Commerce 2025 Jamb Examination

The principle of contribution applies when an individual has insured the same risk with more than one insurance company. In such a case, the insurers share the cost of the indemnity proportionately. Since Fatou was jointly indemnified by Greene and Sunwar Insurance Companies, they essentially pooled their resources to cover her loss. This principle prevents the insured from claiming the full amount of the loss from multiple insurers and thereby making a profit from the misfortune, which would violate the fundamental principle of indemnity.

A sole proprietorship is a business owned and managed by a single individual. Because it is not a legal entity like a limited liability company, it cannot issue shares or debentures to the public. The owner must rely on personal savings, ploughed-back profits, or informal credit sources. Loans from friends and family are a common way for sole traders to raise additional capital without changing the ownership structure of the business. Admitting a new member would transform the business into a partnership, thus ending its status as a sole proprietorship.

Hire purchase is a system where a buyer takes possession of goods immediately but pays for them in regular instalments over a set period. Under this agreement, ownership of the goods does not pass to the buyer until the final instalment has been paid. Until then, the buyer is essentially 'hiring' the goods with an option to purchase. This distinguishes it from a credit sale, where ownership usually passes to the buyer at the moment the contract is signed, regardless of when the payment is completed.

The theory of comparative cost advantage, popularized by David Ricardo, suggests that international trade occurs because countries benefit from specializing in the production of goods they can produce relatively more efficiently than others. Even if one country is better at producing everything (absolute advantage), trade is still beneficial if each nation focuses on products where its relative efficiency is highest. This leads to a more efficient global allocation of resources and allows countries to consume more than they could in isolation. Balance of trade and payments are measures of trade, not the fundamental reason why trade happens.

A counter offer occurs when the offeree responds to an initial offer by suggesting different terms rather than accepting the original ones. In contract law, a counter offer acts as a rejection of the original offer, meaning the original offer is terminated and can no longer be accepted unless it is revived by the offeror. For example, if a seller offers a car for £5,000 and the buyer offers £4,500, the original offer of £5,000 is legally dead. The buyer has now become the offeror of a new proposal.

Public enterprises, also known as statutory corporations, are businesses owned and controlled by the government to provide essential services to the public. Because they are often not primary profit-driven entities, their main source of funding comes from the government through grants, subventions, and budgetary allocations. While they may occasionally take loans or generate internal revenue, the foundational capital and operational shortfalls are typically covered by the state. Unlike public limited companies, they do not issue shares to the general public (shareholders).

A proforma invoice is the standard document used when a seller requires payment before goods are dispatched, often referred to as 'Cash with Order' (CWO). It provides the buyer with the exact amount due so that payment can be made in advance. Once the payment is received, the seller then ships the goods and issues a final commercial invoice. Debit and credit notes are used to correct errors in existing invoices, and a consignment note is a document used in the transportation of goods, making the proforma invoice the only appropriate choice for pre-payment terms.

Unlimited liability is a legal obligation where the owners of a business (typically sole proprietors and general partners) are personally responsible for all the debts and liabilities incurred by the business. If the business fails and cannot pay its creditors, there is no legal distinction between the assets of the business and the personal assets of the owner. Consequently, creditors can legally claim the owner's personal property, such as their home, car, or savings, to satisfy the business's debts. This is the primary risk of unincorporated business forms compared to limited liability companies.

In the stock exchange, a 'bull' speculator who has bought shares expecting the price to rise but is unable to pay for them by the settlement day may request to carry over the transaction to the next period. The interest or charge he pays to the seller for this delay is known as 'contango'. Conversely, 'backwardation' is the fee paid by a 'bear' speculator who has sold shares he does not own and cannot deliver on time. Brokerage and commission are standard fees paid to brokers for executing trades, regardless of settlement delays.

Net profit is the final profit remaining after all operating costs, interest, and taxes have been deducted from the total revenue. In a standard trading, profit and loss account, the calculation begins by finding the gross profit (Sales minus Cost of Goods Sold). From this gross profit, all other administrative, selling, and distribution expenses are subtracted. The resulting figure is the net profit. It represents the actual earnings that can be distributed to owners or reinvested back into the business. Sales less total expenses is also a way to view it, but traditionally it is derived from gross profit in accounting cycles.