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Business Studies Paper 2

This paper consists of six questions. Answer any five questions.

(a). Explain five reasons why the Kenyan government may decide to organise a training exercise for local traders.

(b).Explain five reasons why a sole trader may decide to wind up his/her business to invest in public limited companies.

20 marks


(a). Explain five circumstances that may influence a trader to locate his/her firm near the source of raw materials.

(b). Explain five factors that determine the level of national income of a country.

20 marks


(a). Advertising in the newspaper is one of the ways of promoting sale of goods, Wafula advertised a new product in the newspapers but there was insignificant difference in sale. Explain five likely reasons for this.

(b). Explain five circumstances when a manufacturer may decide to sell directly to the consumers.

20 marks


(a).Describe five ways through which the central bank of Kenya can expand the supply of money in the economy.

(b). Explain five benefits that a firm may derive from its environment.

20 marks


(a). Discuss five benefits that accrue to a business organisation that adopts a comprehensive code of conduct.

(b). The value of exports of a given country was found to be higher than the value of its imports. Explain five factors that may have led to this phenomenon.

20 marks


(a).Highlight four distinctions between hire purchase and deferred payment /credit sale.

(b).The following information was extracted from Abduba’s books of account.

Stock (1.1.2012) 80 000

Stock (31.1.2012) 120 000

Net sales 708 000

Net purchases 640 000

Indirect expenses 8 000

Bank 180 000

Debtors 140 000

Creditors 100 000

Cash 40 000

Bank overdraft 80 000

Capital 500 000



i. Working capital

ii. Current ratio

iii. Rate of stock turn over

iv. Mark up percentage

v. Margin percentage

vi. Rate of return on capital

20 marks

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