Types of Business Ownership
14 Grade 10 Business Studies questions on Types of Business Ownership, with worked marking schemes. 14 questions are available on this topic in full.
Question 1
1 markA public corporation, such as a national water or power body, is usually brought into existence by:
A. An Act of Parliament
B. Registration with the Registrar of Companies
C. A partnership deed signed by the ministers
D. By-laws made by a co-operative society
(1 mark)
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1 markA person who contributes capital to a firm but takes no part in its day-to-day management is described as a:
A. Nominal partner
B. Dormant partner
C. Major partner
D. Active partner
(1 mark)
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Create a free account to see itQuestion 3
6 marksExplain three benefits small-scale dairy farmers in Nyandarua obtain from selling their milk through a co-operative society.
(6 marks)
Marking scheme
Award 2 marks per benefit (1 for the point, 1 for the explanation), maximum 3: 1. Better bargaining power: the society bulks the milk of many members (1), so it negotiates a higher price with processors than an individual farmer could (1). 2. Shared facilities and services: the society provides coolers, transport, artificial insemination and extension advice (1), which no single small farmer could afford alone (1). 3. Access to credit and inputs: feeds, fertiliser and loans are advanced to members (1) and recovered gradually from their milk payments (1). 4. Assured market and regular payment: the society collects milk daily (1), so the farmer is certain of a buyer and of a monthly cheque (1). 5. Democratic control and a share of surplus: each member has one vote regardless of shares (1) and receives a bonus or dividend from the surplus (1).
Question 4
1 markAt the annual general meeting of a dairy co-operative society in Nyandarua, a member who holds 500 shares has:
A. One vote, the same as a member holding ten shares
B. An automatic right to be appointed to the committee
C. Votes in proportion to the milk he delivered that year
D. Five hundred votes, one for each share held
(1 mark)
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6 marksTwo friends intend to start a hardware shop in Kisii town. Explain three advantages of forming a partnership rather than each of them running a separate sole proprietorship.
(6 marks)
Marking scheme
Award 2 marks per advantage (1 for the point, 1 for the explanation), maximum 3: 1. More capital: both partners contribute (1), so the firm can stock a wider range of building materials and rent larger premises (1). 2. Combined skills and shared duties: one may handle sales while the other keeps the accounts (1), leading to better decisions and specialisation (1). 3. Shared losses and risks: any loss is borne by both partners (1), so the burden on one person is lighter than in a sole proprietorship (1). 4. Continuity of operations: when one partner travels or falls ill the other keeps the shop running (1), so business does not stop (1). 5. Easier access to credit: more assets and two people stand behind the firm (1), so suppliers and banks extend larger credit (1).
Question 6
1 markOne of the shareholders of Mavuno Millers Ltd dies. The company:
A. Automatically becomes a partnership of the remaining shareholders
B. Continues to exist because it has perpetual succession
C. Must be dissolved and its assets shared out
D. Must be registered afresh with the surviving members
(1 mark)
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Create a free account to see itQuestion 7
4 marksDistinguish between a private limited company and a public limited company.
(4 marks)
Marking scheme
Award 1 mark for each fully contrasted pair (both sides stated), maximum 4: 1. Membership: a private company has a maximum of fifty members, while a public company has no maximum number of members. 2. Sale of shares: a private company may not invite members of the public to buy its shares, while a public company offers shares to the public through a prospectus. 3. Transfer of shares: shares in a private company are transferred only with the consent of the other members, while shares in a public company are freely transferable, often through the stock exchange. 4. Publication of accounts: a private company need not publish its accounts, while a public company must publish audited accounts. 5. Commencement of business: a private company may begin trading on incorporation, while a public company must first obtain a trading certificate. A statement about only one type of company scores no mark.
Question 8
1 markWhich one of the following best explains why sole proprietorship is the commonest form of business ownership in Kenyan market centres?
A. It can raise large capital by selling shares to the public
B. It continues to operate automatically after the death of the owner
C. It is cheap and simple to start, needing little capital and few legal formalities
D. The owner enjoys limited liability for the debts of the business
(1 mark)
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6 marksSuggest the most suitable form of business ownership for each of the following, giving one reason for your choice in each case: (a) a boda boda rider who wants to start a small phone-charging kiosk at a stage; (b) thirty tomato growers in Kirinyaga who wish to market their produce together; (c) a group of investors who want to raise a very large sum of money to put up a cement factory.
(6 marks)
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1 markThe document that states a company's name, its objects and the liability of its members is the:
A. Memorandum of association
B. Certificate of incorporation
C. Prospectus
D. Articles of association
(1 mark)
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Create a free account to see itQuestion 11
1 markWanjiru has fully paid for her shares in Kilimo Ltd, a private company. If the company fails to pay its debts, Wanjiru will:
A. Lose no more than the money she has already paid for the shares
B. Have her personal land sold to settle the debts
C. Be required to pay again an amount equal to her shares
D. Be sued personally by each of the company's creditors
(1 mark)
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4 marksState four reasons why the Government of Kenya forms public corporations.
(4 marks)
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Create a free account to see itQuestion 13
6 marksExplain three challenges a sole proprietor running a retail shop in a small town is likely to face when trying to expand the business.
(6 marks)
Marking scheme
Award 2 marks per challenge (1 for the point, 1 for the explanation), maximum 3: 1. Limited capital: the owner depends on personal savings and small loans (1), so she cannot stock in bulk or open a second branch (1). 2. One-person management: the owner makes every decision and may lack skills in book-keeping or marketing (1), so poor decisions go unchecked and she cannot specialise (1). 3. Lack of continuity: the business depends entirely on the owner (1), so illness, travel or death disrupts or ends it, which discourages long-term investment (1). 4. Difficulty in obtaining credit: the business has no separate legal identity and few assets to pledge (1), so lenders are unwilling to advance large sums (1). 5. Stiff competition: supermarkets and larger shops buy cheaply in bulk (1), so they undercut her prices and take her customers (1).
Question 14
4 marksState four circumstances under which a partnership may be dissolved.
(4 marks)
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