BGCSE Commerce 0598 cheat sheet

Commerce is the sum of activities involved in moving goods and services from producers to final consumers, including trade and the aids to trade.

Trade splits into home trade (wholesale and retail within one country) and foreign trade (import, export, entrepot, visible and invisible trade).

Aids to trade are banking, insurance, transport, warehousing, advertising and communication; each removes one barrier between producer and consumer.

Production and commerce are complementary: production creates utility (form, place, time, possession), commerce delivers it to the user.

Direct production: goods made and consumed by the same person; indirect production: specialised stages linked by exchange and money.

Industry covers extractive, manufacturing, construction and service activity; commerce is the distributive half of business activity.

Commerce raises living standards by widening markets, enabling mass production and lowering unit costs through specialisation.

Business activity is classified into primary, secondary and tertiary sectors; commerce sits wholly in the tertiary sector.

Sole proprietorship: one owner, unlimited liability, no separate legal personality, capital limited to owner's savings and loans, profits taxed as personal income.

Partnership: 2-20 partners (ordinary), unlimited liability unless a limited partner or limited liability partnership is used; profit-sharing per partnership agreement.

Private limited company: separate legal personality, limited liability, 2 or more members, shares not offered to the public, cannot be listed on a stock exchange.

Public limited company: shares offered to the public, must publish accounts, minimum membership usually 2, governed by a board of directors elected by shareholders.

Cooperative societies: one member one vote, profits shared as dividends based on patronage, formed to buy or sell in bulk for members' benefit.

Public corporations: state-owned, created by statute, capital from government, surplus usually returned to the treasury, run by a board appointed by government.

Franchise: franchisee pays an initial fee plus royalty for the right to use a proven brand, system and training; ownership stays with the franchisee.

Joint venture: two or more businesses share capital, control and risk for a specific project, then dissolve or continue by agreement.

Factors of production: land (rent), labour (wages), capital (interest), enterprise (profit); each earns a distinct reward.

Division of labour raises output per worker but creates dependence, monotony and risk of stoppage if one stage fails.

Chain of distribution: producer to wholesaler to retailer to consumer; shorter chains appear when goods are perishable, costly, bulky or technically complex.

Direct selling (producer to consumer) suits perishable goods, services, custom-made items and goods sold online or by mail order.

Wholesaler functions: bulk breaking, storage, transport, financing retailers by credit, grading and packaging, market information to producers.

Retailer functions: offering a wide assortment, convenience of location, credit to consumers, after-sales service, breaking bulk into household units.

Location of industry depends on raw materials, power, labour supply, market, transport links, government incentives and availability of capital.

Vertical integration joins successive stages (producer plus retailer); horizontal integration joins competitors at the same stage.

Retail types: department store, supermarket, chain store, discount store, convenience store, specialist shop, market stall, e-commerce, vending.

Large-scale retailing advantages: bulk buying discounts, self-service lowers wages, wider choice, one-stop shopping; drawbacks: high overheads, impersonal service.

Small retailer advantages: personal service, long opening hours, credit to known customers, convenient location; weaknesses: higher unit costs, limited range.

Wholesalers survive where small retailers need credit, frequent small deliveries and a nearby source of assorted stock.

Wholesalers are bypassed when producers sell direct, when retailers buy in bulk through buying groups, or when goods are highly perishable.

Multiple shops and supermarkets use central buying and standardised display to cut unit costs and negotiate lower prices.

Mail order and online retailing reduce shop costs but require reliable delivery, secure payment and clear returns policies.

Stock control terms: minimum stock, maximum stock, reorder level, lead time, economic order quantity; stock turnover = cost of goods sold divided by average stock.

Functions of money: medium of exchange, unit of account, store of value, standard of deferred payment; requires acceptability, divisibility, durability, portability, scarcity.

Barter fails because of the double coincidence of wants, indivisibility of goods and absence of a common measure of value.

Central bank functions: issue currency, act as banker to government and to commercial banks, hold foreign reserves, control credit, lender of last resort.

Commercial bank functions: accept deposits, lend, facilitate payments, offer overdrafts, safe custody, foreign exchange and trustee services.

Types of account: current (cheque or demand, low or no interest), savings (interest, withdrawal limits), fixed deposit (higher interest, locked term).

Credit creation: banks create deposits by lending out a fraction of deposits; the multiplier is 1 divided by the reserve ratio.

Interest is the price of borrowed money; simple interest = principal x rate x time; compound interest adds interest to principal each period.

Bahamian financial sector includes the Central Bank of The Bahamas, commercial banks, credit unions, insurance companies, trust companies and the Bahamas Stock Exchange.

Sources of finance: owners' capital, retained profit, bank loan, overdraft, trade credit, hire purchase, leasing, debentures, share issue, government grants.

Short-term finance (under one year): overdraft, trade credit, factoring; medium-term (1-5 years): hire purchase, leasing, term loan; long-term: shares, debentures, retained earnings.

Working capital = current assets minus current liabilities; it funds day-to-day operations such as stock, wages and bills.

Insurable risks are measurable and not deliberate; uninsurable risks include market changes, bad management and speculative loss.

Insurance principles: insurable interest, utmost good faith, indemnity, proximate cause, subrogation, contribution.

Premium factors: sum insured, probability of loss, period covered, excess chosen, claims history and type of risk.

Insurance types for business: fire and property, marine cargo, public liability, employer's liability, fidelity guarantee, business interruption, life and key-person cover.

Break-even output = fixed costs divided by (selling price per unit minus variable cost per unit).

Core consumer rights: safety, accurate information, choice, redress, consumer education, and the right to be heard.

Sale of goods law implies that goods are of merchantable quality, fit for purpose, as described, and that the seller has title.

A contract requires offer, acceptance, consideration, capacity and lawful intention; a minor's contracts are generally voidable.

Misleading advertising, false weights and measures, and sale of unsafe goods are unfair trading practices subject to regulation.

Redress routes: complain to the seller, then the manufacturer or supplier, then a consumer protection agency or small claims court.

Consumers can protect themselves by keeping receipts, reading labels, comparing prices, checking guarantees and avoiding impulse credit purchases.

Consumer responsibilities: read contracts before signing, use goods as directed, pay debts on time, and report unsafe products.

Bahamian consumer protection is supported by the Consumer Protection Commission, the Utilities Regulation and Competition Authority and the Price Control Commission.

Government regulates business to protect consumers, workers, investors and the environment, and to raise revenue and stabilise the economy.

Direct taxes fall on income and wealth (income tax, corporation tax, property tax, capital gains); indirect taxes fall on spending (VAT, customs duty, excise).

Progressive tax takes a larger proportion from higher incomes; regressive tax takes a larger proportion from lower incomes; proportional tax takes the same rate.

A good tax is fair, certain, convenient, economical to collect and neutral in its effect on decisions.

Regulation tools: licensing, price controls, health and safety inspection, environmental standards, competition law, minimum wage and consumer legislation.

Public services funded by taxation include roads, schools, hospitals, police, customs, ports and utilities such as water and electricity.

Government can aid business through grants, tax concessions, training, infrastructure and export promotion.

Bahamian taxes include customs duty, value added tax, real property tax, business licence fees, stamp duty and national insurance contributions.

Balance of trade = value of visible exports minus value of visible imports; balance of payments includes visible, invisible and capital flows.

A trade deficit occurs when imports exceed exports; it may be financed by invisible earnings, borrowing or capital inflows.

Terms of trade = index of export prices divided by index of import prices, multiplied by 100.

Free trade raises choice and lowers prices but exposes infant industries; protection uses tariffs, quotas, subsidies, embargoes and standards.

Bahamas trade pattern: large imports of food, fuel and manufactured goods; exports dominated by tourism services, fisheries, salt, rum and financial services.

Invisible trade is crucial: tourism and offshore financial services earn foreign exchange that offsets the visible trade deficit.

Exchange rate: the Bahamian dollar is pegged at one-to-one with the US dollar, so the Central Bank must hold adequate reserves.

Trading partners and blocs: CARICOM, the Bahamas' main partners being the United States, and membership of the WTO since 2001.

The Bahamian economy is service-based; tourism and financial services together account for the majority of GDP and employment.

Tourism components: stopover visitors, cruise passengers, hotels, restaurants, attractions and transport; cruise passengers spend less per head than stopover visitors.

Offshore financial centre features: low or no direct taxes, strict bank secrecy and regulation, trust and company formation, and international banking.

Economic challenges: narrow export base, high import dependence, vulnerability to hurricanes, high energy costs and unemployment in outer islands.

National income measures: gross domestic product (within borders) versus gross national product (residents' income at home and abroad).

Inflation erodes purchasing power; deflation may delay spending; both are measured by changes in a consumer price index.

Government economic policy tools: fiscal policy (tax and spending) and monetary policy (money supply, interest rates, reserve requirements).

Development indicators include GDP per capita, literacy, life expectancy, employment structure and income distribution.

Commerce is defined as trade plus the aids to trade that make exchange possible.

Home trade is conducted inside one country; foreign trade crosses national borders.

Visible trade involves physical goods; invisible trade involves services such as tourism, shipping and banking.

Entrepot trade imports goods and re-exports them, sometimes after processing.

The aids to trade remove barriers of time (warehousing), place (transport), risk (insurance), finance (banking) and information (advertising).

Sole trader has unlimited liability, so personal assets can be used to pay business debts.

Limited companies have separate legal personality and limited liability for shareholders.

Partnerships are governed by a deed of partnership setting out capital and profit shares.

Cooperatives operate on one member, one vote regardless of capital contributed.

Public corporations are owned by the state and answerable to government.

Land, labour, capital and enterprise are the four factors of production.

Rewards are rent, wages, interest and profit respectively.

The chain of distribution shortens for perishable, bulky or expensive goods.

Wholesalers break bulk, store stock and give credit to retailers.

Division of labour increases output but raises interdependence.

Retailers sell to final consumers in small quantities.

Wholesalers buy in bulk and sell in smaller lots to retailers.

Supermarkets use self-service and central buying to reduce costs.

Stock turnover measures how quickly stock is sold and replaced.

Reorder level equals average usage during lead time plus safety stock.

Money serves as medium of exchange, unit of account, store of value and standard of deferred payment.

Central banks issue notes and act as lender of last resort.

Commercial banks create credit by lending a fraction of deposits.

The credit multiplier equals one divided by the reserve ratio.

Simple interest equals principal times rate times time.

Working capital equals current assets minus current liabilities.

Insurable risks are measurable and accidental, not speculative.

Indemnity restores the insured to the pre-loss financial position.

Break-even output equals fixed costs divided by contribution per unit.

Debentures are long-term loans that pay fixed interest.

Goods must be of merchantable quality and fit for their purpose.

Consumers have rights to safety, information, choice and redress.

Receipts and written contracts are key evidence in a complaint.

Unfair trading includes false weights, misleading ads and unsafe goods.

Redress may end in a consumer agency or the courts.

Direct taxes hit income and wealth; indirect taxes hit spending.

Progressive taxes take a higher proportion from higher earners.

Licensing and price controls are forms of business regulation.

Customs duty and VAT are the Bahamas' main indirect taxes.

Public services are funded mainly from taxation.

Balance of trade compares visible exports and visible imports.

Balance of payments includes visible, invisible and capital flows.

Tariffs and quotas are protectionist tools.

The Bahamas relies on tourism and finance to offset its trade deficit.

The Bahamian dollar is pegged one-to-one to the US dollar.

Tourism and financial services dominate Bahamian output and jobs.

The economy depends heavily on imported food and fuel.

Hurricanes create major supply-side shocks.

GDP measures output within a country's borders.

Fiscal policy uses taxation and spending; monetary policy uses money supply and interest rates.