Waec Model Questions Vol1 2019 Commerce Question 7

Practice essay / theory question 7 from the 2019 Waec Model Questions Vol1 Commerce examination. This question covers Business Organizations .

Waec Model Questions Vol1 2019 Commerce Essay / Theory
Topic: Business Organizations
Question 7 WAEC_MODEL_QUESTIONS_VOL1 • 2019 • COMMERCE • essay

XYZ Traders is a partnership that has been operating for five years. The partners are considering converting the business into a private limited company. The partnership currently has four partners, each contributing equal capital of ₦2,500,000. The business owns a piece of land valued at ₦10,000,000 and equipment worth ₦5,000,000. The partners are concerned about liability, continuity, and access to finance.

Question Parts

( a )
Explain three legal differences between a partnership and a private limited company in Nigeria.
( b )
Discuss how conversion to a private limited company would affect the partners’ personal liability and the continuity of the business.
( c )
The partners estimate that as a private limited company they could raise external finance of up to ₦20,000,000 at an average cost of 12% per annum, whereas as a partnership they could only obtain a bank loan of ₦8,000,000 at 15% per annum. Assuming the business needs ₦15,000,000 for expansion, evaluate which form of organization is more financially advantageous, showing calculations of annual interest cost for each option.
( d )
Summarise two non‑financial advantages and two non‑financial disadvantages of converting to a private limited company.

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About This Question

This is Waec Model Questions Vol1 2019 Commerce Question 7. It is one of the essay questions from the 2019 Waec Model Questions Vol1 Commerce examination.

The question covers Business Organizations .

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