Commerce Practice Flashcards

Comprehensive question-and-answer practice flashcards covering all key topics from the Commerce notes, including production, business units, foreign trade, banking, insurance, transportation, warehousing, and advertising.

What is the definition of Commerce?

Commerce is defined as trade and aids to trade, which aims at the distribution of goods and services in order to satisfy human wants and needs.

What does the acronym WABTIC stand for in relation to aids to trade?

WABTIC stands for Warehousing, Advertising, Banking, Transport, Insurance, and Communication.

What are the four factors of production and their respective rewards?

The four factors of production are Land (reward: Rent or Rates), Labour (reward: Salary or Wage), Capital (reward: Interest), and Enterprise/Entrepreneurship (reward: Profit or Loss).

How does direct production differ from indirect production?

Direct production is the production of goods for one's own use at a subsistence level without trading, whereas indirect production is production for the benefit of others involving trade and specialization.

What is the legal difference regarding ownership between a cash buyer and a hire purchase buyer?

Under a hire purchase agreement, the buyer takes possession of the item upon paying a deposit, but legally becomes the owner only after paying the final installment.

What is a Bill of Lading in foreign trade?

A Bill of Lading is a quasi-negotiable document of title used in sea transport that acts as a receipt for goods on board, evidence of a carriage contract, and details the condition of the cargo.

What is the difference between a closed indent and an open indent?

A closed indent specifies the exact goods to be ordered from abroad, whereas an open indent gives the agent or seller freedom to choose which goods to send to the importer.

What is the difference between Ad Valorem duty and Specific duty?

Ad Valorem duty is charged as a percentage of the value of imported goods, whereas Specific duty is charged according to the physical quantity, weight, or number of goods.

What is meant by the term Entrepot trade?

Entrepot trade is a form of foreign trade where goods are temporarily imported into a country, processed or stored, and subsequently re-exported to other countries.

Under the Partnership Act of 1890, how are profits and losses shared if no deed is drawn?

Under the Partnership Act of 1890, profits and losses must be shared equally among all partners if no partnership deed exists.

What is the legal significance of a Certificate of Incorporation?

It certifies that the company is officially registered and incorporated as a separate legal entity from its owners, allowing it to sue or be sued in its own business name.

What distinguishes a Stock Broker from a Dealer on the Lusaka Stock Exchange (LuSE)?

A Stock Broker acts as an agent buying and selling shares on behalf of clients for a commission, whereas a Dealer acts as a principal buying and selling shares on their own behalf for profit.

What key differences distinguish a Bank Loan from a Bank Overdraft?

A bank loan is a formal lump-sum borrowing for capital items requiring collateral with interest charged on the full amount, while an overdraft is an informal short-term current account facility with interest charged only on the daily overdrawn balance.

What does 'Refer to Drawer' (RD) mean on a dishonoured cheque?

It indicates that the bank refuses to cash the cheque and is returning it to the payee, typically because the drawer lacks sufficient funds in their account.

What is the formula for calculating Working Capital?

$$\text{Working Capital} = \text{Current Assets} - \text{Current Liabilities}$$

What is the formula for calculating Rate of Stock Turn at buying price?

$$\text{Rate of Stock Turn} = \frac{\text{Cost of Goods Sold}}{\text{Average Stock}}$$

What is the principle of Utmost Good Faith (Uberrima Fides) in insurance?

It requires both the applicant and the insurer to disclose all true material facts completely when filling out a proposal form, otherwise the contract becomes void.

According to the principle of Subrogation, what happens to damaged property once full indemnity is paid?

Once the insured person receives full compensation for a loss, all ownership rights to the wreckage or salvage pass directly to the insurance company.

According to the Average Clause, how much compensation is paid if property valued at K30,000,000 is insured for K20,000,000 and suffers K18,000,000 in damages?

$$\text{Compensation} = \frac{\text{K20,000,000}}{\text{K30,000,000}} \times \text{K18,000,000} = \text{K12,000,000}$$

How does a Whole Life Policy differ from an Endowment Policy in life assurance?

A Whole Life Policy pays compensation only upon the death of the insured, whereas an Endowment Policy pays the sum insured either at a specified maturity date or upon death, whichever occurs first.

What is the purpose of a Business Reply Service?

It allows licensed businesses to receive replies or orders from potential customers using pre-printed envelopes where postage is paid by the business recipient rather than the sender.

What is the Poste Restante postal service?

It is a postal service where mail sent to a specific post office is held until collected by the addressee upon presenting proof of identity, catering to travelers or salespeople without a fixed address.

What are the main advantages of Containerization in transport?

Containerization provides faster turnaround of ships, protection of goods against damage and bad weather, reduced pilferage, savings on packaging costs, and quick transfer between transport modes.

What is the difference between Full Container Load (FCL) and Less than Container Load (LCL)?

Full Container Load (FCL) means the consignment occupies an entire container for one owner, whereas Less than Container Load (LCL) groups smaller shipments from multiple traders into one shared container.

How does a Bonded Warehouse differ from an Ordinary Warehouse regarding customs duty?

A Bonded Warehouse stores dutiable imported goods under customs authority control until duty is paid, whereas an Ordinary Warehouse stores non-dutiable finished goods or raw materials freely.

What is Generic (or Collective) Advertising?

Generic advertising promotes an entire product category (e.g., 'Drinking Milk is essential for children') rather than a specific brand, and is financed jointly by all producers of that product.

What are the main functions of the Central Bank (Bank of Zambia)?

Functions include issuing notes and coins, holding government accounts, managing national debt, supervising commercial banks, controlling foreign exchange reserves, and acting as lender of last resort.

What is the purpose of a Prospectus issued by a public limited company?

A Prospectus is an advertisement inviting the general public to purchase shares in a company to raise capital, outlining share details, past financial performance, and future prospects.

What is a Standing Order in commercial banking?

A Standing Order is a written instruction from an account holder to their bank to regularly transfer a fixed amount of money to a specified payee's account on set dates.

How does a Direct Debit differ from a Standing Order?

Direct Debit is initiated by the creditor to collect variable payment amounts at regular intervals, whereas a Standing Order is initiated by the debtor to pay fixed amounts on fixed dates.

What is Customs Drawback?

Customs drawback is the refunding of customs duty that was previously paid on imported goods when those goods are subsequently re-exported.

What is a Charter Party document?

A Charter Party is a formal contract between a ship owner and a hirer/trader for renting a ship either for a specific journey (voyage charter) or for a set period (time charter).