GREATER LIFE ACADEMY

END OF TERM EXAMINATION STUDY GUIDE

CSEC PRINCIPLES OF BUSINESS
Kindly go through this document with a focus to prepare for your END OF TERM
Examinations in December 2025
Section 1
Question 1
Explain two ways in which the barter system limited trade in early economies.
Answer
A common measure of value did not exist. It was difficult to ascertain the value of goods
exchanged. It therefore would hinder trade as sometimes persons would not want to feel cheated.
A double coincidence of wants must exist for trade to take place. An individual who wishes to
trade must have what other persons want to trade his goods. If this does not exist then trade
cannot take place.

Question 2
State one advantage and one disadvantage of specialization.
Answer
An advantage of specialization is that it increases output.
A disadvantage of specialization is that it discourages quality work because of monotony.

Question 3
Show how two functions of money facilitate trade.
Answer
Money is a common measure of value. Persons can therefore determine the value of commodities
and know how much to accept in exchange for goods and services.
Money is a medium of exchange and therefore accepted by everyone. Persons will not have
difficulties to buy or sell goods and services.

Question 4
Starting a business is a lot of hard work and very costly. Why would an individual want to start a
business?
Answer
An individual may wish to gain financial independence. A successful business can earn high
levels of profits.
Using the skills and knowledge acquired to operate a profitable business.
Question 5
State the form of business organization that you believe is most advantageous to form. Give two
reasons why.
Answer
Choose one of the following:
Sole trader – Decisions are made quickly and there is little legal requirement to start the
business.
Partnership – more capital can be raised, specialization of functions is more efficient
Limited liability Company – shareholders are not liable for the company’s debts beyond their
level of investment, continuity of existence is assured.

Question 6
State two differences between the Free Market and the Planned economic systems.
Answer
In the free market economy the consumer is king i.e. the consumer determines what goods and
services are to be produced based on their demand. In a planned economy the government
makes decision concerning the distribution of goods and service.
Competition in a free market economy leads to efficiency and innovation.
However, in a planned economy, the lack of competition reduces innovation and the motivation
to produce quality output.

Question 7
Explain the roles of two stakeholders in business activities.
Answer
The role of the government is to monitor and regulate business activity to ensure that the
consumer is treated fairly.
Employees must work efficiently to create quality goods and services.
Employees must adhere to the rules and relations of the company.

Question 8
Identify a business activity within your community and discuss two contributions of this business
to your community.
Answer
Sally’s bakery produces good quality bread in various sizes to meet the requirements of
customers. The prices are also very affordable. The bakery makes it convenient for community
members as they do not have to travel a far distance to obtain this product.
Sally’s bakery also employs persons from the community. The bakery is very popular, and so
workers are paid an adequate salary to support their family.
Section 2
Question 1
Explain two important activities carried out by one functional area of a business.
Answer
The marketing department promotes the firms products to encourage sales. Consumers must be
made aware of what is being offered and encouraged to buy. They also conduct market research
to identify the needs and wants of consumers. Companies depend on consumers support for their
success, and so ascertaining consumers taste is very important.

Question 2
Outline two functions of management and say how each is important to the efficient operation of
a business.
Answer
Controlling involves the continuous assessment of the work done by subordinates. Poor quality
work is a reflection of the company and so managers must ensure that quality work is done.
Planning involves outlining all future activities that are required to achieve the organizations
objectives. Planning activities involve all the programmes and policies that will guide the firm’s
path to success.

Question 3
Give two examples to show how managers can fulfill their responsibilities to one group of
business stakeholders.
Answer
Managers can full their responsibility to customers by proving quality goods and services. A
system that ensures standards should be implemented. Prices must also be affordable. All
measures must be taken to operate as efficiently as possible so that production cost are kept low
resulting in affordable selling prices.

Question 4
(a) Draw an organizational chart of your school or business organization.
(b) Identify the type of organizational chart drawn
(c) Identify the span of control of one person in authority on the chart
(d) Identify two persons at the same level of authority.
Answer

(a)
(b) Line organizational chart
(c) The span of control of Vice principal is the head of departments for arts and science.
(d) Two persons at the same level of authority are the heads of department for arts and science.

Question 5
Show how two important characteristics of a good leader can improve the efficiency of a group.
Answer
Good communication skills will foster good working relationships between workers and
managers. Workers are more effective in a comfortable environment. This also encourages
feedback from workers.
A devoted and committed manager will lead by example. His commitment to the tasks that are
required to achieve the organizations objectives will inspire subordinates to work hard.

Question 6
Give two differences between the autocratic and the democratic leadership styles.
Answer
An autocratic manager makes all decisions concerning the tasks to be performed by
subordinates. All directives handed down by him must be closely followed. He makes frequent
checks on output of workers. The democratic leader allows the participation of others in
decision making. He allows workers some latitude to work on their own initiative and
periodically checks output from workers.

Question 7
Outline the steps for handling grievances in the organization.
Answer
The worker lodges a complaint with his or her immediate supervisor. If worker feels that the
complaint was not adequately dealt with then he may discuss the matter with the head of
department. If the worker is still not satisfied with how the matter is being dealt with, he along
with the union representative may discuss the matter with management. It may need to go a
further stage where there is mediation from Ministry of Labour or any independent body. The
final stage is when the matter has to be taken to court.

Question 8
Explain the purpose of the collective bargaining process.
Answer
The purpose of collective bargaining is a means to reach an amicable agreement between
management and workers. Workers bargain collectively through their union representative with
management until an agreement is reached.

Question 9
Discuss two ways in which teamwork can improve the efficiency of an organization.
Answer
Teamwork gives workers the opportunity to make collaborative decisions and support each other
to accomplish tasks more effectively.
Teamwork allows for specialization in various parts of a task based on the skill of each team
member. Specialization increases output.
Question 10
Discuss two benefits that a business will derive from using Management Information Systems.
Answer
It reduces labour costs as the computer compiles and analyses all the data. This increases the
efficiency of employees and reduces production costs. It provides timely information that helps
the business. This allows for better decision making as information is available when needed.

Section 3
Question 1
Explain the importance of encouraging entrepreneurial skills and abilities in Caribbean schools.
Answer
Entrepreneurship is important to Caribbean economies. Businesses create jobs, add to GDP and
foreign exchange earnings. They also provide revenue for government in the form of taxes.
Therefore, entrepreneurship skills must be taught in schools. Our students should be prepared to
enter the workplace and to also start businesses. An investment in a programme that prepares
students for entrepreneurship will have long–term impact on a country’s economic growth and
development.

Question 2
Outline and explain the importance of two characteristics required for a successful entrepreneur.
Answer
Creativity is an important characteristic of an entrepreneur. Creativity helps entrepreneurs to
innovate new products and ideas for the success of the business. Entrepreneurs must have the
drive and determination to be successful. Operating a business requires a lot of effort and will to
succeed.

Question 3
Three of your past high school friends request your assistance in starting a small business.
Advise them on three important steps that they must take.
Answer
Do a feasibility study to ascertain the viability/feasibility of a business idea. It assesses the
operational costs, expected revenue flows, level of competition etc. Its main purpose is to find
out if the business idea is practical. The business must be registered. This is a legal requirement.
Decisions must be taken on the type of business that you wish to form i.e. either a partnership or
a private limited liability company. Identify sources of capital to purchase machinery,
equipment, fixtures and raw materials.

Question 4
‘James & Sons’ has been operating as a partnership for five years. They have decided to expand
through offering shares to the public. Outline the steps that must be taken by the owners of
‘James & Sons’ to establish a public limited liability company.
Answer
Documents that must be submitted to the registrar of companies are the memorandum and
articles of association and statutory declaration. A prospectus must then be published inviting
the public to subscribe for shares. Collecting the capital required as outlined in the
memorandum of association, to be issued with a certificate of trading allowing the company to
start trading as a public limited liability company.

Question 5
Compare two advantages and two disadvantages of a sole trading business and a public liability
company.
Answer
One advantage of a sole trading business is that the owner receives all the profits made.
However, profits are shared among members of a public limited liability company.
The sole trader can also implement new ideas quickly as he does not have to consult anyone else
concerning business decisions. However, new ideas must be ratified by the board of public
limited entities and therefore may take much longer to implement.
One disadvantage is that the sole trader must find all the capital to invest into a business.
A public limited liability company raises capital from shareholders. The sole trader will lose all
his personal assets if the business goes bankrupt. Shareholders in a public limited liability
company have limited liability and therefore will not lose their personal assets if the company
goes bankrupt.

Question 6
Outline three features of a business plan.
Answer
The executive summary is a synopsis of the full business plan. It outlines information on the
purpose of the business, its methods of operation and future expectations.
The mission statement conveys the overall goals and value of a business. It speaks to how a
company operates. For example: providing the highest quality goods and services.
A SWOT Analysis outlines the strengths and weaknesses of the business. For example,
Strengths –low overhead costs and large market share
Weakness – difficulty in sourcing raw materials and sourcing skilled workers.

Question 7
Differentiate between primary and secondary data and give two examples of each.
Answer
Primary data is originally collected data. This data will be obtained by interviewing, observing
or distributing questionnaires to the sample population.
Secondary data is information that has already been collected by someone else originally. This
data will be therefore obtained from books, newspapers, magazines, libraries and publications
of various institutions.
Question 8
Explain how government may intervene to curtail unethical and illegal practices of business.
Answer
Government uses legislation to guide business practice thus protecting consumers. Laws
outlining accepted standard for manufactured goods and packaging and storing of goods protect
consumers. Taxes are also charged to curb activities such as pollution as a result of production.

Question 9
Explain the importance of a feasibility study to the start up of a business.
Answer
A feasibility study helps individuals to ascertain whether or not a business will be profitable, it
also assesses the possibilities of future income earnings and overall operational costs.

Question 10
List two forms of collateral and explain their importance to the acquisition of funds for a
business.
Answer
Collateral is anything of value that is used to secure a loan. It is required by financial
institutions for the approval of loans. If the loan is not repaid then the financial institution has
the authority to seize the borrower’s collateral. Forms of collateral include: bank balances,
motor vehicle, dwelling house, land, machinery and equipment etc.

Section 4
Martha offered to sell her prized orchid for $1000. Joseph telephoned her and expressed his great
interest in that variety of orchid. He however could not pay the $1000 she asked but could
manage to pay $800. Joseph then promised that he will visit her later to pay for and collect the
orchid.
Later that day Joseph visited Martha with the money to pay for the orchid. Martha informed him
that she had already sold the orchid for $1000. Joseph was furious and told Martha that it was not
only unethical for her to sell the orchid to someone else but it was also illegal.

Question 1
Did a valid contract exist between Martha and Joseph? Explain the reason for your answer.
Answer
A valid contract did not exist between Martha and Joseph.
An offer was initially made by Martha. Joseph wished to obtain the orchid but could not pay the
amount asked by Martha. He therefore made a counter offer of $800.
Martha did not clearly accept his offer and therefore a contract did not exist. Since a contract
did not exist, Martha is allowed to sell the orchid to whomever she chooses.
Question 2
Differentiate between a simple and a specialty contract.
Answer
A simple contract is legally binding if there are an offer, acceptance and consideration. A
specialty contract must have all these in addition to it, being documented, signed sealed and
delivered.

Question 3
Outline three reasons for the discharge of a contract.
Answer
If the time for which the contract must be executed is passed, then the contract can be brought to
an end because of lapse of time.
If there is a mutual agreement between the parties of a contract to bring the contract to an end.
A contract may also be discharged if one of the parties to the contract dies.

Question 4
You purchased an item from a variety store and were not given a receipt. The owner explained
that he never usually gives a receipt. Explain to him the importance of not only a receipt but two
other business documents to the operation of his business.
Answer
A receipt is proof of payment for goods or services bought. It not only provides protection for the
purchaser but also is a record of money received by the business. Two other important business
documents are an invoice and a statement of account.
An invoice is a bill outlining the total amount owed by customers for goods or services. It also
informs the customer of deadline dates for payments and any discounts offered. A statement of
account informs customers of all payments made within a specific time period and outstanding
balances at the end of that period.

Question 5
Outline two ways of making payments overseas.
Answer
A bank draft is a cheque which guarantees payment to the receiver from the issuing bank. Bank
drafts can be made out to a payee in foreign currency and thus used for making overseas
payments.
Letters of credit are used in international trade to make payments for imports. Payments to
exporters are guaranteed through the bank.

Question 6
Explain the importance of the following documents in international trade:
– Certificate of origin
– Import license
– Bill of lading
– Certificate of insurance
Answer
Certificate of Origin
A certificate of origin states the country in which goods imported were manufactured. It informs
importing countries if goods are to be accepted in the case of a ban and if tariffs to be charged.
Import license
Ensures that approved goods and quantities are imported
Bill of lading
Ensures the safety of goods in transit and delivery to receiver
Certificate of insurance
This ensures that there is financial protection for goods during transit

Question 7
You are a business owner in a Caribbean country and wish to export. Explain how you would
ensure that payments are received for items exported.
Answer
Request from the importer an irrevocable letter of credit. This ensures receipt of payments once
an order is filled.

Question 8
Explain the purpose of insurance and identify four fundamental principles.
Answer
The purpose of insurance is to indemnify the insured who suffers loss. It ensures that the insured
is returned to the exact position he was financially before the loss occurred.
Four principles of insurance are:
– Utmost Good Faith
– Proximate Cause
– Contribution
– Average Cause

Question 9
Differentiate between Insurance and assurance and give four types of Insurance.
Answer
Insurance refers to the coverage of events that may occur e.g. an accident. Assurance on the
other hand covers events that are inevitable such as death.
Four types of insurance are Bad debt, Plate glass, marine, and employers’ liability.

Question 10
Show how three types of insurance is beneficial to businesses.
Answer
Bad debt insurance covers any loss that a business might incur if customers do not make
payments on outstanding balances.
Plate glass insurance covers any damage to customers or anyone else due to the accidental
breakage of a shop window. The cost of the window is also covered by the insurance company.
Employers’ Liability covers injury to staff or visitors on a business location due to the
negligence of the company.
Section 5
Question 1
Discuss the importance of one natural resource to the survival, economic growth and
development of your Caribbean country.
Answer
Bauxite is a natural resource found in Guyana and Jamaica. The bauxite industry provides
employment for thousands of workers. It is also a main export product and foreign exchange
earner. The growth of this industry will impact on the growth and development of these
countries.

Question 2
Explain the importance of productivity to a business organization and state two ways by which
productivity can be achieved.
Answer
Productivity is measured by the output of each worker. If workers are very productive, output
will rise and unit cost of production will decline. This will result in higher profit margins for a
business. Workers can be made more productive by training to improve skill and by the
introduction of machinery and equipment to increase output.

Question 3
State one positive and one negative effect of external migration.
Answer
External migration deprives Caribbean countries of nationals who are professionals and those
who possess a high level of skill. However, an advantage of external migration is that foreign
exchange is remitted to Caribbean countries.

Question 4
Discuss the importance of two factors of production to the production process.
Answer
Capital is very important to the production process. Machinery, tools and equipment are needed
for production as they increase the efficiency of workers.
Labour as a factor of production is also important. Labour combines raw materials and
machinery to create goods and services. Methods applied to increase the productivity of labour
will increase output.

Question 5
Differentiate between subsistence and surplus levels of production and explain the importance of
surplus level production to an economy.
Answer
Subsistence level of production refers to a level of output that is just enough to ensure survival.
However, surplus production refers to a production level that is greater than what is demanded
locally.
Surplus production is important as it allows countries to export and earn foreign exchange.
Foreign exchange earned can be used to import goods and services that are not produced
locally.
Question 6
Give two examples of items made by cottage industries in your country and explain how these
activities contribute to your economy’s growth.
Answer
Handcraft jewellery and T-shirt are popular cottage industry products in my country. Both these
items are sold locally in many popular boutiques and therefore provide income for producers
and retailers. They are also sold to visiting tourists and thus contribute to foreign exchange
earnings. Output from cottage industries contributes to the GDP of the economy and thus
economic growth as these industries expand to meet rising demand.

Question 7
State three factors to be considered when identifying a suitable location to set up a new business
and give a reason for each.
Answer
Proximity to ones customers – A new business should be located where it will be seen by its most
likely customers.
Available supply of labour- A new business will require the best quality workers to ensure that it
makes a positive impact on the market.
Adequate infrastructure- A new business will need to be located in an area that is supported by
infrastructure such as good roads, communication and transportation services so that customers
and suppliers will have easy access.

Question 8
Differentiate between a forward and a backward linkage and give one example of each in your
country.
Answer
A forward linkage refers to the industries that are linked in such a way so that the finished
product of one becomes the raw material of another. For example, lumber from saw mills are
used in the construction of houses and furniture.
A backward linkage refers to industries that are established to meet the needs of other already
established industries. For example, hotels will backward link to the entertainment and
transportation industries.

Question 9
Explain the importance of mechanization for the growth of small businesses in the Caribbean.
Answer
Mechanization is the use of mainly machinery in a production process. Machinery increases
output. This will mean lower cost of production and therefore higher profits. Small businesses
owners should endeavour to mechanize in order to increase output and be more competitive with
large and medium sized business.
Question 10
What are the social and economic implications of mechanization and automation on Caribbean
countries?

Answer
Mechanization increases the productivity of workers. High productivity as a result of machinery
may cause job losses as fewer workers will be needed to produce the levels of output required.
Automation also results in job losses as this process involves little human intervention.