telex.
(i) Paging – When there is need to call a person to attend to an emergency in a specific location
(ii) Facsimile (fax) – Where there is need to send a copy of a printed document urgently.
(iii) Radio call
When there is need to give co-ordinated information through a central point
(iv) Telex – Sending and receiving written messages
No.9..The following transactions relate to Jelimo Stores:
(a) 10th October 2015 sold unused stationery for Sh 3,000 on credit to K. Likia.
(b) 23rd October 2015, bought a motor vehicle on credit from Onjwaria Motors for Sh 700,000.
Required: Record the above transactions in the general Journal given below:(4 marks)
No.10.State four features of an insurable interest. (4 marks)
❖ Presence of property rights or interest
❖ Potential insurable risk must be present
❖ The property must have monetary value
❖ The insurable risk must be legal
❖ There must be the possibility of suffering financial loss in case of a risk happening
No.11.State four features of a parastatal. (4 marks)
❖ Provide essential services.
❖ Not profit motivated.
❖ Is formed by an Act of Parliament.
❖ Is mainly funded by the government.
❖ Is managed by government appointees.
❖ Any surplus earned-is surrendered to the government.
❖ Has limited liabilities.
❖ Attachment to a government ministry.
❖ Can be dissolved only through an act of parliament
No.12.The graph given below represents the demand and supply curves of milk:
State four effects of a shift of the demand curve to the right. (4 marks)
❖ The price will increase
❖ The quantity demanded will increase / demand will increase
❖ The equilibrium quantity shifts to right / increases
❖ The equilibrium price shifts upwards / increases
❖ The equilibrium point shifts upwards / right
No.13 .Outline four functions of the World Bank. (4 marks)
❖ Providing finances to reduce budgetary deficits
❖ Provide loans for development projects.
❖ Provide finance to correct and adverse balance of payments.
❖ Provide technical expertise to support development.
No.14.0utline four ways of reducing the level of unemployment in Kenya.(4mks)
❖ Diversification of the economy by encouraging the establishing of different industries /sectors to create employments opportunities
❖ Transforming agricultural sector to curb rural urban migration to create more jobs and reduce unemployment)
❖ Transforming education sector making graduates acquire relevant skills.
❖ Establishing an employment policy by government to make it easy for people to get jobs/ Accept e.gs of policy as mention
❖ Lending /setting of a fund to assist unemployed to stat income generating activities/ accept e.gs of funds as a mention
❖ Exporting Labour by assisting unemployed people to acquire jobs abroad /countries with labour deficiency.
❖ Encouraging the informal Jua Kali sector to promote self employment
❖ Delocalization/ decentralization policy for balanced regional development/ reduced rural urban irrigation
❖ Population policy to control growth/ have a labour force that the economy can absorb
❖ To improve infrastructure in order to have suitable economic activities /accept e gs of infrastructure as a rating.
❖ Increase government expenditure to expand the size of the economy/ to finance development projects.
❖ Effective use of natural resources to increase production activities
❖ Income /wage policy to harmonize differences between regions/ sectors
❖ Attract (Local /foreign) investments through vision incentives/ to grow the economy
❖ Reviving collapsed industries/ projects by injector, funds/ selling them / increased production activities
No.15.The following balances were extracted from the books of Highlife General Stores on 31st December 2015.
Required: Prepare the balance sheet of Highlite General Stores as at 31st December 2015. (4 marks)
No.16..Outline four circumstances in which the government may be involved in business. (4 marks)
❖ When a business venture requires investment of large sums of money which individual entrepreneurs may not provide.
❖ When the goods or services to be provided are essential to the welfare of the citizens.
❖ When there is need to protect citizens from exploitation by private entrepreneurs.
❖ When the government desires to create employment for the citizens.
❖ When the government needs to generate income through revenue collection.
❖ When there is need to safeguard national security.
❖ When the venture is strategic but provides low profits hence unattractive to private investors.
❖ Where there are monopolies in the economy, the government gets involved in business to increase competition.
❖ Where there is need to balance regional development.
❖ To reduce foreign dominance in the economy.
❖ Where there is need to attract foreign investment.
No.17..Identify the ledgers in which the following accounts are kept.(4mks)
PP1 No.18.The following diagram represents the circular flow of income in a two sector closed economy
Identify two factors represented by each of the arrows labelled a and b. (4 marks)
(a) (i) Payment for goods and services.
(ii) Factor services / inputs / factors of production.
b) (i) Payment for factor inputs,
(ii) Goods and services.
No.19.State four reasons for privatising public corporations. (4 marks)
❖ To improve efficiency in their operations.
❖ To generate revenue to the government through sale of shares and taxes.
❖ To enhance competition.
❖ To increase public participation in economic activities of the country.
❖ To reduce government expenditure.
❖ To comply with conditions set by development partners and international donor agencies.
❖ To enable the government to concentrate on other state responsibilities.
❖ To minimize political interference.
No.20..State four reasons for the increased use of cell phones in banking. (4 marks)
❖ Easy to transact / easy ownership
❖ It saves on time since there is no traveling and queuing for the services.
❖ The speed of transaction is fast / quick feedback.
❖ It reduces paper- work by eliminating the need for physical files and other documentations.
❖ The use of PIN enhances security
❖ Increased ownership of mobile phones
❖ Transactions can be conducted any time
❖ Reduce transaction costs (travel and bank charges)
❖ Easy access to transaction records
❖ It is a requirement by service providers (utility bills)
❖ Easy to obtain credit facilities e.g. M-Shwari loan
No.21.List four sources of public finance. (4 marks)
❖ Taxes
❖ Licenses
❖ Court fines
❖ Donor aid
❖ Fees
❖ Treasury bonds and bills
No.22.State two situations in which each of the following types of inflation may occur.
(i) Creeping inflation (2 marks)
❖ When the general price levels rise gradually/ single digit over a period of time usually at single digit. Where the value of money tends to be stable over time the effects on the economy is not severe.
(ii) Hyperinflation (2 marks)
❖ Where the general price rise at high rate/ usually more than two digits.
Where there is drastic loss in the value of money effect on the economy is very severe
No.23..Outline four factors that may make a producer to by-pass the wholesaler when distributing goods. (4 marks)
❖ Having own retail outlet.
❖ Dealing in perishable goods like bread which require shorter channels.
❖ Dealing in technical goods which require elaborate after sales services.
❖ Consumers and retailers buying in large quantities.
❖ Need to keep price of goods low.
❖ Limited geographical spread of the market.
❖ Government policy.
❖ When the production is in small quantity.
❖ Where the producer has enough storage facilities.
❖ When goods are produced on order
No.24.Outline four goals of development to a country. (4 marks)
❖ Alleviation of poverty
❖ Attainment of high and sustainable economic growth
❖ Provision of adequate social amenities e.g. health
❖ Diversification of the economy to reduce over-reliance on a few products
❖ Alleviation of unemployment
❖ Attainment of more equitable distribution of incomes
❖ Enhancement / upholding of human freedom, rights and self esteem / democracy
❖ Provision of security
❖ Maintenance of political sustainability / good governance.
❖ Attainment of food security for population
❖ Alleviation of illiteracy
❖ Elimination of harmful cultural practices
❖ Improvement of infrastructure e.g. transport, communication, water
No.25..Outline four characteristics of services. (4 mark)
❖ c
❖ Service cannot be stored for future/ service is only consumed at the time it is being offered/ service capacity cannot be stored.
❖ Service cannot be touched/ it is intangible/ invisible can only be felt/ experienced
❖ Services cannot be separated from service properties the provider must directly offer the service to the user
❖ Service is perishable service can only be enjoyed at the time the provider is available/ it expires after it is provided.
❖ Services cannot be owned by the buyer/ ownership cannot be transferred as the buyer only pays for the experience
❖ Services/ have utility to satisfy wants.
❖ Services are mobile since they can be received/ provided at different places/ locations
