KCSE Past Papers 2016 Business Studies Paper 1(565/1)

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


(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



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