Questions, Suggested Answers

and Examiners Reports

June 2013

CONTENTS

Professional Programme I
Page
Strategic & Operations Management
Corporate Law
Financial Accounting
Management Accounting

Professional Programme II

Corporate Administration
Corporate Secretaryship
Corporate Financial Management
Corporate Governance

DISCLAIMER:
It should be noted that this booklet contains ‘suggested’ answers only; they are not model answers,
and are not exhaustive, but indicate what could have been achieved by a good candidate in the time
allowed. The aim is to provide students with guidance regarding what could be included in their
answers.
THE INSTITUTE OF CHARTERED SECRETARIES AND
ADMINISTRATORS OF NIGERIA

JUNE 2013 DIET: PROFESSIONAL EXAMINATIONS

STRATEGIC AND OPERATIONS MANAGEMENT

(Code: P101)

Tuesday Afternoon, 11th June, 2013

INSTRUCTIONS

1. Answer ALL questions in Section A. All questions carry equal marks.

2. Answer THREE (3) questions from Section B. All questions carry equal marks.
3. Time Allowed: 3 HOURS
4. Candidates are expected to show their workings using the inside page and the last
sheet of the answer booklet.
5. Candidates are forbidden from bringing phones into the examination hall.
6. Only non-programmable calculators are permitted for use in the examination.
 SECTION A
(Answer all questions in this section)
QUESTION 1
(a) Distinguish, using examples, between decision making and policy. (4 Marks)
(b) Highlight Schein Adaptive-Coping Cycle and the four conditions for successful coping.
(4 Marks)
(c) Henry Mintzberg suggested five ways in which the concept ‘strategy is used.
Enumerate any four of these give ways. (4 Marks)
(d) Enumerate the characteristics of:
(a) Vision Statement and
(b) Mission statements. (4 Marks)
(e) Organizations need to properly prepare to face the demands of a changing environment.
Identify any four ways in which change can be initiated in an organisation (4 Marks)
(f) According to Drucker, managers need four types of information. Indentify these four types
of information and explain briefly what each entails (4 Marks)
(g) Highlight eight ways to make written or oral communications more effective. (4 Marks)
(h) Explain the Concept of Capacity Planning in terms of long-term and Short-term Strategies.
(4 Marks)
(i) Using Abraham Maslow’s Theory, explain the concept of ‘Motivation’ (4 Marks)
(j) Operations management deals with the systematic direction and control for the processes
that transform resources into finished goods/services for clients/customers. Use a
diagrammatic model to illustrate the basic transformation model (4 Marks)
(Total: 40 Marks)

SECTION B
(Answer THREE questions from this Section at least One (1) each from Part I and Part II )
PART I: STRATEGIC MANAGEMENT
QUESTION 2
“Planning and control task requires the reconciliation of supply and demand in terms of volumes, in
terms of timing, and in terms of quality. To reconcile volume and timing, three distinct, though
integrated activities are performed: Loading, Sequencing, Scheduling”. Nigel Slack et al, (1995),
“Operations Management”

Critically evaluate this statement. (Total: 20 Marks)

QUESTION 3
Assuming you are the manager of an organization and you have to formulate strategies to achieve
organization objectives.
(a) Itemize the three levels of strategy needed in an organization. (3 Marks)
(b) Discuss briefly any two (2) of the three (3) levels of strategy itemized above. (11 Marks)
(c) Select an organization and use a diagrammatic model to summarize the three (3) levels of
strategy. (6 Marks)
(Total: 20 Marks)

PART II: OPERATIONS MANAGEMENT

QUESTION 4
Discuss what constitutes quality, speed, dependability and flexibility using a unit of your choice, e.g.
a University library, a hair dresser, to buttress your explanations. (20 Marks)

QUESTION 5
The production process is one by which goods and services are brought into existence.
Write a brief account of the planning and operating decisions which the production manager is likely
to encounter in a business which manufactures toy motor cars. (20 Marks)

QUESTION 6
Write brief notes on any six of the following:-
- Management Audit
- Distinction between Objectives and Strategies
- Industrial Democracy
- The Difficulties of Productivity Measurement
- The Marketing Mix
- Quality Circles
- Social Responsibility of Management
- Total Quality Management (TQM)
- Just –In-Time (JIT)
(Total: 20 Marks)
 STRATEGIC AND OPERATIONS MANAGEMENT
MARKING GUIDE
SECTION A
QUESTION 1
(a) 4 Marks:
– Policy: 2 Marks
– Decision making: 2 Marks
Policy formulation and decision making are the first steps in management. A policy is a
general statement that provides guidelines for management decision-making. Policy is very
much essential for planning a course of action. It supplies that planner with necessary
guidance to achieve the desired objectives. For example, not to business with certain
organizations because of their political affiliations to offer five-year guarantees on all
products sold and to give money back to customers with valid complaints or to promote
managers from within the organization, wherever possible. These appear to be long-term in
focus but concerned largely with the internal operation of the organization.

Decision-making is the most important function of any manager. Decision-making pertains to

all managerial functions. The Collins English Learners Dictionary, (1974) defines decision as
“the act of deciding, reaching an opinion after thought”. Most people agree that decision-
making is the process of selecting a course of action form among many alternatives. The
process involves-
- Objectives to be achieved are determined;
- Alternative ways of achieving the objectives are identified;
- Each alternative is evaluated in terms of its objective – achieving ability and
- The host alternative is chosen.

(b) 4 Marks
- 2 Marks: Highlight of Schein Adaptive – Coping Cycle
- 2 Marks: The four Conditions for coping
Schein has described an adaptive - coping cycle that is helpful in organizational diagnosis.
This cycle is the sequence of activities or processes that begins with some change in the
internal or external environment and ends with a more adaptive dynamic equilibrium for
dealing with the change. There are six stages of the cycle:
 - Sensing a change in the internal or external environment
- Importing the relevant information about the change into those parts of the
organization that can act on it.
- Changing activities inside the organization according to the information obtained.
- Stabilizing internal changes while reducing or managing undesired by-products.
- Exploring new products, services or methods that are more in line with the originally
perceived changes in the environment.
- Obtaining feedback on the success of the change through further sensing of the
state of the external environment and the degree of integration of the internal
environment.
From these stages of the cycle, Schein indicates four conditions for successful coping,
conditions that are very similar to the ultimate criteria of organizational health:
- Ability to take in and communicate information reliably and validly;
- Internal flexibility and creativity to make changes that are demanded by the
information obtained;
- Integration and commitment to the goals of the organization, from which comes the
willingness to change and
- An internal climate of support and freedom form threat.

(c) The four ways in which the concept ‘strategy’ is used as suggested by Mintzberg are:--
i. Strategy as a plan (1 Mark)
ii. Strategy as play or manoeuvre (1 Mark)
iii. Strategy as pattern (1 Mark)
iv. Strategy as position (1 Mark)
v. Strategy as perspective (1 Mark)
1 Mark each for Maximum of 4 = Total (4 Marks)
(d) 4 Marks:
- 2 Marks: Definition & Characteristics of Vision Statement
- 2 Marks: Definition & Characteristics of Mission Statement
Vision is an image of how the organization sees itself, a dream, a mental image of the future
state, a long term intentions.
Characteristics of Vision Statement are:
- A dream that is shared across the entire organization
- Inspiring, motivating and challenging
 - ‘A Slogan’ – it could be encapsulated in an actionable slogan.
- Easily communicated and shared among the whole organization and its stakeholders.
- An organizational charter of core values and principles.
- The ultimate source of priorities, plans and goals
- A pillar (not pusher) into the future
- A determination and publication of what makes us unique
- A declaration of independence.
Mission Statement as defined by Thompson, (1997) is “the essential purpose of the
organization concerning particularly why it is in existence, the nature of the business (es) it is
in and the customers it sucks to serve and satisfy”. Mission occupies a definite place as a part
of strategic intent.
Characterizes of a Mission Statement are:
- It should be feasible, realistic and achievable
- It should be precise, but not so narrow as to restrict the organization’s activities.
- It should be clear enough to lead to action.
- It should be motivating for members of the organization and the society.
- It should be distinctive. A mission statement which is indiscriminate is likely to have
little impact.
- It should indicate the major components of the strategy to be adapted.
- It should indicate how objectives are to be accomplished, i.e. should provide dues
regarding the accomplishment of the objectives.
(e) Change can be initiated in organization through:
i. Deliberate initiation by managers (1 Mark)
ii. Evolve slowly within a department (1 Mark)
iii. (Be imposed) imposition by specific changes in policy or procedures (1 Mark)
Through external pressures (1 Mark)
(Total = 4 Marks)
(f) Types of information as identified by Drucker are:-
i. Foundation Information
ii. Productivity Information
iii. Competence Information
iv. Resources Allocation Information
- Foundation information are those types of information that tend to report when
things go wrong. (½ Mark)
 - Productivity information are developed for service work. (½ Mark)
- Competence information are concerned with what organizations of best i.e. their
expertise. (½ Mark)
- Resources allocation information explains how resources are used. (½ Mark)
(Total = 4 Marks)

(g) 4 Marks
Two points will fetch one mark. Therefore, eight points will fetch 4marks.
Candidates are expected to mention any of the following ways to make written or oral
communication more effective:
- Avoiding the use if jargon
- Listen attentively; find areas of common interest, listen for main ideas
- Withhold value judgements about context or delivery, until strategically appropriate.
- Plan ahead; be prepared; avoid impromptu situations if possible.
- Keep messages brief.
- Attend to behavioural cues as well as language or diction.
- Avoid stereotyping and the assignment of individuals or ideas to rigid categories.
- “Small talk” has a function, but be aware of mis-using it by taking it literally.
- Distinguish between the desire to known and the need to know.
- Distinguish among facts, references, and conclusions.
- Say what you mean or fuel, but use judgement in how you do so.
- Avoid attributing motives to others.
- Say enough, but leave some things unsaid.
- Don’t shun all conflict but avoid unnecessary conflict.

(h) 4 Marks:
2 Marks- Concept of capacity planning in terms of long-term strategies.
2 Marks - Concept of capacity planning in terms of short-term strategies.
Capacity is a measure of the ability to produce, or serve that is, having enough worker or
equipment, time to do the job.
Capacity planning is concerned with defining the long term and short term.
Capacity needs of the organization and determining how those needs will be satisfied.
Long-term capacity planning strategies usually take more than a year to implement. It
(i) 4 Marks
Candidates are expected to draw motivation diagram (one mark) while the explanation will
fetch 3 Marks

NEEDS
FOR
SELF-
ACTUALIZATION

ESTEEM NEEDS

SOCIAL NEEDS

SAFETY/SECURITY NEEDS

PHYSIOLOGICAL NEEDS

Hierarchy of Needs

Candidates are expected to explain each needs and state Maslow’s motivation Theory.

(j) Diagrammatic Model of the Basic Transformation Model

Transformation Process Input

Input

Feedback

1 Mark Each for Each Component in the Diagram (Total = 4 Marks)

SECTION B
QUESTION 2
20 Marks:
Introduction - 3 Marks
Main Context - 15 Marks (Loading, Sequencing & Scheduling)
Conclusion - 2 Marks
The following are illustrations:
Planning and Control task requires the reconciliation of supply and demand in terms of volumes, in
terms of timing and in terms of quality. The purpose of planning and Control is to ensure that the
operation runs effectively and produces products and services as it should do.
To reconcile volume and volume and timing, three districts, though integrated activities are
performed:
Loading: Loading determines the volume that an operation can cope with. Loading is the amount of
work that is allocated to a work centre. The machine cannot work all the time. It may not be
available on statutory holidays, weekends and time may be lost while changing over from making
one component to another. The machine may also need cleaning between operations before
another can be started. These lost times must be taken into account when a plan is formed of how
much work can be loaded on to the machine. There are two main approaches to loading operation –
finite and infinite loading.
Finite loading is an approach which only allocates work to a work centre (A person or machine, or
may be a group of people limit is the estimate of capacity for the work centre based on the times
available for loading.
The diagram below shows the illustration.
Loads in Standard
Hours

140

120
Capacity
100

80

60

40

20
0
Work Centers
FINITE LOADING
Infinite loading is an approach to loading work which does not limit accepting work, but instead tries
to cope with it. Infinite loading is relevant for operations where:
- It is not possible to limit the load;
- It is not necessary to limit the load;
- The cost of limiting the load is prohibitive

Below is a diagram showing

Loads in Standard Hours

140

Capacity
120

100

80

60

40

20
0
Work Centers
INFINITE LOADING
Sequencing:
Whether the approach to loading is finite or infinite when work arrives, decisions must be taken on
the order that the work will be tackled. This activity is termed sequencing. The priorities given to
work in an operation are often set by some predefined set of rules which include customer priority,
due date, Last-in-First-In-Out (LIFO), and First-In-First-Out (FIFO).
Operations will sometimes allow an important or aggrieved customer to be processed prior to
others.
Prioritizing by due date means that work is sequenced according to when it is ‘due’ for delivery,
irrespective of the size of each job or the importance of each customer.
LIFO is good for unloading and elevator but it is not an equitable approach.
This is contrary to FIFO basis.

Scheduling:
Having determined the sequence that work is to be tackled in, some operations require a detailed
timetable showing at what time or date jobs should start and when they should end. Schedules are
familiar statements of volume and timing in many consumer environments. For example, a bus
schedule shows that more buses are put on routes at more frequent interval during rush-hour
periods. The bus schedule shows the time each bus is due to arrive at each stage of the route.
Scheduling could be forward and backward scheduling or push and pull scheduling.
The volume and variety position of an operation has an effect on the nature of its planning and
control.

QUESTION 3
(a) The three levels of strategy are:-
i. Operational Level 1 Mark
ii. Business Unit Level 1 Mark
iii. Corporate Level 1 Mark

(b) - Operational Level Strategies:- These are concerned with how the component parts
of an organization such as resources, processes, people and their skills effectively
deliver the business unit level and corporate level strategies. These include
strategies in the functional areas of a business such as: Production, Marketing,
Finance and Personnel. (5½ Marks)
- Business Unit Level Strategies:- These are concerned with how an organization can
compete successfully in a particular market. They deal with strategic business unit
(SBU) i.e. a part of the organization for which there is a distinct external market for
goods or services. These types of strategies deal with how a business can succeed in
a particular area. (5½ Marks)
- Corporate Level Strategies:- These are concerned with the overall purpose and
scope of an organization to meet the expectations of owners of major stakeholders
and add value to the different parts of the organization. The publicly quota
companies, corporate level strategies are highly influenced by the expectations of
shareholders and the stock market. (5½ marks)
5 ½ Marks for Maximum of two: - Subtotal (11marks)
 (c) Diagrammatic Model of the Levels of Strategies

XYZ PLC
Corporate Strategies

XYZ PLC Business Unit Strategies XYZ PLC

Consumables Motors

Functional Level
Strategies
Personnel Production Marketing Finance

2 Marks for Each Level = (Subtotal = 6 Marks) (Total = 20 Marks)

QUESTION 4
20 Marks:
Explanations on Quality (4marks); Speed (4marks); Dependability (4marks); and Flexibility
(4marks).
The use of Case Study (a unit) to Elucidate or Inform Opinion (4 Marks)
Typical, expected, answer should look as follows:
For any organization which wants to succeed in the long term the contribution of its operations
function is vital. It gives the organization an ‘operations-based advantage’. It does so through five
basic ‘performance objective’:
Doing things right gives a quality advantage
Doing things fast gives a speed advantage
Doing things on time gives a dependability advantage
Changing what you do gives a flexibility advantage
Doing thing cheap gives a cost advantage.
Quality: Quality performance in an operation not only leads to external customer satisfaction but
also internal customer. It reduces costs and increases dependability. In an automobile factory quality
means that car is made of specifications and is reliable. Visually the car should look attractive and be
blemish and scratch free.
Speed: is concerned with how long customers have to wait to receive their prwas service, the more
likely he or she is to buy it. For the super-market manager, speed means how fast customer can get
to the store, park their cars, select their purchases, get through the check-out, return to their cars
and arrive back home or office. Speed reduced incentives, speed reduced risks.
Dependability Objective: Dependability means doing things in time for customers to receive their
goods or services when they were promised. A hospital with a high standard of dependability would
not cancel operations or any other appointments made with its patients. It would always deliver the
results of tests and X-ray investigations, for example; on time and keep to schedule on its
immunization programmes. Dependability saves time, saves money and gives stability.
Flexibility: Flexibility means being able to change the operation in some way. This may mean
changing what the operation does, how it is doing it, or when it is doing it, but change is the key
idea. Specifically customers will need the operation to change so that it can provide four types of
requirement:
- Product/service flexibility - different products and services
- Mix flexibility - a wide range or mix of products or services
- Volume flexibility - different quantities or volumes of products and services
- Delivering flexibility - different delivery times.
Flexibility speeds up response, saves time, and maintains dependability.
Others - Cost Objective
Companies would aim at keep cost of production low- to the minimum. Other associated costs are
staff costs; facilities; technology and equipment costs; materials costs and cost of fund.

QUESTION 5
20 Marks
Candidates are expected to express their knowledge on decision-making and strategic planning
decisions in a toy car manufacturing firm as a model.
The basic features of management decision-making are the same, no matter whether a manager
specializes in production, selling, purchasing or any other operating function.
Similarly, the decisions of a production manager in a toy car manufacturing business are the same as
the decision of a production manager in a different type of manufacturing business.
If we assume that the production manager is fairly senior in the management hierarchy, it could be
presumed that he would be involved in strategic decision-making budgeting and weekly or daily
production planning and control.
Planning new products: while the Engineering manager plan on research and design but with
consultation with the production manager, the latter would be involved in decisions to develop
existing products, promotion method and timing / duration of promotion.
Deciding capital expenditure plans.
The production manager will make recommendations about capital expenditures, e.g. re-sitting
production plant, introducing new production technology, replacing worn-out plant.

Quality of Products: This is a key factor in the marketing mix. Strategic decision on target market, the
choice of balance between quality and price will have to be made with the involvement of the
production manager.

Decision to shut down a plant, or to ‘rationalize’ production so as to achieve lower costs or greater
efficiency, are either strategic or ‘budgeting’ decisions.
The production manager will be involved in production budgeting decision. The budget will focus on
quantity or volume to be made, resources required, costs, labour and machine time.

Control decisions might involve some strategic control, i.e. monitoring the success or failure of the
organization in achieving its strategic plans.

Budgeting control involves a comparison of actual results against the budget plan, and highlighting
of excessive variances which might indicate that control action is required on improving efficiency,
labour productivity, expenditure levels, reducing time lost idle, improving capacity utilization of the
plant or quality control.

QUESTION 6
20 Marks at 3 Marks for each chosen sub-question. 2 Marks for Citation of Authorities or
Illustration using Practical Example or Diagram. Candidates are nevertheless to explain each in
full. Hence, are some tips?
- The Management Audit
The auditing process is concerned with the independent checking of performance after
implementing various decisions. It specially represents a process of assessing the overall
management system of an organization – finance, marketing, accounting, personnel,
production stores, organizational structure, organizational climate, environment, policies,
rules, quality, purchasing, corrective actions, management/directors effectiveness.
It’s a way of evaluating all indices of the organization.
- Objectives and Strategies
The objectives and strategies are different, but related, elements of the planning process.
- Objectives: The objectives of an organization represent the focus of all organizational
activities. Objective setting is additionally a necessary requirement to the maintenance of
control in an organization, as it leads to the establishment of expected standards of
performance and suggests forms of corrective action where necessary.
- Strategies: Strategies are directly linked with objectives- they represent programme of
action which are designed to achieve the stated objectives. While objectives are the end-
point of the planning process, strategies are intermediary elements where decisions about
resources are pronounced.
- Industrial Democracy
Describes a system of organization in which workers are entitled to participate, directly or
indirectly, in some of the decisions ‘traditionally’ taken by management alone. This is infact a
form of ‘worker participation’ and in consonant with MBO. A form of industrial democracy
might be introduced into an organization as a result of worker or trade union pressure for
reform.
- Productivity Measurement
Productivity is the rate of output of a product or service per unit of input resource. A
productivity measurement can be applied to any of the factors of production – labour,
capital, land. Typically, a measure might be taken of units of output per man—hour or per
machine hour. The reasons for measuring productivity are usually for control purposes on
standard and efficiency, to gauge whether new methods of working have succeeded in
improving productivity, to make bonus payments to the workforce based on improvements
in labour productivity.
- The Marketing Mix
The term ‘marketing mix’ was coined by Borden of Harvard Business School to show range of
marketing decision and elements which must be balanced to achieve maximum effect. The
elements in the marketing mix are the selling mix, (advertising, promotion, branding,
packaging, merchandising, distribution policy, personal selling); balance between a ‘push’
and ‘pull’ policy of selling; price policy; research and development; product design and
quality; credit policy, after sales service. Ferome McCarthy came up with the 4Ps – Product,
Place, Promotion and Price.
- Quality Circles
It is a system to improve quality by a reduction in errors. It involves participation of groups of
supervisors and operatives in an organization to barnstorm on quality improvement. Training
is given simultaneously.
- Social Responsibility of Management
Management has a social responsibility to ensure that their action and behaviour conform to
the needs, values and culture of the society of which they belong. It involves acceptable
ethical practices, ecology and environment protection, provider of jobs; improve working
condition for employees, community support.
- Total Quality Management (TQM)
Candidates are to define ‘Quality’; TQM audits elements, i.e. Total, Quality and
Management.
Definition of TQM should contain four key implications, involving everyone, continuous
improvement, identification of customer needs, using tools. Others getting it right-first-time
and always, continuous improvement and actual introduction of TQM in an organization.
- Just-In-Time (JIT)
JIT is similar to MRP (Material Requirements Planning). It is widely used in line manufacture
and assembly system. The purpose is to minimize stocks of WIP and to ensure flow of
production process.
They characteristics of JIT are replenishment of inventory from time-to-time and wider one
placed when inventory fail to re-order level and delivery follows a delay called the delivery
lead time. There must be supplier-delivery efficiency, no queued, no warehouses constraints.
JIT does aim to product parts and products just-in-time for them to be needed by customers
– not earlier than they need them and not later than they need them.
 INSTITUTE OF CHARTERED SECRETARIES AND
ADMINISTRATORS OF NIGERIA

JUNE 2013 DIET: PROFESSIONAL EXAMINATIONS

CORPORATE LAW
(Code: P102)

Wednesday Afternoon, 12th June, 2013

INSTRUCTIONS

1. Answer ALL questions in Section A. All questions carry equal marks.

2. Answer THREE (3) questions from Section B. All questions carry equal marks.
3. Time Allowed: 3 HOURS
4. Candidates are expected to show their workings using the inside page and the last
sheet of the answer booklet.
5. Candidates are forbidden from bringing phones into the examination hall.
6. Only non-programmable calculators are permitted for use in the examination.
 SECTION A
(Answer all questions in this section)

QUESTION 1
(a) Briefly explain the principle that shareholder do not owe any fiduciary duty to the Company
(4 Marks)
(b) Explain how a director may be appointed by way of casual vacancy. (4 Marks)
(c) Distinguish between compensation and damages in respect of ceasing to hold office as a
director. (4 Marks)
(d) Briefly explain the division of powers within a company. (4 Marks)
(e) Mention the circumstances under which investigation into the affairs of a Company may be
made by the CAC. (4 Marks)
(f) What do you understand by the power of the Commission to strike off defunct companies?
(4 Marks)
(g) Who is an Official Receiver? (4 Marks)
(h) Explain the main distinctions and similarities between a registered company and a partnership
. (4 Marks)
(i) Differentiate between nominal share, issued shares and paid up shares.
In what ways is Debenture Capital different from a Share Capital (4 Marks)
(j) What do you understand by winding up of a company and what are the legal consequences of
winding up? (4 Marks)
(Total: 40 Marks)

SECTION B

(Answer THREE Questions from this section)

QUESTION 2

Kayode , Kenke and Kole are shareholders of Kako Plc.The Company has not declared dividends for
the past two years despite the huge profits it has made because the directors have decided to
capitalize all its profits for future growth and expansion. Kole who has been in the United Kingdom
for a while believes that the Company ought to pay him interests on his unclaimed dividend while he
was away. Kayode’s wife, Titi is the sales director of the Company and according to her contract of
service she is entitled to N500, 000 per annum out of the profit of the Company. The Board has
however refused to pay for the past two years that dividends have not been declared.
(a) Briefly re-state the Law on Distribution of profits as stipulated in the Companies and Allied
Matters Act. (10 Marks)

(b) Advise Kole and Titi on their complaints. (10 Marks)

(Total: 20 Marks)

QUESTION 3
Frontline Persons Assets Limited was incorporated in 2009. The Chairman/Managing Director of the
Company was named in the Articles of Association as the Chairman/Managing Director.
All the Executive Directors of the Company including the Chairman/Managing Director have
executed service contracts with the Company which guarantees their salaries and allowances which
the shareholders consider excessive. The company has not been doing well due to executive fraud,
management squabbles and incompetence.
BGS Limited, a technical core investor, who has just acquired majority shareholdings in the company,
was able to secure the removal of all the executive directors at a general meeting of the Company.
New directors were appointed to replace them at the same meeting.
(a) Discuss the provisions of the law in respect to the remuneration of Executive and Non-
Executive Directors. (10 Marks)
(b) Comment on the removal of all the Executive Directors. (10 Marks)
(Total: 20 Marks)

QUESTION 4
The Central Bank of Nigeria (CBN) has abolished the Universal Banking System which allowed banks
to have non-banking subsidiaries.
However non-banking subsidiaries can still be retained by banks under a holding company structure
if such banks are granted licence to operate a holding company by the CBN.
Apple Bank Plc has been granted licence to operate a holding company by the CBN under the
restructure arrangement of the Bank 40% of its shares would be cancelled under a Scheme of
Reduction while the 60% remaining shares would be exchanged for shares in Apple Hold Plc at the
rate of 3 shares in Apple Bank Plc for 1 share Hold Co. Plc.
Required
(a) Explain the process of Reduction of Share Capital under CAMA. (10 Marks)
(b) Arrangement and compromise is only used for share restructuring under CAMA.
Discuss (10 Marks)
(Total: 20 Marks)
QUESTION 5
Explain any two (2) of the following as they relate to the management and operation of a company.
(a) Transfer and transmission of shares (10 Marks)
(b) Meetings of a company (10 Marks)
(c) Rule in Foss V. Harbottle (10 Marks)
(Total: 20 Marks)

QUESTION 6
Adamu operate a one-man business and retail store in down-town Lagos. The highly successful
commercial outfit services, the needs of the residential quarters, government offices and many
commercial organizations in the neighborhood. On one occasion, Adamu visited a nearby
Recreation Club to relax and further publicise his business. There, he met Barrister Joachim, his age-
long childhood friend who counseled him extensively on the dire need to transform his (Adamu’s)
business activities. He strongly advised him to subscribe to and incorporate a limited liability
company. Adamu took to the advice and would require further enlightenment and guidance on the
modalities for the transformation.
Required:
Outline the various processes for the formation and incorporation of a limited liabilities company
and the consequences of incorporation. (Total: 20 Marks)
 CORPORATE LAW
MARKING GUIDE
SECTION A

QUESTION 1
a) Briefly explain the principle that shareholder do not owe any fiduciary duty to the
company.
As a shareholder may use their voting rights in a general meeting as they wish subject to any
specific provisions of the law. For instance majority shareholders must not act unfairly
towards minority shareholders may have regard to their own interests while voting directors
who owe fiduciary duty to the company must have regard to the company by acting in good
faith towards it in their dealings with the company.
Shareholders on the other hand may enter into a contract arrangement to vote in a
particular way.
b) Explain how a director may be appointed by way of casual vacancy.
A director may be appointed by the board of directors to fill any casual vacancy arising out of
death, resignation, retirement, or removal of a director,
Where a casual vacancy is filled by the board the director appointed must be approved by
the next annual general meeting in order to continue in meeting.
c) Distinguish between compensation and damages in respect of ceasing to hold office as a
director.
Compensation is non-contractual while damages are paid based on the breach of a contract.
Compensation for loss of office must receive the approval the general meeting while
damages does not meet such approval because the director is lawfully entitled to it if his
service is terminated in breach of his contract of service
d) Briefly explain the division of powers within a company.
Power in a company is shared between two organs the general meeting and the board of
directors.
However the business of the company shall be managed by the board which can exercise all
powers of the company that are not specifically reserved for the members in the general
meeting.
The respective powers of the board and the general meeting are as stipulated in the articles.
e) Mention the circumstances under Which investigation into the affairs of a company may
be made by the corporate Affairs Commission (CAC)
 Investigation may be carried about the affairs of a company in the following
circumstances:
 On the application of members holding not less than ¼ of the issued share capital or
membership of a company.
 On application of the company
 On the direction of the courts
 By the Corporate Affairs Commission
f) What do you understand by the power of the commission too strike off defunct
companies.
Where the CAC has cause to believe that a company os no longer in operation, it may send a
letter by post enquiring if the company is carrying on business,
If no response is received within a month, the CAC shall within 14 days send another letter
and if no response is received or if a response that the company is no longer in business is
received within a month, it shall publish a notice in the gazette with a view to striking off the
company from the Register.
The company would be struck off, the Register of Companies within 3 months of the Notice
and the company shall be dissolved.
The same situation applies when a company is being wound up and the CAC has cease to
believe that the liquidator is no longer acting.
g) Who is an official Receiver?
An official receiver is the deputy chief registrar to the federal high court or an officer
designated for that purpose by the chief judge of the federal high court. The official receiver
may be appointed as a liquidator or provisional liquidator in the event of winding up by the
court.
h) Explain the main distinctions and similarities between a registered company and a
partnership
A company is a separate legal entity established by process of registration while a
partnership is formed by a written agreement.
ii) Under a company, liability of members is limited whereas it is unlimited under
partnership unless the partnership agreement provides other wise.
 iii) In a company, control and management is done by the board of directors whereas
under partnership each partners may participate except under limited partnership.
Essentially a partner is an agent of the other.
iv) The procedure for the incorporation of limited liability company is more expensive
and cumbersome than the makeup of a partnership agreement.
v) A company has perpetual succession whereas a partnership ceases upon the death
of a partner.
vi) A company is affected by the ultra vires doctrine whereas partnership has nothing of
such as it could get involved in any trade or business conceivable.
vii) Company’s books of accounts and other document are subject to pursue something
but this does not happen in partnership.
viii) Registered company and partnership are outfits for purpose of trading and making
profits.
i) Differentiate between nominal shares, and paid up shares. In what ways is Debenture
Capital different from a share capital,
i) Nominal Capital
This is the capital that is stipulated in the memorandum on registration and which
the CAMA provides shall not be less than N5,000,000 for public companies
respectively.
ii) Issued Shares
This is the number of shares actually allocated to shareholders in return for a
consideration in cash or kind. Issued share capital cannot be reduced except
through the procedure stipulated in the CAMA
iii) Paid Up Share Capital
This is part of the share capital paid for by the share holder at any given time in
response to a call. Calls must be made as regulated by the articles or as provided for
in the CAMA because any call made without due regards to the land down
procedures shall be prime facie invalid.

Debenture is a loan capital to company those granting the loan are more creditors to
and not members of the company.

A debenture is a document by which the company acknowledge its indebtedness for

a loan of money. The document usually states that a specific sum is repayable on a
certain date with a fixed rate of interest.
 Debentures are often secured by a change on the assets of the company. The
change may be floating or fixed( specific). It is floating when it attaches to the
subject changed in the varying conditions that object happens to be from time to
time. A fixed or specific change ‘’is one that without more fastens on ascertained
and definite propriety capable of being ascertained and definite’’ Advantage of
floating debenture over a fixed debenture is that with the floating debenture the
company can realize, mortgage or even dispose of the property charged in the
ordinary course by business without the consent of the debenture holder. A fixed
debenture ranks in priority over floating debenture.

The CAMA classified debenture into perpetual convertible secured or naked and
redeemable debentures rights of debenture holders include right to sue the
company or trustee, the right to attend debenture holders’ meeting (s.176 CAMA)

A debenture holder is also entitled to remedies which include ability to sue for his
property and may also sue for the winding up of the company. if he is a secured
debenture holder he may appoint a receiver purchase sell value his security and
proof for the balance

A charge a debenture must be registered with the CAC. If unregistered it is void

against the liquidator and any of the company’s creditors
j) The dissolution of a company as what is called “winding up”. The winding up phenomenon
terminates its characteristic feature of perpetual succession. Sections 401-536 of CAMA
contains the main provisions for winding up. This is done by means of petition to court.
Section 401 provides for three modes of winding up as follows:
(i) Winding up by the Court
The Federal High court has exclusive statutory jurisdiction for winding up a company
under the following circumstances.
(a) Where a company by special resolution requests to be wound up.
(b) Where membership is reduced t below two
(c) Where the company fails to deliver statutory report to the CAC or fails to hold
statutory meeting.
(d) Where the company is unable to pay its debts
(e) Where in the court’s opinion, it is just aid equitable to wind up the company
 (ii) Voluntary Winding Up
A company may decide to voluntarily wind itself up under the following situation.
(a) Special resolution by the company
(b) Where it is operating at a loss and there is no hope of recovery
(c) Persistent lack of raw materials for production
(d) Lack of market for its products
(e) Where the period fixed for the duration of the company expires
(iii) Winding up subject to supervision of the court
Sections 486-490 of CAMA provides for this. It is a voluntary winding up by order of
court that subsequently become subject to the supervision of the court. The court
then appoints an additional liquidator. The liquidator is free to exercise his powers
provided the works within the limits allowed by the court as to the payment of
creditors, compromise or arrangement with creditors and contributions.
Upon the completion of the winding up processes all secured and unsecured debts
are taken care of appropriately. The CAMA recognizes certain preferential payment
which should have priority over all other debts and those must be paid in full.
Secured auditors take often preferential creditors followed by creditors with floating
charges, then unsecured creditors and finally contributories.

Legal consequences of winding up

 The company ceases to exist i.e. it is dissolved
 All debts, to the extent that the values realized from assets do not cover them, are
extinguished
 All employees are disengaged
 All proceedings in cases against the company and those instituted by the company
cease.
 The name is stuck off the register by the CAC when the winding up order is
presented.

SECTION B
QUESTION 2
(a) Dividends may only be declared at a general meeting of the company on the
recommendation of the directors. The general meeting may however decrease the amount
recommended by the directors. Interim dividends may be paid by directors as justified by
the profit of the company. Dividends may be paid only out of the following profits.
  Profits arising from the use of the company’s property.
 Revenue reserves realized profit on sale of fixed assets.
A company shall not declare dividend if there are reasonable grounds that the company
would not be able to pay its liabilities. When they become due unclaimed dividends do not
attract interest but where there is an omission to send dividend due to the fault of the
company dividend shall be paid.
Part of the distributable profit may be set aside as reserve and capitalization. Dividends may
not be paid out of capital and any director involved in such payment shall be personally
liable to repay
Dividends are special debts due to and recoverable by shareholders within 12 years. They
are however actionable only when declared. Sec. 379 - 385

(b) Kole is not entitled to interest on his unclaimed dividends 382(1)

If an employee is entitled to share in the profit of a company as an incentive he or she shall
be so entitled whether dividend has been declared or not Section 384 CAMA. Titi is entitled
to her commission.

QUESTION 3
(a) This can be determined by the contract of service or by Articles of Association. Section 268
provides that a Managing Director shall receive remuneration either by way of salary,
commission or participation in profits as may be determined by the directors.
Remuneration of Non-Executive Directors: A company shall not be bound to pay
remuneration, where remuneration is to be paid. It shall be determined by the general
meeting. Directors are however entitled to be paid travelling hotel and other expenses
incurred in attending meetings.

(b) Section 262 CAMA provides that a general meeting can by passing an ordinary resolution to
remove a director before the expiration of his time, provide that damages shall be paid if
there is any breach of contract.
Notice of intention to remove must however be given to the directors who should be
allowed to defend themselves or make representations at the meeting.
However, in this case the Chairman/Managing Director was named in the articles. He cannot
be removed except by a special resolution altering the articles to that effect.
QUESTION 4
(a) (i) Alteration of the articles where necessary to allow for reduction in share capital.
(ii) Prepare a scheme of reduction
(iii) Alter its memorandum by reducing the amount of its share capital
(iii) A special resolution must be present at a general meeting of the company for the
resolution of the capital.
(iv) An application must be made to court for confirming the order. If order is confirmed
it must be registered by the commission along with the minutes of meeting in which
the reduction was made.

(b) An arrangement or compromise is a comprise arrival at between a company and it members

or between a company and its creditors.
It involves change in the right and liabilities of members and creditors and debenture
holders. It can be used for share restructuring or variation of class rights whereby e.g.
preference share holders are made to take ordinary shares in the company or shareholders
in a transfer or company are offered lesser number of shares in a transferee company.
However, arrangement and compromise goes beyond share restructuring as it can be used
in a debt-equity swap whereby creditors such as debenture holders can exchange their
interest for shares in the company. It can be used in transfer of undertakings and mergers in
which the whole or any part of the undertaking or property of the transfer company is
transferred to the transferee company.

QUESTION 5
(a) Transfer of Shares
- Shares are transferable from one holder to another. Transfers can be done “inter
vivos” (While alive). Transfers: -
(i) Are governed by the Articles of Association
(ii) Need not be by deed
(iii) Must be in writing signed by transfer or and properly stamped
(iv) Must also be signed by Transferee
(v) Must be registered
- Right to transfer may be restricted by the Articles which may give the Directors
power to refuse transfer
- Refusal must be authorized by the Board’s resolution
- Transferee must be notified of refusal in good time
 - Transfers made during winding-up process are void
- Certification of transfer must be done
- Forged transfers are not permissible.

Transmission of Shares
A transmission of shares is a transfer by operation of law and effected by:
i) Death: Personal Representatives or the Estate may be liable
ii) Bankruptcy: Trustee may sell or transfer shares
iii) Lunacy: There should be evidence of title
iv) Marriage: Shares are personal properties of women
v) Appointment of new trustees
- Generally transmission occurs on death, lunacy and bankruptcy when the power to
transfer no longer exists and secures that there shall be someone entitled to the shares
held by the deceased bankrupt, in a representative capacity.

(b) Meetings of a Company

A company’s shareholders’ meetings are of three kinds: -
(i) Statutory
(ii) Ordinary and
(iii) Extra-Ordinary

Statutory Meeting: Section 211 of CAMA is to be held by every public company within 6
months of the incorporation.
- The object is to brief the shareholders on the position and prospects of the
company.
- Statutory report is compiled and sent to all shareholders at least 21 days before the
meeting. A copy is filed with the Registrar-General (CAC). Private companies are
excluded. Two Directors must certify the Report.
- Report must state among others, number of shares allotted and the consideration
paid. The total cash received for shares and the receipts of payments; names,
addresses and descriptions of directors, auditors, manager and secretary and
particulars of any contracts; list of members and particulars of shares held.
Resolutions are made while adjournments are done. Default in filming report or
 holding statutory meeting calls for hire and the company and officer in default shall
be guilty of an offence and liable to a fine.
- Ordinary Meetings: An Annual General Meeting must be held every calendar year
within 15 months of the previous one. The meeting may be called by the Directors’
resolution or on receipt of requisition. Businesses transacted at such meetings
include Auditors’ Report, Directors’ Report, Accounts, Declaration of Dividends,
Appointment and remuneration of Directors and Auditors, any special Business and
any ordinary Business.
- Extra-Ordinary General Meeting: This refers to other meetings than the ordinary
ones. Such meetings may be convened either by (a) resolution of Board of Directors
or (b) on requisition of members or (c) members holding at least one-tenth for such
paid up capital with voting rights. In the case of requisition, it must be signed by the
workers stating the object of calling the meeting. Directors must convene the
meeting within 21 days of receiving the notice failing which members requisitioning
the meeting may do so. A meeting convened according to rules cannot be postponed
by the Directors.
Generally, notices of meetings must be issued and Quorum must be formed in accordance
with the prescription in the Articles.
(c) THE RULE IN FOSS v HARBOTTLE
This is also referred to as the Doctrine of Majority Rule in Company Law. The rule was
propounded in the case of Foss v. Harbottle.
The principle is to the effect that if any wrong occurs in a company, it is the Company that
can bring action as regards such irregularity presented by the Directors.
Majority Rule and its existence of the Company’s separate legal personality produce an
important consequence. In Foss v. Harbottle (1843), the directors allegedly misapplied
company property. Two shareholders attempted to sue them for account to the company
but they could not because the company as the victim of the alleged misconduct was the
proper person to decide whether to sue or not.
There are however exceptions to the rule in Foss v. Harbottle:
a) It does not apply to “ultra vires” acts which by their nature cannot be ratified by the
majority
b) Minority shareholders can complain of a fraud on the minority
c) A bare majority cannot do something needing a larger majority
d) Individual members can always assert their personal rights
QUESTION 6
ADAMU & CO. LIMITED
Any two persons or more could form a company as per Section 18 CAMA. There are two types of
companies’ namely private company and public company.
Private companies have restrictions on transfer of shares and total membership should not be more
than 50 excluding employees. It cannot also issue prospectus.
A Public company on the other hand can issue prospectus, transfer shares and invite subscriptions to
its shares. Its powers and capacity are as stated in the Memorandum and Articles of Association. The
promotion of a company is done by a person who takes the necessary steps towards registration and
incorporation.
In this case, Adamu assumes the responsibility of a promoter. His duties include among others,
deciding the name, the objects, address and liability of members. He raises the capital and prepares
the Memorandum and Articles of Association. The Company is registered when all requisite forms
have been completed and lodged with the Corporate Affairs Commission (CAC). The Registrar –
General upon being satisfied issues a Certificate. Registration is not automatic because the CAC may
have cause to refuse to register a Company if it fails to comply with the provisions of the Companies
and Allied Matters Act (CAMA). Section 36
The following categories may be disqualified from the formation of a company. These among others
include infants of less than 18 years; persons of unsound mind and a bankrupt.
Registration implies that the company is incorporated and can commence business and trading
activities. It also means that the liability of members is limited by shares or by guarantee; and it
stipulates whether it is a Public or Private company. Upon Incorporation, the Company assumes the
status of a private person – Corporate Personality that is, a separate existence separate and distinct
from that of its Founders meaning that Adamu shall henceforth be separate and different from
“Adamu & Co. Ltd”. The Company also assumes perpetual succession unless it is wound up. It can
transfer or transmit its shares; borrow and lend out money in its own name.
The following documents are required to be delivered to the CAC for the purpose of Income:
a) Memorandum and Articles of Association
b) Notice of Address of Registered Office
c) A statement in the prescribed form containing the list of persons and their consents to be
first directors of the company
d) A statement of the Authorized Share Capital
e) If shares are allotted, the form and Return of Allotment
f) Evidence of payment of prescribed fees
 CORPORATE LAW
Examiner’s Report
General Comments
The result showed a remarkable improvement compared to previous examinations. All the
students from Port Harcourt passed the examinations while 60% of students from Lagos passed.
However, most of the students from Abuja failed the examination. Students are encouraged to
make in-depth studies and preparation before sitting for the examination. Performance would
have been better if the students had prepared very well.

QUESTION 1
Performance would have been better if the students had prepared well. were not able to show
a clear understanding of the issues.

QUESTION 2
The question required a detailed understanding of the law on distribution of profit, but the
students did not envisage that they could be required to demonstrate some in-depth knowledge
in that area.

Many of the students did not understand that they were required to address the issue of
unclaimed dividends in respect of Kole’s complaints. It appears they did not read the question
properly.
The question required an advice on the complaints identified in the question and not a general
advice; but the students thought otherwise.

QUESTION 3
Most of the students knew the difference between Executive and Non- Executive Directors but
could not articulate well the differences in the remuneration policy.

On the issue of removal of the Executive Directors, the students were expected to discuss the
principles enunciated in Section 262 CAMA whereby a Director could be removed at any time
before the end of his tenure subject to the payment of damages. Only few of the students
mentioned the principle in Section 262 CAMA and the damages for breach of contract.
QUESTION 4
Most of the students understood the (a) part of the question on Reduction of Share Capital. They
however performed poorly on the (b) part. The students could hardly define “Arrangement” and
“Compromise” and those who did could not relate it to Share Restructuring.

QUESTION 5
This question was popular among the students and they performed reasonably well.

QUESTION 6
Many of the students attempted this question and performed reasonably well.

----------------------------
Mrs. Motunrayo Egbe
 THE INSTITUTE OF CHARTERED SECRETARIES AND
ADMINISTRATORS OF NIGERIA

JUNE 2013 DIET: PROFESSIONAL EXAMINATIONS

FINANCIAL ACCOUNTING
(Code: P103)

Tuesday Morning, 11th June, 2013

INSTRUCTIONS

1. Answer ALL questions in Section A. All questions carry equal marks.

2. Answer THREE (3) questions from Section B. All questions carry equal marks.
3. Time Allowed: 3 HOURS
4. Candidates are expected to show their workings using the inside page and the last
sheet of the answer booklet.
5. Candidates are forbidden from bringing phones into the examination hall.
6. Only non-programmable calculators are permitted for use in the examination.
 SECTION A
(Answer all questions in this Section)

QUESTION 1
(a) Distinguish between reserves and provisions. (4 Marks)
(b) In the published accounts of Dokun Nigeria Limited. The profit for the period is N35,000,000.
The balance of retained earnings at the beginning of the year was N500,000. If dividends of
N2,500,000 were paid. What is the closing balance of retained earnings? (4 Marks)
(c) State four (4) sources of income for non-trading organizations, e.g. football club. Identify the
main source.
Also give the special names for (i) profit, and (ii) loss, of this type of organization. (4 Marks)
(d) The following are extracts from the financial statements of Atanda Nigeria Limited for the
year 2000.
N
Sales 2,500,000
Gross Profit 1,250,000
Net Profit before Taxation 750,000
Tax for the Year 225,000
Working Capital 190,000
Current Liabilities 380,000
Shareholders’ funds 2,625,000
Closing Stock 180,000

You are required to calculate the following ratios:

(i) Mark-up;
(ii) Returns on capital employed;
(iii) Working capital ratio;
(iv) Quick-asset ratio; (4 Marks)
(e) Gbajumo Plc has always prepared its Financial Statement to 31 December each year. The
company complied with International Financial Reporting Standard (IFRS) and then prepared
its first IFRS Financial Statements. These statements show comparative figures for the year
to 31 December 2011.
(a) Identify the first IFRS Reporting period and state the date of transition to IFRS.
(b) Explain the term regulatory framework as it applies to financial reporting. (4 Marks)
(f) A Computer item is included in a financial statement at a carrying amount of N350,000. The
present value of the future cash flow from continuing to operate the computer system is
N300,000. Alternatively, the computer could be sold for a net proceeds of N295,000.
(a) Calculate the recoverable amount of the computer
(b) Calculate the impairment loss. (4 Marks)
(g) On 1 January 2012, Olojuede Nigeria Limited acquired an item of equipment on a finance
lease. The fair value of the equipment on 1 January 2012 is N200,000 and the company is
required to make four (4) lease repayments of N66,540 each. These payments fall due on 31
December 2012, 2013, 2014 and 2015. The rate of interest implicit in the lease is 12.5% p.a.

Calculate the total finance charge payable by the company using sum of year digits method.
(4 Marks)
(h) The broad principles of accounting for property, plant and equipment involve distinguishing
between capital and revenue expenditure, measuring the cost of assets, determining how
they should be depreciated and dealing with the problems of subsequent measurement and
subsequent expenditure. IAS 16 - Property, Plant and Equipment has the intention of
improving consistency in these areas.

Explain how the initial cost of property, plant and equipment should be measured. (4 Marks)
(i) The objectives of IAS 10 - Events After the Reporting Period is to prescribe the treatment of
events that occur after an entity’s reporting period has ended.
Define the period to which IAS 10 relates and explain what are adjusting events. (4 Marks)
(j) At 1 January 2011, the capital structure of Mogaji Plc was as follows:
N’000
Ordinary Share Capital (50k each) 500
Share Premium 300
On 1 April 2011, the company made an issue of 200,000, 50k Shares at N1.30 each and on 1
July 2010, the company made a bonus issue of one for every four shares held on 1 January
2011 using the share premium.

The distributable earnings for the year ended 31 December 2011 was N168,000.
Calculate the Basic EPS for the year. (4 Marks)
(Total: 40 Marks)
 SECTION B
(Answer THREE questions from this Section)

QUESTION 2
The Financial position of Ailing Plc as at 31 December 2010 is stated below:
AILING PLC
Financial position as at 31 December 2010
N’000
400,000 ordinary shares of N1 each-fully paid up 400,000
5% cumulative preference shares of N1 each 140,000
8% loan stock 2017 160,000
Interest payable on loan 25,600
Trade payables 192,494
Loan from directors 32,000
Bank overdraft 73,426
1,023,520
Land and building 366,492
Equipment 21,508
Goodwill 120,000
Investment in shares (Quoted) 54,000
Stock and W.I.P. 240,494
Trade receivables 141,384
Accumulates losses 79,642
1,023,520

The company which was registered with an authorized share capital of N600,000,000 found itself in
financial difficulties and the shareholders and directors decided to carry out a scheme of internal
reconstruction. The following scheme has been agreed and sanctioned by the court: -

i) Each ordinary share is to be re-designated as a share of 25kobo par value.

ii) The existing 140,000,000 Preference Shares are to be exchanged for a new issue of
70,000,000, 9% Cumulative Preference Shares of N1 each and 280,000,000 ordinary shares
of 25kobo each.
iii) The ordinary shareholders are to accept a reduction in the nominal value of their shares
from N1 to 25kobo and subscribe for a new issue on the basis of 1 of 1 at a price of 30 kobo
per share.
iv) The loan stockholders are to accept 40,000,000 ordinary shares of 25kobo each in lieu of the
interest payable. It is agreed that the value of the interest liability is equivalent to the
nominal value of the shares issued. The interest rate is to be increased to 10%. A further
N18,000,000 of the 10% loan stock is to be issued and taken up by the existing stockholders
at N90 per 100.
v) N12,000,000 of directors loan is to be cancelled.
The balance is to be settled by issue of 20,000,000 ordinary shares of 25kobo each.
vi) Goodwill and the balance of accumulated losses are to be written off.
vii) The investment in shares is to be sold at the current market price of N120,000,000
viii) The bank overdraft is to be repaid.
ix) N92,000,000 is to be paid to trade payables
x) 10% of the receivable are to be written off
xi) The remaining assets were professionally valued and should be included in the books and
accounts as follows:
N’000
Land and Buildings 340,000
Equipment 20,000
Stock and Work in Progress 100,000

You are required to prepare:

(a) i. The capital reduction/reconstruction account. (4 Marks)
ii. The cash and bank account (3 Marks)
iii. The ordinary share capital account (3 Marks)
(b) The balance sheet of the company immediately after the reconstruction. (10 Marks)
(Total: 20 Marks)
QUESTION 3
The summarized financial position and operating result of CHUKWUDI PLC for the year ended 31
December 2010 and 2011 were as follows:

CHUKWUDI PLC
Financial Position as at 31 December
2011 2010
N’000 N’000
Non-Current Assets (Net) 24,333 10,412
Current Assets
Stock 93,441 78,294
Debtors 82,289 75,078
Bank 10,851 21,848
210,914 185,632

Equity
18,750 Ordinary Shares of N1 each paid up 18,750 18,750
Revenue Reserves 53,811 44,681
Deferred Taxation 20,289 12,170
10% Debenture Stock 37,500 37,500
Current Liabilities:
Trade Payables 70,583 64,328
Taxation 6,231 4,829
Dividends 3,750 3,374
210,914 185,632

Operating results for the year ended 31 December

2011 2010
N’000 N’000
Sales 1,009,416 838,607
Profit before Interest & Taxation 35,118 31,323
Interest Payable 3,750 3,750
Taxation 15,759 13,121
Dividends 5,625 5,250
Required:
(a) Calculate for the relevant two years the following ratios:
(i) Current ratio
(ii) Quick asset ratio
(iii) Return on capital employed
(iv) Profit margin
(v) Earnings per share
(vi) Dividend cover (12 Marks)
(b) Comment on changes in earnings per share and dividend cover between the two years.
(4 Marks)
(c) Explain the terms “overtrading” and “under trading” (4 Marks)
(Total: 20 Marks)

QUESTION 4
Financial statements are the means of communicating to shareholders and other interested parties
information on the financial resources and performance of an entity.
Section 355 of the Companies and Allied Matters Act, LFN 2004 allows companies to publish
Abridged Financial Statements.
Required:
(a) State the circumstances under which a company is NOT allowed to publish Abridged Financial
Statements. (2 Marks)
(b) SAS 20 - Statement of Accounting Standard on Abridged Financial Statement expects certain
declarations to be made on every published Abridged Financial Statements. Enumerate them.
(8 Marks)
(c) What are the contents of an Abridged Financial Statements? (10 Marks)
(Total: 20 Marks)
QUESTION 5
The Oodua Peoples’ Congress offers lectures to its members on military exercises and sells charms
for self-protection to members.
The following is a summary of the receipts and payments of the society for the year 2000.
Receipts and Payments
N N
Balance at Bank 1/1/2000 18,360 Rent 7,650
Annual Subscriptions: Salaries 42,075
1999 867 Stationery 10,965
2000 62,424 Equipment bought 3,825
2001 7,599 Lecture Fees 6,885
Sale of Charms 61,200 General Expenses 10,965
Income from Expenses on Charms 48,450
Investments 7,650 Balance at bank 31/12/2000 27,285
158,100 158,100

You are given the following information:

i) Accrued expenses on charms
1/1/2000 N11,016
31/12/2000 N15,504
ii) Members’ indebtedness on charms
1/1/2000 N3,978
31/12/2000 N2,907
iii) Subscriptions in advance on 31/12/99 amounted to N6,222
iv) Salaries outstanding at 31/12/2000 amounted to N3,315
v) Other assets of the congress as at 31/12/99 were
N
Office furniture at cost 6,375
Equipment at cost 20,400
Investments at cost 142,800
The congress does not take credit for subscription due but not received.
You are required to prepare:
a) An income and expenditure account for 2000
b) A balance sheet as at 31/12/2000 (20 Marks)

QUESTION 6
(a) The following are the profit and loss accounts of M Plc and N Ltd. for the year ended 31 st
December, 1999.
M Plc N Ltd
N N
Turnover 500,000 300,000
Profit before taxation 90,000 50,000
After Crediting
Dividends from:
 Preference Shares 5,000
 Ordinary Shares 6,000
Taxation (40,000) (20,000)
Profit after Taxation 50,000 30,000
Appropriation
Dividends
 Preference (10,000) (10,000)
 Ordinary (10,000) (8,000)
Transfer to Reserves (5,000) (2,000)
25,000 10,000
Balance B/f 120,000 40,000
Balance c/f 145,000 50,000

Note:
M Plc acquired 50% preference share capital of N Ltd. on 30/6/99 and also acquired 75% of
the ordinary share of N Ltd on 31/3/99.

Prepare a consolidated profit and loss account of the group for the year ended 31/12/99.
(20 Marks)

FINANCIAL ACCOUNTING
MARKING GUIDE
SECTION A

QUESTION 1
(a) A reserve is an appropriation of distributable profit for a specific purpose, e.g. plant
replacement, while a provision is an amount charged against revenue as an expense. A
provision relates either to a diminution in the value of an asset, the amount of which cannot
be established with any accuracy. (4 Marks)
(b) Retained Earnings
N’000
Opening Balance 500
Profit for the Year 3,500
4,000
Dividends Paid (2,500)
Closing Balance 1,500 (4 Marks)
(c) Four sources of income for non-trading organizations, especially clubs and societies are:
(i) Membership fees
(ii) Government grants
(iii) Voluntary donations
(iv) Tickets at events
(v) Fines on defaulting members
(vi) Trading activities and
(vii) Entrance fees (Any Four x ½ = 2 Marks)
Main source of income is membership fees or subscriptions.
Profit is called ‘surplus’ and loss is called ‘deficit’ (2 Marks)
(d) (i) Mark-up = Gross Profit
x 100
Cost
Cost = Sales - Gross Profit
= 2,500,000 - 1,250,000
= N1,250,000
 Mark-up = 1,250,000
x 100
1,250,000
= 100%
(ii) Return on Capital Employed
= Profit before Interest & Tax
x 100
 Total Assets - Current Liabilities
= 750,000
x 100
2,625,000
= 28.6%

(iii) Working Capital Ratio

= Current Assets
Current Liabilities
Working Capital =
Current Assets - Current Liabilities
 Current Assets = Working Capital + Liabilities
190,000 = Current Assets - 380,000
 Current Assets = 190,000 + 380,000
 Working Capital Ratio = 570,000
380,000
= 1.5

(iv) Quick Asset Ratio

= Current Assets - Stock
Current Liabilities
= 570,000 - 180,000
= 1.03
380,000
(e) (i) The first IFRS reporting period is the year to 31 December 2012
The date of transition to IFRS is the beginning of business on 1 January 2011, which
is equivalent to the close of business on 31 December 2010.
(ii) The term ‘regulatory framework’ refers to the collection of rules and regulations
which govern financial reporting.
The regulatory framework applies to companies and consists of legislation,
accounting standards, stock exchange regulations. (4 Marks)
(f) (i) Calculation of recoverable amount of the computer.
Recoverable amount is the higher of
Fair value less cost of Sales N295,000
Present Value or Value in use N300,000
Therefore, the recoverable amount is N300,000
 (ii) Calculation of impairment loss
N
Recoverable Amount 300,000
Carrying Amount 350,000
Impairment Loss 50,000
(g) Total lease payments are 4 x N66,540 = N266,160. So, the total finance charge is
N66,160.
Using such of year digits method
Year Digit Finance Charge N
4
2012 4 /10 x 66,160 = 26,460
3
2013 3 /10 x 66,160 = 19,850
2
2014 2 /10 x 66,160 = 13,230
1
2015 1 /10 x 66,160 = 6,620
10 66,160
(h) IAS 16 requires that property, plant and equipment is measured at cost:
Cost includes:
- Purchase price (After trade discounts)
- Import duties
- Direct cost in bringing the assets to the location and condition necessary for normal
operation, such as:
* Cost of site preparation
* Delivery cost
* Installation Cost
* Testing Cost
* Professional Fees
* Labour Cost
- An initial estimates of future dismantling costs where there is an obligation to
dismantle the asset after use.
(i) The period to which IAS 10 relates is the gap of time between the end of the reporting
period (year end) and the date of the financial statement are authorized for issue (usually by
the board of directors)
Adjusting events
 - This provides further evidence of conditions that existed at the end of the reporting
period.
- Timing of occurrence decides whether adjusting
(j) Mogaji Plc
Computation of Basic EPS
N
- Basic earnings (given) 168,000

Computation of number of shares

Existing shares (500,000 x 2) 1,000,000
9
Now issue (200,000 x /12) 150,000
1
Bonus Issue (1,000,000 x /4) 250,000
1,400,000
 Basic EPS = 168,000
1,400,000
= N0.12 or 12k

SECTION B
QUESTION 2
ai) CAPITAL REDUCTION AND RECONSTRUCTION ACCOUNT
N’000 N’000
Goodwill 120,000 Ordinary Shares 300,000
Accumulated Loss 79,642 Directors Loans 12,000
Bad Debts W/off 14,138 Investment 66,000
Land & Building 26,492 Loan Interest 15,600
Equipment 1,508
Stock and WIP 140,494
Capital Reserve 11,326
393,600 393,600

ORDINARY SHARE CAPITAL

 N’000 N’000
Capital Reduction 300,000 Bal B/f 400,000
Bal C/d 285,000 5% Preference Share 70,000
Application & Allotment 100,000
Interest on 8% Loan 10,000
Directors Loan 5,000
585,000 585,000

CASH ACCOUNT
N’000 N’000
Application & Allotment 120,000 Bal. b/d 73,426
10% Loan 16,200 Trade Payable 92,000
Investment Account 120,000 Bal c/d 90,774
256,200 256,200
Bal. b/d 90,774

AILING PLC
FINANCIAL POSITION AS AT 1 JANUARY 2010
Non Current Assets N’000 N’000
Land and Building 340,000
Equipment 20,000
360,000
Current Assets
Stock and WIP 100,000
Trade Receivable 127,246
Cash and Bank 90,774
318,020

Current Liabilities
Trade Payables (100,494)
217,526
577,526

Long Term Liabilities

 10% Loan Stock (Note 3) (178,000)
399,526

Equity
1,140,000,000 Ordinary Shares of 25k each 285,000
9% Cumulative Preferences Share of N1 each (Note 1) 70,000
Share Premium (Note 6) 33,200
Capital Reserve 11,326
399,526

INTEREST ON 8% LOAN
N’000 N’000 N’000
Ordinary Shares 10,000 Bal b/d 25,600
Capital Reduction 15,600
25,600 25,600

WORKINGS
1. 5% CUMULATIVE PREFERENCE SHARE
N’000 N’000
9% Cumulative Pref. Share 70,000 Bal b/d 140,000
Ordinary Shares 70,000
140,000 140,000

2. 8% LOAN CAPITAL
N’000 N’000
10% Loan Capital 160,000 Bal b/d 160,000

3. 10% LOAN CAPITAL

N’000 N’000
Bal c/d 178,000 8% Loan Capital 160,000
Bank 16,200
Share Premium (Discount) 1,800
178,000 178,000
4. DIRECTORS LOAN
 N’000 N’000
Capital Reduction 12,000 Bal b/d 32,000
Ordinary Shares 5,000
Share Premium 15,000
32,000 32,000

5. INVESTMENT
N’000 N’000
Bal. B/d 54,000 Bank 120,000
Capital Reduction 66,000
120,000 120,000

6. SHARE PREMIUM ACCOUNT

N’000 N’000
10% Loan Capital 1,800 Application & Allotment 20,000
Bal c/d 33,200 Directors Loan 15,000
35,000 35,000

QUESTION 3
a. CALCULATION OF RATIOS
2011 2012
i. Current Ratio
= Current Assets 186,581 175,220
Current Liabilities 80,564 75,531
2:3:1 2 : 42 : 1

ii. Quick Ratio

= Current Asset - Stock 93,140 96,926
Current Liabilities 80,564 72,531
1 : 16 : 1 1 : 34: 1

iii. Return on Capital Employed (ROCE)

= PBIT 35,118 31,323
x 100 x 100
Share Capital + Reserve + Long Term 110,061 100,931
Liabilities = 31.9% 31%
iv. PROFIT MARGIN
 = PBIT 35,118 31,323
x 100 x 100
Sales 1,009,416 838,607
= 3.5% 3.7%

v. Earnings Per Share (EPS)

= Profit After Tax 15,609 14,452
x 100 x 100
No. of Issued Ordinary Shares 18,750 Shares 18,750 Shares
= 83kobo 77kobo

vi. Dividend Cover

= Profit After Tax 15,609 14,452
Dividend 5,625 5,625
= 2.8Times 2.8Times

b. Comments on changes in earnings per share and dividend cover between the two years.
Earnings per share increased in year 2011 because, while the number of issued ordinary
shares remained the same, the profit after tax increased. This is an indication of growth even
though this is not matched by the increase in profitability as revealed by the profit margin.
The dividend cover remained unchanged because the dividend increased in the same
proportion to the increase in earnings.

c. Overtrading
This is a term used to describe a situation where a business involves itself in a volume of
trade that is above its financial capability.
Under-trading
This is known as over capitalization. It refers to the situation where a business is not making
adequate use of its financial resources.

QUESTION 4
a. A company may not be allowed to publish an Abridged Financial Statement for a period if its
Financial Statements are qualified by its auditors for that period.
b. The declaration that must be made on every Abridged Financial Statements are:
(i) That the statement are Abridged Financial Statements
 (ii) That the financial statements are specific disclosure included in them have been
derived from the full financial statement of the company
(iii) That the abridged financial statements cannot be expected to provide as full an
understanding of the financial performance, financial position and financing and
investing activities o the organization as the full financial statements
(iv) That copies of the full financial statements can be obtained from the Registrars of
the company
c. Abridged Financial Statements usually include some or all of the following statements;
(i) Chairman’s Report
(ii) Director’s Report
(iii) Audit Committee’s Report
(iv) Other Corporate Information
(v) Financial highlights (Result at a glance)
(vi) Accounting Policies
(vii) Auditors’ Report
(viii) Income Statement for the Financial year
(ix) Financial Position as at the end of the Financial year
(x) A statement of cash flows for the financial year
(xi) Value Added Statement
(xii) Five-year Financial Summary
(xiii) Notice of Annual General Meeting

QUESTION 5
THE OODUA PEOPLES’ CONGRESS
INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31ST DECEMBER, 2000
Income N N
Sale of Charms (W.2) 60,129
Income from Investments 7,650
Subscriptions (W.5) 63,291
131,070

Expenditure
Rent 7,650
Purchase of Charms (W.1) 52,938
Salaries (W.3) 45,390
Stationery 10,965
Lecture Fees 6,885
General Expenses 10,965 (134,793)
3,723

THE OODUA PEOPLES’ CONGRESS

BALANCE SHEET AS AT 31ST DECEMBER, 2000
Fixed Assets N N
Equipment (W.6) 24,225
Office Furniture 6,375
Investment 142,800
173,400
Current Assets
Debtors on Charms 2,907
Cash 27,285
30,192

Current Liabilities
Subscriptions in Advance 7,599
Accruals: On Charms 15,504
Salaries 3,315
26,418 3,774
177,174

Financed by: N
Accumulated Fund (W.4) 180,897
Deficit (3,723)
177,174
WORKING NOTES
1. Charms Creditors’ Control
N
Payment made 48,450
Bal c/f 15,504
63,954
Bal b/f (11,016)
Purchases 52,938

2. Charms Debtors Control N

Cash Received 61,200
Bal. c/f 2,907
64,107
Bal. b/f (3,978)
Salaries 60,129

3. Salaries N
Cash Paid 42,075
Accrued c/f 3,315
45,390

4. Accumulated Fund
N
Cash 18,360
Office Furniture 6,375
Members owing on charms 3,978
Equipment 20,400
Investment 142,800
191,913
Congress Owing on Charms (11,016)
180,897
5. Subscriptions Account
N
Cash Received (1999) 867
Cash Received (2000) 62,424
63,291

Working Notes Cont’d

6. Equipment Account
N
Bal b/f 20,400
Addition 3,825
24,225

QUESTION 6
M PLC AND ITS SUBSIDIARY
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST DECEMBER, 1999
N N
Turnover 800,000
Profit 129,000
Taxation (60,000)
Profit after taxation 69,000
Minority Interest and Pre-Acquisition (16,250)
Profit attributable to the group of which
N46,000 has been treated In the account of M Ltd 52,750
Appropriations:
Preference Dividend 10,000
Ordinary Dividend 10,000
Reserve 6,125 (26,125)
Retained Profit for the Year 26,625
Retained Profit b/f 120,000
Retained Profit c/f 146,625
WORKING NOTES
A B C D
M Plc N Ltd MI + Pre Acq. CPL
N N N N
i) Turnover 500,000 300,000 800,000
ii) Profit 79,000 50,000 129,000
iii) Taxation (40,000) (20,000) (60,000)
39,000 30,000 69,000
iv) Preference Dividend (10,000) 5,000
2,500 20,000 2,500
41,500
v) Minority Interest (25%) (5,000) 5,000
15,000
vi) Pre-acquisition
Profit of N Ltd
(75% x 3/12 x 20,000) (3,750) 3,750
41,500 11,250 16,250 (16,250)
52,750
vii) Extra Ordinary Item - - - -
viii) Ordinary Dividend of N Ltd
(75% x 9/12 x 8,000) 4,500 (4,500) -
46,000 6,750 52,750
ix) Appropriations
Dividend - Preference (10,000)
Ordinary (10,000)
Transfer to Reserve (5,000) (1,125) (6,125)
21,000 5,625 26,625
x) Balance b/f 120,000 - 120,000
141,000 5,625 146,625
 FINANCIAL ACCOUNTING
Examiner’s Report
GENERAL COMMENTS
QUESTION 1A
This is one of the most well answered parts of question 1. Nonetheless, the candidates could not
define provision, they cited examples instead.

QUESTION 1B
There were very good answers to this part. Few candidates did not attempt the question.

QUESTION 1C
Performance of candidates in this part was very good. However, few candidates were confused with
the special names for ‘profit’ and ‘loss’ of Non-profit organizations. They were mentioning income
and expenditure instead of surplus and deficit.

QUESTION 1D
The requirement of this question is clear to candidates but some candidates did not know the
formula of mark-up, rather than use cost of sales as denominator, they use sales.

QUESTION 1E
Only few candidates could interpret first part of the question correctly, many were citing 2005; when
IFRS was adopted internationally. Many candidates did well in the second part.

QUESTION 1F
Candidates’ performances were not quite good. Many candidates could not distinguish between
‘value in use’ and ‘fair value’ less cost to sell. Many too did not know the operational definition of
recoverable value.

QUESTION 1G
Some candidates did fairly well. However, a few others regarded the total amount paid as the
finance charge without deducting the fair value of the asset and then, using the correct method to
allocate this wrong figure over the useful life of the asset.
QUESTION 1H
Candidates’ performances were impressive but few of the candidates were discussing measurement
subsequent to initial acquisition instead of the requirement of the question.

QUESTION 1I
Only few candidates demonstrated a good understanding of this question. Many candidates were
discussing prior year items instead of Event after the Reporting period.

QUESTION 1J
Most candidates showed their understanding of the calculation of Basic Earnings Per Share (EPS) but
they found it difficult to apply the effect of shares issued during the year and bonus shares to the
calculation of EPS in this question.

QUESTION 2
(a) Candidates were required to apply the requirement of the company law to prepare accounts
for the reconstruction of an ailing company. Only very small percentage of the candidates
answers this question and their performance was poor. The most common problems are
candidates’
i. Lack of in-depth knowledge of the application of the double entry principles, thereby
debiting items that should have been credited and crediting those that should have
been debited.
ii. Failure to recognize the gain on the settlement of preference shares and loan in
reconstruction Account.
iii. Failure to account for the premium on the fresh shares issued to ordinary
shareholders in the share premium Accounts.
iv. Failure to reflect the difference between the ‘fair value’ and ‘book value’ of the
assets realised in the reconstruction account.

QUESTION 3
This question appears to be the most popular among the candidates. Almost all the candidates
answer the question and their performance was above average.

The main weakness observed was the inability of candidates to comment on changes in the earnings
and dividends cover over the two years. The unit of measurement of different categories of the
ratios was also wrongly stated, for instance, stating current ratio and acid test ratios in percentage.
Candidates should familiarise themselves with the measurement units so that they would know the
ratios to be measured in (a) number of times, (b) percentages (c) number of days or months (d)
and one ratio in relation to another.

QUESTION 4
Many candidates answer this question and their performance was good however, the following
weaknesses were observed among some candidates.
(i) Confusing Abridged Financial Statement to be Interim Financial Statement. Abridged
Financial Statement is only a summary of a full unqualified financial statement while
Interim Financial Statements are those prepared in the interim by management before the
Audited Financial Statements are published. Interim Financial Statement could be prepared
for say three (3) months or six (6) months period.
(ii) Rather than stating the contents of Abridged Financial Statements, some candidates were
stating the components of the statements of financial position such as fixed assets, current
asset, equity etc.

QUESTION 5
This question tests candidates’ ability to prepare the accounts of a not-for profit organisation.
Most candidates answer the question and performance was good for many of them. However, a few
of the candidates could not apply the knowledge of double entry principle to calculate the
subscriptions to be credited to income and expenditure account. Many others did also not know
that subscriptions due but not yet received by association and subscriptions prepaid should be
treated as current assets and current liabilities respectively. The calculation of accumulated fund at
the beginning of the period also posed a problem to them.

QUESTION 6
This question on preparation of consolidated profit and loss accounts is the most unpopular among
the candidates. Only few candidates answer the question and their performance was below
average. The following difficulties were noticed.
(i) Candidates did not recognise that it was an acquisition during the year under review, and
hence should deduct the pre-acquisition profit of the subsidiary from the consolidated
profit.
(ii) Candidates did not take cognisance of the fact that Non-controlling Interest (NCI) comprised
of earnings from two parts; dividends receivable on the Preference shares and from profits
attributable to equity holders.
 THE INSTITUTE OF CHARTERED SECRETARIES AND
ADMINISTRATORS OF NIGERIA

JUNE 2013 DIET: PROFESSIONAL EXAMINATIONS

MANAGEMENT ACCOUNTING
(Code: P104)

Wednesday Morning 12th June, 2013

INSTRUCTIONS

1. Answer ALL questions in Section A. All questions carry equal marks.

2. Answer THREE (3) questions from Section B. All questions carry equal marks.
3. Time Allowed: 3 HOURS
4. Candidates are expected to show their workings using the inside page and the last
sheet of the answer booklet.
5. Candidates are forbidden from bringing phones into the examination hall.
6. Only non-programmable calculators are permitted for use in the examination.
 SECTION A
(Answer all questions in this Section)

QUESTION 1
CAB Limited is a newly established company. You are the Management Accountant. The
Personnel Manager requested you to deliver a lecture to the newly employed graduate
trainees and that you have just a few minutes to talk on some topics relating to
Management Accounting.
Briefly state what you know about:
a) Linear Programme Technique (4 Marks)
b) Assumptions of this technique (4 Marks)
c) Its applications in decision-making (4 Marks)
The company produces and sells different types of dresses with identical purchase and
selling prices. The management has decided to open another store at the Trade Fair
Complex, in addition to the present store in Ikeja, which will incur the following expenses
and generates the following revenue;
N N
Selling Price Per Unit 3,000
Less: Purchase Cost Per Unit 1,950
Salesman Commission Per Unit 150

Annual Fixed Expenses are:

Rent 6,000,000
Salaries 20,000,000
Advert 8,000,000
Other Fixed Expenses 2,000,000
36,000,000
d) Calculate the Annual Break-even point in units (4 Marks)
e) Calculate the Profit or Loss if the company produces and sells 3,500,000 units (4 Marks)
f) If the sales commission is discontinued and instead a fixed cost amounting to N9,000,000 is
to be incurred and a reduction in selling price of 5% is proposed.
Determine the break-even point in units. (4 Marks)
g) You are required to suggest (4) Four methods of financing working capital (4 Marks)
h) The Company is planning to acquire a new machine worth N50Million which will be used for
only four years with a scrap value of N2Million which will be realized in the fourth year,
hence it is to be added to the fourth year revenue. The cost of capital to the company is 16%
and expected receipt for the four years excluding the N2Million of scrap are as follows:
Year N’Million
1 18
2 25
3 15
4 10

Determine the Net Present Value of the Machine (4 Marks)

i) Advise the management whether to acquire the machine or not, based on your calculation
in (h) above (4 Marks)
Present Value of Annuity of N1 at 16%
Year 1 0.862
2 0.743
3 0.641
4 0.553

j) Briefly state what you understand by Zero-based budgeting (4 Marks)

(Total: 40 Marks)

SECTION B
(Answer ANY THREE questions from this Section)

QUESTION 2
Legba Company Limited operates at several sites in Ogun State, where the company extracts, gravel,
sand and granite. Revenues, costs and quantities in the last year were:

Product Gravel Sand Granite

Tonnes Tonnes Tonnes
Extracted and Sold 25,000 32,000 60,000
 N’000 N’000 N’000
Revenue 250 640 1,800
Royalties 50 96 240
Direct Labour 125 134 250
Variable Extract Costs 75 64 300
Variable Transport Costs 25 32 60

Fixed Cost N’000

Extraction 485
Transport 342
Administration 79
Opening and closing stocks were minimal and should be ignored.
Required:
(a) Prepare an operating statement in marginal costing format, for Legba Company Limited,
which covers the last year. (14 Marks)
(b) Give three (3) advantages and three (3) limitations of using marginal costing system.
(6 Marks)
(Total: 20 Marks)

QUESTION 3
(a) What do you consider to be the main objective upon which budgeting is based? (8 Marks)
(b) Set out in brief notes, the distinctive aspects of budgeting for selling and distribution costs
compared to budgeting for manufacturing costs. (12 Marks)
(Total: 20 Marks)

QUESTION 4
The data given below refers to contract M101 for the Repair of a section of Ibadan-Lagos Motorway.
The contract was commenced on 1 st April 2011 at an agreed price of N20,000,000. The contract was
expected to be completed in four years. Retention money was agreed at 10% of work certified.
Details of the contract during the first year are as follows:
 N’000
Direct Materials: - Received on Site 2,560
Returned from Site 25
Lost from Site but Insured 30
On Site at 31st March 2012 355
Direct Wages: - Paid 1,320
Accrued at 31st March 2012 30
Direct Expenses: - Paid 240
Accrued at 31st March 2012 10
Plant In use on site at Cost 2,000
st
Valuation at 31 March 2012 1,500
Site Overhead 370
Allocated Head Office Charges 180
Cash received in respect of work certified 4,500
Cost of work completed but not certified 700

Required:
Prepare the Contract Account as at 31st March 2012 (20 Marks)

QUESTION 5
You are the Managing Partner of SME Consult Limited. One of your clients, Detergent Products
Limited manufactures “One Wash” detergent. The accounts of the company for the year 2012 are
expected to reveal a profit of N140,000 from the manufacture of the “One Wash” after charging
fixed costs of N100,000. The “One Wash” is sold for N5 and has a variable cost of N2.
Market sensitivity tests suggests the following responses to price changes;
Alternatives Selling Price Quantity Sold
Reduced by Increased by
A 5% 10%
B 7% 20%
C 10% 25%

Required:
Evaluate these alternatives and state which, on profitability consideration, should be adopted for the
forthcoming year, assuming a cost structure unchanged. (20 Marks)
QUESTION 6
Discuss the uses and limitations of Cost-Volume-Profit (CVP) in the field of business decision-making.
(20 Marks)
 MANAGEMENT ACCOUNTING
MARKING GUIDE
SECTION A

QUESTION 1
a) Linear Programme Technique
This is a mathematical technique which can be applied to the problem of rationing limited
facilities and resources among many alternative users in such a way that the optimum benefit
can be derived from their utilization. It seeks to find a feasible combination of output which
will maximize or minimize the objective function. The objective function refers to the
quantification of an objective and usually takes the form of maximizing profits or minimizing
costs.
b) Assumptions of this technique:
(i) A linear relationship must exist between the objectives and the factors of production
(ii) Information relating to various factors of production are known with certainty
(iii) It is possible to manufacture a fraction of any product
(iv) Negative unit of any product cannot be achieved
(v) Objective must be economic and simple in nature.
c) Applications in Decision making
(i) Computation of relevant costs which is essential for decision making
(ii) It can be used to decide on when it is possible to introduce a new product to the
market using the relevant cost and opportunity cost derived from linear
programming.
(iii) It can be used to deduce maximum payment for additional scarce resources.
(iv) Opportunity cost derived from linear programming can be used for cost control.
(v) Linear programming can be used to determine the correct transfer price when goods
are transferred within divisions of a company.
(vi) It can also be applied to capital budgeting in multi-period capital retaining situations.
d) Calculation of breakeven point in unit
Unit Selling Price N3,000
Less: Variable Cost (1,950 + 150) N2,100
Contribution per unit 900

Total Fixed Costs 36,000,000

900 = 40,000 units
e) Profit or Loss on 3,500,000units sales
Sales (N3,000 x 3,500,000) 10,500,000,000
Less: Variable Cost (N2,100 x 3,500,000) 7,350,000,000
3,150,000,000
Less: Fixed Costs 36,000,000
Profit 3,114,000,000
f) New Breakdown Point (Sales 60million discounted)
New Selling Price (N500 x 5%) 2,850,000
New Variation Cost 1,950,000
New Fixed Costs - N36,000,000
N 9,000,000 45,000,000
 Contribution - FC = 45,000,000
CPU 900
= 50,000units
g) Methods of financing working capital (Any Four)
(i) Bank Overdraft
(ii) Upfront Payment by Customers
(iii) Retained Earnings
(iv) Debt Financing
(v) Equity Contribution
(vi) Credit from suppliers
(vii) Commercial Papers
h) To determine the NPV
Year Cashflow DF PV
N’000 N’000
0 (50,000) 1 (50,000)
1 18,000 0.862 15,516
2 25,000 0.743 18,575
3 15,000 0.641 9,615
4 12,000 0.553 6,636
NPV 342
i) The Management should acquire the machine.
 j) Zero-based budgeting (ZBB)
This is an alternative to incremental budgeting; this system of budgeting rejects the
traditional view of annual budgeting as an incremental process which takes into account
current expenditure plus an estimate of next year’s expenditure to arrive at the next budget.
Instead, the projected expenditure for existing programmes should start from base zero with
each year’s budgets being compiled as if the programmes were being launched for the first
time.

SECTION B
QUESTION 2
(a) Legba Company Limited
Operating Statement for the last year
Product Gravel Sand Granite Total
Tonnes Tonnes Tonnes Tonnes
Extracted and Sold 25,000 32,000 60,000 117,000
N’000 N’000 N’000 N’000
Revenue 250 640 1,800 2,690
Variable Costs: -
Royalties 50 96 240 386
Direct Labour 125 134 250 509
Variable Extraction Costs 75 64 300 439
Variable Transport Costs 25 32 60 117
Total Variable Costs 275 326 850 1,451
Contribution (25) 314 950 1,239
Fixed Costs
Extraction 485
Transport 342
Administration 79
Total Fixed Costs 906
Profit 333
Gravel has negative contribution.
(b) Advantages of Marginal Costing are:
(i) It uses the same cost logic as CVP, so is consistent with short-term decision making
technique and will provide a source of date for solving decision problems.
 (ii) Managers can understand the distinction between variable costs and fixed costs.
(iii) Highlighting contribution encourages managers to concentrate on sales volume
rather than production volume, as surplus production does not add to profits.
(iv) A marginal costing system is simple to operate. Material costs, direct labour costs
and sales commissions are the main variable costs and they are all comparatively
easy to trace to individual products. Almost all fixed costs are period costs and can
be collected from routine financial accounting records.
(v) Marginal costs are useful for identifying minimum selling prices.
(c) Limitations of Marginal Costing System are:
(i) Materials have become the only significant short-term variable production cost, as
more and more production costs become fixed, consequently, marginal costing is
range applicability, particularly if manufacturing is decreasing.
(ii) Marginal costing encourages managers to concentrate on maximizing contribution
per unit by increasing selling prices and/or reducing variable costs. So fixed costs
may be ignored until there is a reduction in sales volume and panic cuts ensure.
(iii) It is a simplistic system that fails to recognize that upward, or downward trends in
volume should eventually lead to increased or reduced fixed costs.
(iv) Using marginal costs as a basis for determining selling prices can be dangerous,
except for peripheral activities or jobs. A business will be unprofitable unless
sufficient contribution is earned to cover all its fixed costs.

QUESTION 3
(a) Budgeting Objectives
The implementation of any budgeting system indicates that due consideration is being paid
to future planning with an in-built form of control to some degree. The main objectives upon
which budgeting is based are, therefore, considered to be: -
(i) Profit Target: To recognize that the eventual measure of success of the enterprise
will be the profit earned and that forward planning should be carried out with the
intention of achieving the profit target, consistent with other social obligations and
objectives.
(ii) Responsibility: To define areas of responsibility within the organization where
targets can be set within the overall plan relating activity to responsibility.
(iii) Implementation of a control system: To provide a system enabling the constant
monitoring of performance to be carried out and corrective action to be taken when
necessary.
 (iv) Selling and Distribution Costs:
(1) Time Lapse: With much of the selling cost, expenditure incurred in a budget
period will have no effect on sales until some future period, e.g. Advertising
costs. A problem, therefore, arises in measuring for comparative purpose the
cost incurred and the results achieved.
(2) Effort and achievement: Because of the nature of many selling and
distribution costs, it will be difficult if not impossible to find a true reflection
of the relationship between those costs incurred and the volume of sales
generated by incurring those costs.
(3) Cost classification: Whereas manufacturing costs may be classified as fixed
or variable with production, selling and distribution costs need to be
analyzed in more detail if accurate forecasts and budgets are to be prepared
e.g. On what basis will a cost such as variable travelers’ expenses be
budgeted - how do they vary?
(4) Minimization of Costs: When budgeting for selling and distribution costs, the
problem is not so much that of keeping costs to a minimum, but rather of
determining a figure that enables maximum relative effort to be applied in
achieving the desired sales volume.

QUESTION 4
1. Contract MIOI
Contract Account as at 31st March, 2012
N’000 N’000
Direct Material (Received) 2,560 Direct Material (Returned) 25
Direct Wage (Paid) 1,320 Direct Material (Lost) 30
Direct Wage (Accrued) 30 Direct Material (Stock C/F) 355
Direct Expenses (Paid) 240 Plant (Revalued) C/F 1,500
Direct Expenses (Accrued) C/F 10 Cost of Work to Date C/d 4,800
Plant at Cost 2,000
Site Overhead 370
Head Office Cost (Allocated) 180
6,710 6,710
 Cost of Work to Date B/D 4,800 Value of Work Certified 5,000
Profit in Suspense C/F 360 Cost of Work not
Paid Account 540 Yet Certified 700
5,700 5,700

Direct Materials Stock B/F 355 Direct Wages (Accrued) B/F 30

Plant B/F 1,500 Direct Expense (Accrued) B/F 10
Cost of not yet Certified 700 Profit in Suspense B/F 360

NOTES:
1. Value of Work Certified
Since a 10% retention has been agreed with the customer, the cash received of
N4,500,000 only represents 90% of the value of the work certified. The full value has
been shown in the contract account as N5,000,000.
2. Calculation of Profit taken
Since no specific instruction has to given, the following formular has been used:
2
Profit taken = /3 x Norminal Profit x Cash Received
Value of work certified
2
= /3 x N900,000 x 4,500,000
5,000,000
= N540,000
* (5,000 + 7,000 - 4,800) = N900,000 (Nominal Profit)

QUESTION 5
DETERGENT PRODUCTS LIMITED
Results N
Net Profit 140,000
Fixed Cost 100,000
240,000

Selling Price Per Unit N5

Variable Cost Per Unit 2
Contribution Per Unit N3
Units Sold in 2012 = N240,000
N3
= 80,000units

Alternative A
Original contribution per Unit N3
Deduct: 5% Reduction on Selling Price (N5 x 5%) 0.25
Revised Contribution N2.75
Original Unit - Sales 80,000
Add: Increase 10% (80,000 x 10%) 8,000
88,000
Total Contribution (88,000 x N2.75) 242,000

Alternative B
Original contribution per Unit N3
Deduct: 7% Reduction on Selling Price (N5 x 7%) 0.35
Revised Contribution N2.65
Original Unit - Sales 80,000
Add: Increase in sales (80,000 x 20%) 16,000
96,000
Total Contribution (96,000 x N2.65) 254,000

Alternative C
Original contribution per Unit N3
Deduct: 10% Reduction on Selling Price (N5 x 10%) 0.50
Revised Contribution N2.50
Original Unit - Sales 80,000
Add: Increase 25% (80,000 x 25%) 20,000
100,000
Total Contribution (100,000 x N2.50) 250,000
New Contributions from the above alternatives
Original N240,000
A N242,000
B N254,000
C N240,000
The three alternatives are better than the original contribution, however, alternative B should be
adopted based on these calculations and ignoring other factors.

QUESTION 6
Cost-volume-profit (CVP) analysis is an essential part of business decision-making. The alternatives
being examined will often differ both in the total volume and the composition of that volume. An
excellent way of highlighting the relationship between cost, volume and profit is the break-even
chart. Alternatively, a profit-volume chart can also provide a visual picture of the situation being
examined.

Uses
(i) Relatively complex situation can be reduced to the basic decision making which are required.
(ii) The break-even points of alternatives can be calculated
(iii) The margin of safety of alternatives can be determined
(iv) Within limits, results can be extrapolated and evaluated
(v) The effect on profit of changes in selling price, costs or output can be readily determined
(vi) It may be found easier to explain the financial implication of alternatives to non-accountant.

Limitations
(i) It may not prove easy to separate all costs into either fixed or variable cost.
(ii) The selling price per unit may not remain constant for all volumes
(iii) When more than one product is manufactured or sold, changes in product mix could well
distort the results
(iv) Too much importance may be attached to the breakeven point. In practice, one could not
say that by selling one more unit a break-even point had necessarily been achieved.
(v) Costs and volumes may well change due to circumstance outside the control of the analyst.

While limitations exist, it must be reminded that much valuable decision making information will
result from the fact that an attempt has actually been made to analyse costs, volumes and profits.
 INSTITUTE OF CHARTERED SECRETARIES AND
ADMINISTRATORS OF NIGERIA

JUNE 2013 DIET: PROFESSIONAL EXAMINATIONS

CORPORATE ADMINISTRATION
(Code: P201)

Wednesday Morning, 12th June, 2013

INSTRUCTIONS

1. Answer ALL questions in Section A. All questions carry equal marks.

2. Answer THREE (3) questions from Section B. All questions carry equal marks.
3. Time Allowed: 3 HOURS
4. Candidates are expected to show their workings using the inside page and the last
sheet of the answer booklet.
5. Candidates are forbidden from bringing phones into the examination hall.
6. Only non-programmable calculators are permitted for use in the examination.
 SECTION A
(Answer all questions in this Section)

QUESTION 1
(a) Explain the following (i) Total Quality Management (TQM) (ii) Cyber-squatting (iii) Hazard
Reporting (iv) Head Hunters (4 Marks)
(b) List four key features of a Corporation tax self-assessment system (4 Marks)
(c) Explain four types of works that copyright protects (4 Marks)
(d) For a Company to succeed, it needs regular supply of up-to-date and relevant information.
Explain the characteristics of good information (4 Marks)
(e) It is vital that a company is able to keep sensitive information confidential. How do you deal
with and store this information as a Company Secretary? (4 Marks)
(f) What can be registered as a trade mark? (4 Marks)
(g) What are the main duties of a trustee according to Investment and Securities Act? (4 Marks)
(h) What do you understand by probationary period in human resource management? (4 Marks)
(i) Explain the principle of indemnity in Insurance. (4 Marks)
(j) Achieving goals in the workplace requires making available all the necessary tools and allowing
the workers to develop emotional intelligence so as to work for a common goal. What do you
understand by emotional intelligence? (4 Marks)
(Total: 40 Marks)

SECTION B
(Answer THREE questions from this Section)

QUESTION 2
Identify the essential features of;
(a) an ideal disciplinary procedure
(b) an ideal grievance procedure in the modern corporate environment (Total: 20 Marks)

QUESTION 3
What are the different categories of intellectual property rights and their main characteristics? In
what situations would you suggest to your organization that each be used or applied for?
(Total: 20 Marks)
QUESTION 4
SHOPRITE SUPERMARKET NIG. LTD wants to open a new retail outlet in the garden city –
PORTHARCOURT, and is considering a range of sites across the OGONI area. What factors should the
Board take into account when choosing a suitable business location? (Total: 20 Marks)

QUESTION 5
You are the administrator of a growing manufacturing Company and the Chairman is worried about
the high incident of factory related accidents. You have been asked to draft a safety policy
specifying the following: -
(a) Aims
(b) Responsibilities of:
(i) Company name
(ii) named director
(iii) Managers and supervisor
(iv) Employees
(v) Safety Representatives
(vi) Safety Committee
(c) Administration of the Safety Policy (20 Marks)

QUESTION 6
(a) What is risk analysis? Explain the four steps in a risk analysis and management process.
(10 Marks)
(b) Risks facing an organization can be external or internal.
Mention four key risks and their external and internal drivers (10 Marks)
 CORPORATE ADMINISTRATION
MARKING GUIDE
SECTION A

a. Explain the following (i) Total Quality Management (TQM), (ii) Cyber-squatting (iii) Hazard
Reporting (iv) Head Hunters:
(i) Total Quality Management (TQM) is a management philosophy of quality that links
policy and operational practice by involving everyone in an organization to
continuously improve all products and processes to achieve quality that always
satisfy customer needs.
(ii) Cyber-squatting is a situation where a third party has registered a domain name that
is identical or similar to the corporate identity or brand of a business in the hope
that the domain name purchased at market rates can be sold to that business at a
profit.
(iii) Hazard Reporting is the process by which employees are encouraged to report
health and safety hazards which they identify, providing the employer with an
opportunity to address the hazard.
(iv) Head Hunters are specialist employment recruiters who attempt to identify people
(who were not necessarily looking for a job) who might fit the requirements for a
specific job and approach them to see if they might be interested. (4 Marks)
b. Corporation tax self assessment is the system whereby companies calculate their own
corporation tax liability. The features include the following (NOTE: only four required)
(i) Fixed filing dates for the corporation tax return.
(ii) The company’s self assessment is final, subject to tax payer amendment
(iii) Companies must assess their own liability to corporation tax
(iv) There is automatic interest for under and over payment of corporation tax
(v) Fixed penalties for late filing of the cooperation tax returns
(vi) Returns are processed and possibly checked later
(vii) Large companies must pay corporation tax on quarterly basis
(viii) Small companies must pay corporation tax within 9 months and one day of the end
of the corporation tax accounting period
(ix) Tax authorities have the right to enquire into all returns.
(x) Corporation tax must be paid on fixed due date (4 Marks)
c. Copyright protects the following works (NOTE: only four required)
(i) Original literacy works. e.g. novels, computer programs, songs.
(ii) Original dramatic works e.g. works of dance or mime
(iii) Original musical works
(iv) Original artistic works e.g. painting, engraving, photograph.
(v) Published editions of works (i.e) typographical arrangement of publication
(vi) Sound recordings which may be recordings on any medium e. g. tape or compact
disc, and may be recordings of other copyright works e.g. musical or literary works.
(vii) Films and videos, broadcasts and cable programmes. (4 Marks)
d. The characteristics of good information among other things are as follows:
 Relevant to its purpose
 Complete for its purpose
 Correct for its purpose
 Clear/transparent to the user
 Have integrity
 Be targeted
 Manageable in quantity
 Timely;
 Communicated appropriately
 Cost effective (4 Marks)
e. In order to ensure staffs are clear about what information is confidential it is useful to use
confidentiality caveat as leaders on documents, classifying the level of its sensitivity. These
could range as follows:
- Internal use only;
- Confidential;
- Strictly confidential (4 Marks)
f. The following can be registered as trademark:
- Trading names
- Stylized names
- Newly invented words
- Geographical names
- Distinctive packaging (4 Marks)
g. The main duties of a trustee among other things are:
- To take proper care of the trust property
 - To act impartially among beneficiaries
- To ensure adherence to trust deed
- To keep clear and accurate accounts
- To take professional advise
- To make no profit from being a trustee (4 Marks)
h. A probationary period is the beginning of employment, usually three months, within which
both parties can assess each other and by the end of which they should know whether they
will continue the relationship. (4 Marks)
i. The principle of indemnity is central to insurance. Essentially, it means that following a loss,
the insured should be restored to the same financial position as he had immediately before
it occurred. (4 Marks)
j. Emotional intelligence can be defined as the ability to recognize one’s emotions,
understanding what they are telling you and realizing how they (emotions) affect people
around you. (4 Marks)

SECTION B
QUESTION 2
(a) The essential features of an ideal disciplinary procedure are as follows:
- It should be written down and made known to all those involved;
- It should specify clearly to whom the procedure applies i.e. all employees or only
some.
- It should be capable of dealing swiftly with disciplinary matters;
- It should indicate what is meant by misconduct and gross misconduct
- It should clearly specify who has the authority to enforce disciplinary actions, and to
what extent.
- It should ensure that every disciplinary case is fully investigated, and that the
employees concerned are given fair hearing.
- It should ensure that employees are informed of the reasons for any action taken
against them, permit them the right of appeal.
(b) The essential features of an ideal grievance procedure are as follows:
- It should recognize the right of every employee to seek redress for grievances at
work;
- It should aim to provide for fair and speedy settlement of grievances as near to the
source as possible
 - It should provide, initially, for the employee to raise the grievance with his
immediate superior;
- It should provide for time limits to be set for each stage, so as to ensure that no
delay occurs;
- It should make arrangements for the results of grievances to be recorded in writing
and distributed to the parties concerned.
(Total: 20 Marks)

QUESTION 3
Intellectual property falls into the following categories:
(a) Patents: To qualify the invention must be novel, its development must have involved an
inventive step, it must have a use within the field designated for it, it must be capable of
industrial application. Protection lasts 20 years. Seeking registration is relatively time-
consuming and costly. E.g. biomedical drugs, engineering components with more than a few
years of life before obsolescence.
(b) Trademarks: These may be registered or unregistered. If they are registered they are easier
to protect. Registration is relatively inexpensive and simple. Protection last indefinitely,
provided renewal fees are paid. Trademark is useful to prevent others from passing off their
products or services as those of one’s own organization. Suitable subjects include the name
of one’s company, a logo or hallmark that is associated with a product.
(c) Copyright: This is the right to copy and prevent others from copying without permission. It
protects works of literature and of art. It does not protect ideas, only the words in which
they have been expressed. Copyright is not registered. Suitable subjects for copyright
protection include books, plays, films, reports etc
(d) Registered Design: A design may be protected by registration in respect of colour, shape,
lecture. It must be new, have individual character and not make use of any protected
emblems or symbols. Subjects suitable for this include the container for a brand of perfume,
recognizable by its shape.
(e) Other kinds of intellectual property include goodwill, which is best protected by the right to
prevent others from passing off their goods or services as your own. It should be noted that
not all intellectual property lends itself to the normal forms of protection.
(Total: 20 Marks)
QUESTION 4
For a reputable organization like SHOPRITE, the selection of a suitable location for a new retail outlet
is a significant business decision. Apart from the costs involved in setting up the outlet in the first
place, the decision will be crucial in attracting and retaining customers and the right staff, managing
ongoing costs and getting the new venture off to a good start.
The Board of SHOPRITE SUPERMARKET NIG. LTD would be advised to take the following
considerations into account:
- Design, construction and availability: The outlet will need to be fit for purpose and available
under the appropriate premises. Planning permission for any change of use might also need
to be taken into account.
- Staff Considerations: The availability of appropriate staff and their salary expectations can
vary widely.
- Customer expectations: The new outlet will need to attract customers as well as staff.
- The Competitive Environment: SHOPRITE may need to take into account the location of
other, similar companies, and how this may affect their ability to compete both positively
and negatively.
- Infrastructure issues: External infrastructure issues such as transport and communication
links for staff, customers and supplies will also be relevant.
- The regulatory environment: It is also vital to consider health and safety or insurance
obligations.
- Flexibility: The premises will need to accommodate any charges to the size and focus of the
business. (Total: 20 Marks)

QUESTION 5
DRAFT OF SAFETY POLICY
1. AIM:
(a) To ensure, as far as is reasonably practicable, the health and safety of all employees
whilst at work.
(b) To comply with all relevant health and safety legislation; regulations and code of
practice
(c) To provide safe and healthy conditions of work, plants and systems.
2. RESPONSIBILITIES OF:
(i) Company:
(a) To work towards the achievement of these policy aims
 (b) To provide appropriate training advice, protective clothing, equipment and
documentation as is necessary or advisable
(c) To carry out assessment of risks and endeavour to reduce or eliminate them.
(d) To provide written systems of work for all and any procedures which are
exposed to hazard.
(e) To record notification of hazards and accidents and incorporated
improvements suggested as a result of investigations conducted following
such notifications as soon as possible.
(ii) Name Director: To ensure that all the requirements of this policy and auxiliary
procedures are implemented with the overall aim of ensuring as safe a place of work
as possible.
(iii) Managers and Supervisors:
(a) To be responsible for the execution of the safety policy as far as the
department/employees for which he/she is responsible.
(b) To be responsible, as far as reasonably practicable, for the safety of all
persons working in or visiting his/her department and for all
plant/equipment under his/her control.
(c) To ensure, in the event of accident, that prompt and appropriate first aid is
administered, that further medical assistance is obtained if necessary, that
the circumstances of the recommendations made as a result of an
investigation are implemented.
(d) To ensure that workplace safety folder is kept and displayed that its contents
are brought to the attention of every employee, and that all employees are
conversant with such data.
(e) To ensure protective clothing/equipment is used at all times where and
when necessary
(f) To ensure that employees are conversant with the accident/hazard reporting
procedure and that notification of hazards is passed to the appropriate
person for action.
(iv) Employees:
(a) To make themselves familiar with and adhere to safety procedure including
the fire alarm procedure and evacuation route(s).
(b) To wear protective clothing/equipment at all times as and when necessary,
and to report any defects in such clothing/equipment to their supervisor.
 (c) To report all accidents/incidents to a supervisor, and to carry out instructions
given by a supervisor
(d) To report all safety and health hazards and machinery defects using the
hazard report procedure.
(e) To cooperate with the organization at all times on matters of safety.
(v) Safety Representatives:
(a) To assist the employer and employees in the assessment and reduction of
risk and hazards by being aware of the implementation and effect of
procedures and work in the workplace.
(b) To advise the employer on matters of concern to the employees and
liaise/help in rectifying them.
(c) Take full part in the deliberation of safety committee.
(vi) Safety Committee:
(a) To further the interest of all involved in the reduction and/or elimination of
risk or its control.
(b) To advise management on safety matters
(c) To assist in the education of employees in operating safe working practices
(d) To raise awareness of the need for high profile safety procedure.
3. Administration: The safety director is responsible for overall attainment of safety principles
and the creation of places of work that are as safe as reasonably practicable.
The safety officer is (name) Deputy is responsible for:
(a) Preparing, reviewing and updating this policy, accident/hazard reporting procedures,
fire and safety procedures and evacuation guidance.
(b) Accepting and auctioning accident/hazard report forms.
(c) Ensuring compliance with the responsibilities laid down in this policy statement and
reporting failure to comply to senior management for sanctions to be applied.
(d) Liaise with health and safety officers, insurers, factory and environmental health
officers, fire brigade etc; and ensuring appropriate recommendations are effected.
(e) Implementing the requirements of (reporting of injuries, deaths and dangerous
occurrences regulations) and all such other legislation or requirements as may be
enacted from time to time.

Signed: Managing Director Safety Officer

Date of Issue ……………………… To be renewed on date
QUESTION 6
(a) Risk analysis is the process of systematically identifying, assessing and addressing all the risks
surrounding the organizations’ activities and property.
The four steps in a risk analysis and management process are:
(i) Risk identification
(ii) Risk assessment
(iii) Risk evaluation
(iv) Risk control
1) Risk Identification: This is the structured attempt to identify all activities or events
that might cause a loss. This requires a thorough knowledge of the organization, the
market in which it operates, and the legal, social, political, and cultural environment,
combined with a sound understanding of the strategic and operational objectives of
the organization. Ideally, a risk manager should spend time visiting each of the
organization’s operations to become acquainted at first hand with the particular
risks that each faces and the capabilities of the staff to handle them.
2) Risk assessment: The risk manager needs to describe and estimate the risks he has
identified and assess the probability of an occurrence of each risk, by examining data
from previous incidents and external data where available. He also need to consider
the severity of each loss.
Often two financial impacts of a risk are estimated, the first is the gross loss which
could occur before taking into account any risk reduction measures; the second is
the expected net loss if all risk reduction measures operate as expected.
3) Risk evaluation: The risk manager should then evaluate the risks, placing them in
order of significance in terms of financial impact to the organization. Often the
biggest risks are the most difficult to deal with because they result from external,
uncontrollable factors. However, he should also consider the legal, environmental,
social and moral aspects of the risks.
A risk manager needs to be able to identify the largest predictable loss that the
organization could suffer as a result of a particular risk.
4) Risk Control: Risk control is the selection and implementation of measures to
reduce, transfer or avoid risk. This will include introducing new procedures to help
avoid errors or accidents, the possibility of ceasing or outsourcing an activity to a
third party, and, of course, the possibilities of transferring the financial impact of the
 risk by taking insurance cover. The key factors to consider are the cost effectiveness,
compliance and the stakeholders.
(b) Risk facing an organization can be external or internal. The four key risks to an organization
are: (i) Financial risk (ii) Strategic risk (iii) Operational risk (iv) Hazard risk
Each of these risks have external and internal factors that drives them.
(i) Financial risks have external factors such as interest rate; interest rate volatility can
affect the financial stability of the company. Also is foreign exchange and access to
credit. Internal factors such as liquidity and cash flow can affect the financial stability
of the company. Fraud is also a factor.
(ii) Strategic Risks have external factors such as activities of competitors. Political
stability or government policies are external factors that is of great risk. So is
changes in the market. Internal factors such as research and development and the
impact of new technology or the absence of new technology is of grave
consequences. Intellectual capital is also an internal factor as the quality of human
resources could determine the profitability or otherwise of the organization.
(iii) Operational risks have external factors such as government regulations. Supply chain
is another external factor that constitute operational risk. So is the composition of
the board of directors. Internal factors such as break-in, arson/malicious damage,
power failure, system malfunction constitute operational risk.
(iv) Hazard risks have external factors such as natural disasters e.g. tornadoes and
environmental degradation. Internal factors such as supply chain, health and safety
regulation, trade description, data protection, employment regulation and
production legislation can constitute hazard risk.

The risk of fraud or dishonesty from within the company or cost arising from failure to
comply with current regulation is just as real as the threat of damage to property as a result
of a catastrophe. Equally, damage to an organizations reputation because of adverse
publicity arising from an error or accident can have very serious repercussions for its future
prospect.

A further significant internal risk is the failure of processes and procedures essential to the
achievement of the organizations objectives. For example, the assessment of oil reserves is
critical to the value of an oil company. if exploration managers are remunerated on the basis
of the size of unexploited reserves discovered, there may be a temptation to overstate oil
reserves to obtain larger bonuses. If the internal procedures to counter such overestimation
are ineffective, there is a significant risk of misreporting of the organizations position and
value to its stakeholders. At some point in the future the overestimation will becme
apparent, with a potentially catastrophic impact to the organization. They have been many
instances of black holes in company’s account as a consequence of failed internal processes
and lack of corporate governance.
 CORPORATE ADMINISTRATION
Examiner’s Report
General Comments
Most candidates attempted all the questions in Section A, and Several questions were answered
well such as 1(c) on types of works that copyright protects, 1(d) on characteristics of good
information. 1(F) on what can be registered as a trade made, and 1(h) on probationary period in
human resource management. However, some questions were poorly answered because of poor
understanding. (1b) on key features of a Corporation tax self-assessment system.
1(g) on duties of a trustee according to ten Investment and Securities Act, 1(e) candidates wrote on
storage of information of flagging and storage of sensitive or confidential information.

Overall, section B was answered adequately that is three (3) out of the five (5) questions. However
question 4 was well attempted and had the best performance. Questions 2, 3,5,6 were not.

SECTION A
QUESTION 1
(a) This is made up of four questions.
1a(i) were not understood by the students, while
1a(ii) recorded fair performance
(1b) In general, candidates did not understand the question, quality of a good tax system and
personal income tax were listed instead of features of a corporate tax self assessment
system.
(1c) Candidates understand the questions and scored well.
(1d) The question was well understood and 90% scored good mark.
(1e) Candidates wrote on storage of information generally instead of how to deal and store
confidential information.
(1f) The question was well attempted with good performance.
(g) The question was not well answered because candidates did not understand the question.
(h) This was the best attempted and scored question.
(i) The performance was fair.
(j) Question was not understood by candidates so there was very poor score by students.
SECTION B
QUESTION 2
(a) This question is seeking to have candidates with appropriate acknowledge mention the
main ingredients of a disciplinary procedure, such as :-
i. Investigating and Review of the alleged offence.
ii. Right to Notification of the offence in criteria to employee c.................
iii. Right to the accompanied, it hearing of the care is decided
iv. Right of appeal by employee if s...... is applied.
v. Hearings, Recording of proceedings and sanctions, if need be. However, a high
percentage of candidates who attempted his question. Unfortunately limited
themselves to sub-items under investigation, such as; formal and informal warnings,
suspension, demotion/dismissal. The approach followed by students rendered most
of them unable to earn a pass mark.
(b) An ideal grievance procedure in the modern Corporate environment most candidates did
not know the difference between this question and the one in section 2(a), whereas the
question was asking for ;
(i) How management notifies ............ to employee
(ii) Steps in appeal ...... if hearing is decided.
(iii) Time limit for each step of the disciplinary process.
(iv) Need for timely communication of decision or events.

QUESTION 3
Most of the students who did the course attempted the question. They generally showed a broad
knowledge of the topic. However, some did not answer the question with the depth required.
Some wasted precious time discussing intellectual property Rights in depth instead of the key issues,
which were:-
a. The five categories of intellectual property Rights (Patents, Designs copy rights, Trade marks
others such as goodwill). (Most candidates mentioned four and therefore did not score full
marks.
b. Characteristics of intellectual Property Right. Some students did not address this section of
the question.
c. The use or application of the Rights. Some students did not address this section of the
question.
QUESTION 4
(a) Question 4 was well attended by the candidates, and most, if not all were aware of the
requirements and factors affecting the choice of location/premises of the organisation –
Shoprite supermarket Nig. Ltd. In the garden city in Port-Harcourt.

So, in lieu of above, majority of the students that attempted the question did very well but
very few of them got the question wrong.

QUESTION 5
(a) Majority of candidates did not know how to formulate safety aims of an organisation.
(b) This relate to responsibilities of stakeholders in ensuring a safely environment within the
organisation, more than ninety percent of those that attempted this part scored low marks
because they could not specify their responsibilities in promotion safety environment.
(c) This part was not understood by almost all candidates, as result of not having adequate
knowledge on it.
Recommendation
(i) I advise candidates to understand questions before attempting it.
(ii) They should be conversant with all aspects of the syllabus.
(iii) They should improve their handwriting by making it legible.

QUESTION 6
This question was well attempted by candidates, but vast majority listed pure risk, speculative risk,
fundamental Risk, Fundamental Risks, and particular risks instead of Financial risks, Strategic Risks,
Operational Risks, Strategic Risks, Operational Risks and Hazard Risks as key risks. This made the
overall performance very poor.

This question which is on Risks is of two parts (a) and (b) was well attempted. Candidates answered
part (a) rightly and scored good marks, but vast majority listed pure risk.
 THE INSTITUTE OF CHARTERED SECRETARIES AND
ADMINISTRATORS OF NIGERIA

JUNE 2013 DIET: PROFESSIONAL EXAMINATIONS

CORPORATE SECRETARYSHIP
(Code: P202)

Wednesday Afternoon, 12th JUNE, 2013

INSTRUCTIONS

1. Answer ALL questions in Section A. All questions carry equal marks.

2. Answer THREE (3) questions from Section B. All questions carry equal marks.
3. Time Allowed: THREE (3) HOURS
4. Candidates are expected to show their workings using the inside page and the last
sheet of the answer booklet.
5. Candidates are forbidden from bringing phones into the examination hall.
6. Only non-programmable calculators are permitted for use in the examination.
 SECTION A
(Answer all questions in this section)
QUESTION 1
(a) Describe the main categories of information contained in an Annual Return form for a
Limited Liability Company. (4 Marks)
(b) Explain what is meant by the term “All Employee Schemes” and “Discretionary Schemes”.
Give examples of each. (4 Marks)
(c) Under what circumstances may a General Meeting be adjourned? (4 Marks)
(d) In respect of the minutes of Directors’ Meetings, what are the statutory requirements as to
the location where the minutes must be kept and in what form? (4 Marks)
(e) What Statutory procedures must be followed when a Public Limited Company allots shares
for non-cash consideration? (4 Marks)
(f) How can a Public Company be re-registered as a Private Company? (4 Marks)
(g) Mention any four circumstances where special notice is required to pass an ordinary
resolution at a General Meeting. (4 Marks)
(h) Briefly state in an outline form, the procedure to remove an Auditor. (4 Marks)
(i) Write short notes on the following:
(i) Consolidation of Shares (1 Mark)
(ii) Sub-Division of Shares (1 Mark)
(iii) Declaration of Solvency (1 Mark)
(iv) Special Resolution (1 Mark)
(Total: 4 Marks)
(j) What type of Resolution is required to approve the following actions?
(i) Fixing the financial year end (1 Mark)
(ii) Appointment of an Auditor to fill a casual vacancy (1 Mark)
(iii) Approval of the audited financial statements of a Public Limited
Liability Company (1 Mark)
(iv) Disapplication of pre-emption rights. (1 Mark)
(Total: 4 Marks)
 SECTION B
(Answer THREE Questions from this section)

QUESTION 2
You are the Assistant Company Secretary of Optimum Foods Plc, a company listed on the stock
market. The Annual General Meeting comes up in two months time. The Company Secretary has
asked you to produce a note stating what actions he should take before the Annual General Meeting
and what documents needs to be prepared and/or issued.
Required:
Prepare a suitable note for the Company Secretary. (20 Marks)

QUESTION 3
You are the Company Secretary of Blue Royal Plc. The directors wish to amend the Articles of
Association of the Company.
Required:
Prepare the procedure for the above incorporating: -
(a) All of the Statutory and practical steps in convening the Extra-ordinary General Meeting.
(b) Listing rules compliance
(c) Statutory filings with the Registrar of Companies (Total: 20 Marks)

QUESTION 4
As a practicing Chartered Secretary, a client has approached you to register a private company
limited by shares. A meeting has been scheduled to hold in your office to discuss the general
registration process.
Required:
(a) Prepare a Memorandum indicating the areas of preliminary consideration you may likely
discuss with the client. (10 Marks)
(b) Prepare another Memorandum stating the documentation requirements to register the
Company. (10 Marks)
(Total: 20 Marks)
QUESTION 5
You are the Company Secretary of A & A Limited. The Board of Directors is presently discussing the
need to convert the company to a Public Limited Company. A Board meeting is scheduled to hold
shortly in order to review both the process and documentation requirements expected during the
exercise. The Chairman of the company has invited you to his office for a discussion that will hold
two days before the board meeting.
Required:
(a) Distinguish briefly between a public company and a listed company. (2 Marks)
(b) Prepare a Memorandum to the Chairman of A & A Limited, stating in an orderly manner the
procedure that will be followed to re-register A & A Limited as A & A. Plc. (8 Marks)
(c) Indicate the documentation requirement involved during the process of re-registration.
(10 Marks)
(Total: 20 Marks)
QUESTION 6
You are the Company Secretary of Cosmopolitan Limited. The company has been trading for the past
ten (10) years. Since inception of the Company, no dividend has been declared though the company
has never sustained a loss.

At a recently held Annual General Meeting, the Chairman of the Company presented the audited
accounts for the year ended 31 st December 2011 to the shareholders. All questions asked on the
accounts were answered though not to the full satisfaction of the shareholders.

The Chairman thereafter proceeded to item two (2) on the agenda without formally proposing the
adoption of the accounts. Dr. Goodluck, one of the shareholders raised a point of order on the
failure of the Chairman to move a motion formally adopting the accounts. Another shareholder,
angry at the fact that no dividend has been declared since inception, moved a motion for the
winding up of the company, though this item was not on the agenda of the meeting.
Required:
(a) Is the point of order raised by Dr. Goodluck in order? Discuss briefly what would have been
your explanation to the shareholders at the meeting. (4 Marks)
(b) What is your view on the motion moved by a shareholder for the company to be wound up?
(2 Marks)
(c) After the meeting, the Chairman explained to you that the value of the assets of the
company is in excess of the company’s total liabilities. Based on his explanation, he
requested to know what type of liquidation would be appropriate. (2 Marks)
(d) Prepare a Memorandum to the Chairman stating the procedure involved in the type of
liquidation recommended in (c) above. (12 Marks)
(Total: 20 Marks)
 CORPORATE SECRETARYSHIP
MARKING GUIDE
SECTION A

QUESTION 1
(a) Section 370 of CAMA States that every company with a share capital must file a return with
the commission. Failure to file annual return over many years can lead to a company being
struck off the register. The Annual return form is form CAC 10 (for small companies) and
CAC 10A ( for bigger companies).
The contents are of follows: - (as contained in s.371)
1. The company’s registration number
2. The company’s name in full as contained in the Certificate of Incorporation.
3. The date of the current return.
4. The registered office address
5. The location of the company’s record.
6. The company’s authorized share capital and amount per share.
7. The company’s issued and paid up share capital.
8. Particulars of indebtedness (if any)
9. The company’s financial year accounting year end.
10. The company’s turnover and net assets.
11. Particulars of the directors and their notable details vi:-
(i) Surname, (ii) other names, (iii) nationality (iv) Age (v) Telephone number (vi)
Residential address (vii) E-Mail address (viii) Business occupation (ix)
Particulars of other directorship
12. The company’s particulars of registration (if a firm or many) date of appointment,
telephone number
13. Particulars of present shareholders
14. Signature of a director and secretary’s name and telephone numbers.
15. Name Address, Accreditation number, telephone number, e-mail address, signature
of the presenter of the return for filling purpose.
(b) Employee Share Scheme is a scheme for encouraging or facilitating the holding of shares or
debentures in the company by or for the bonafide employees or former employees of the
company or group of companies on the spouses, children etc of such employees or former
 employees. The employees are given the opportunity to acquire shares in the company and
benefit from the growth of the company and encourage employees’ loyalty and retention.
(i) An All- Employee Scheme: This is a scheme where the company intends all, or
substantially all of its employees to participate in the savings-related scheme or the
share incentive plan.
Examples are Share Incentive Plans (SIP) Free shares partnership shares, matching
scheme.
(ii) Discretionary Schemes
This is when the company intends that only a selected group of employees will
participate in the scheme e.g. a company’s Share option plan or executive share
option plan (ESOPs).
(c) General Meetings are usually called by the directors. The court may also order a general
meeting to be called, held and conducted in the manner in which it’s seen fit.
General meetings include both Annual General meeting and general meetings. A General
meeting must be adjourned by the Chairman if within an hour of the start time, a quorum is
not present, or if during a meeting a quorum ceases to be present S, 239(3). The meeting
shall be dissolved if it was convened on the resolution of members or it stands adjourned to
the same day, the following week at the same time and place or to such other day as
directed.
The Chairman may adjourn a general meeting at which a quorum is present if:-
i. The meeting consents or directs the Chairman to do so
ii. It appears to the Chairman that the adjournment is necessary to protect the safety
of any person attending the meeting or to ensure that the business of the meeting is
conducted in an orderly manner.
iii. If a meeting is adjourned, it should be to a time and place that is reasonable in the
circumstances.
(d) Minutes are to be prepared by the Secretary and circulated in draft form to the directors for
comments. It should be included in the papers for the next meeting and if approved signed
by the chairman. Once, signed, minutes become evidence of the proceedings of the relevant
meeting.
In accordance with s242(1) minutes books must be kept for all meetings of the board etc at
the registered office of the Company and shall during business hours ( of not less than 6
hours in earlier day be allowed for inspection by members).
 Private companies usually keep their minutes in bound book. Larger companies keep their
minutes in loose-leaf binders, consecutively numbered. For security purpose, the minutes’
books should be stored in a fireproof locked cabinet or safe to prevent any physical damage
or unauthorized alteration.
It is necessary to password protected computer files containing the minutes and supporting
documents. Care should be taken to prevent unauthorized access. Electronic copy of the
signed minutes could be made.
(e) A public company may not allot shares either fully or partly paid-up for a payment other
than cash, unless the consideration is valued by an appointed Valuer within the six months
prior to the allotment and a copy of the valuation sent to the proposed allotee. The
valuation report must be made by an independent person (Auditor). The valuation report
must state:-
(i) The nominal value of the shares for consideration.
(ii) The amount of the premium payable on the shares
(iii) The Consideration which has been valued and the method used to value it.
(iv) The amount of the nominal value of the shares and any premium treated as paid-up
for a consideration other than cash.
1. A formal contract is drawn up for the transfer of the non-cash consideration and for
the allotment of the shares in consideration of the assets. Thus should then be sent
to the Registrar General with the return of allotment. If no written contract,
particulars of agreement must be sent
2. Where allotments of shares are made by way of share exchange in a take-over bid,
3. Where the shares are allotted under a capitalization issue by the capitalization of
reserves.
Private companies do not need to have no-cash consideration independently valued.
Directors can apply their own valuation.
(f) Section 53 of CAMA outlines the re-registration of a public company as a private company
following these procedures:-
(1) A special resolution is passed. If enough members object, they can apply (the holders
of not less than 5% aggregate in the nominal share capital of the company) to the
court to cancel the resolution within 20 days of its being passed.
(2) An application signed by a director and the secretary,
(3) Altered memorandum and Articles of Association in printed form.
(4) The court given an order for or against the resolution.
 (5) A certified true copy of the court order is delivered to the commission, together with
the other documents.
(6) When the commission approves the application, a certificate of incorporation will be
issued stating that the company is a private company.
Alterations to the Articles take effect when the certificate is issued.
(g) i. To remove a director before the expiration of his period of office.
ii. To appoint or approve the appointment of a director of a public company who has
attained the age of 70.
iii. To fill a casual vacancy in the office of auditor.
iv. To re- auditor who was appointed by the directors.
v. To remove an auditor before the expiration of his term of office.
vi. To appoint as auditor a person other than a retiring auditor.
(h) i. Hold a board meeting to convene Extraordinary General Meeting (EGM).
ii. Send out special notice to all entitled including the auditor to be removed.
iii. Hold EGM to pass an ordinary resolution removing the auditor
iv. Notify the Corporate Affairs Commission of the removal within
(4 Marks), One Mark for Each Point.
i. i. Consolidation: It means that the shares of a low nominal value are aggregated into a
smaller number of an increased nominal value. For example two shares of 50 kobo
each being consolidated into one share of N1.00 each. (1 Mark)
ii. Subdivision: This is the opposite of consociation of shares. Subdivision of shares is
where shares of a high nominal value are divided into a larger number of shares of
lower nominal value. For example one share of N1.00 each subdivided into 2 shares
of 50 kobo each. (1 Mark)
iii. Declaration of Solvency : This is a Statement made by the directors of a company
confirming that the companies is solvent and will be able to meet all liabilities which
arise within 12 months from the commencement of the voluntary liquidation.
(1 Mark)
iv. Special Resolution: This is a resolution passed by a majority of 75 per cent of the
votes cast at a general meeting. The notice of the general meeting must describe it
as such. At least 21 days clear notice is required of a general meeting at which a
special resolution is to be proposed. The notice should set out the exact text of the
resolution (1 Mark)
(Total: 4 Marks)
j. (i) Board resolution (1 Mark)
(ii) Board resolution (1 Mark)
(iii) Board resolution (1 Mark)
(iv) Special resolution (1 Mark)
Total:(4 Marks)

SECTION B
QUESTION 2
The Company secretary plays a central role in the preparation for, and management of members’
meetings. Firstly, to advise the Chairman of the estimated attendance at the meeting so that a
suitable room is booked in terms of size, availability, cost and quality comfortability. The Chairman
is usually responsible for finding, evaluating and hiring an appropriate venue.
Before the meeting
(1) See that the approved audited accounts and notice of the meeting are signed off by the
appropriate parties:-
(1) Two directors to sign the balance sheet
(2) Auditors on the Auditor’s page
(3) Chairman to sign the Chairman’s statement.
(4) Secretary to sign director’s report and the notice
(2) See that the printer’s proof approval is received from the Stock Exchange for printing the
Annual Report before printing bulk.
(3) Advise the Registrar to prepare dividend warrants for dispatch to shareholders following
approval.
(4) Prepare proxy forms for dispatch with the Annual Returns and Accounts, and the notice of
the General meeting. Proxy forms are to be a tear-out page in the notice of the meeting.
(5) Advise and appropriate date of dispatch of notice to shareholders – this should be at least 21
days before the Annual general meeting.
(6) Issue notice to the Stock Exchange with the required 20 copies of the Annual Reports and
accounts and SEC should be notified as well. The proxy form are to be paid for ( N50,000) at
the SEC office.
(7) Invite other professional advisers to the company – the solicitor, the auditors.
(8) Invite the representative of CAC.
(9) Check for returned proxy forms with the registrar, and make sure they are duly stamp
duties.
(10) Prepare ballot papers in the event of a poll being demanded.
(11) Prepare a more detailed agenda as an order of proceedings for the chairman.
(12) Prepare attendance sheets to register attending shareholders, the press, proxies and
representatives.
(13) Make the Register of Members available for inspection and to identify the people attending
the meeting.
(14) Prepare name cards/bags for the directors.
(15) Make sure the notice is published in a nation daily 21 days before the meeting.

QUESTION 3
(i) The company’s Articles of Association form a key part of the company’s constitution and
binds the company and its members. The board must resolve to amend the Articles and
convene a general meeting.
(ii) SEC and NSE are notified of the decision of the board.
(iii) NSE gives approval for publication of notice on paper. The notice should not be less than 28
days. A proxy form should be sent with the notice. The meeting is held and the resolution
put to vote.
(iv) SEC and NSE are informed of this decision taken.
(v) The resolution signed by 2 to 3 directors verified copies of the Article with the paper
publication as amended are to be sent to the Registrar of Companies within 15days of
passing the resolution.
(vi) Other accompanying documents include evidence of Annual Reports filed to date and form
CAC 2.1, appointment of secretary duly filed. The statutory fees for filing an alteration of
Articles is N.
(vii) The Certified true copy of the amended articles is obtained from the Registrar of Companies
(viii) The Annual general Meeting is informed of this if done at an Extraordinary General Meeting.

QUESTION 4
(a) To: Client
From: Chartered Secretary
Date:
Topic: Preliminary Considerations on Registration of a Company
(i) Type of Company to be registered
(ii) The name of the company and its availability at the CAC
 (iii) The objects
(iv) Capital requirements
(v) Registered office
(vi) Directors
(vii) Shareholder/Shareholding structure
(viii) Company Secretary
2 Marks for any Five of the 8 Points with a Brief Explanation (10 Marks)

(b) To: Client

From: Chartered Secretary
Date:
TOPIC: Documentation Requirements for Company Registration:
(i) A memorandum of Association – This should be printed and signed by at least two
subscribers.
(ii) Articles of Association – This should be printed and practically combined with the
memorandum of Association. It should be signed by at least two subscribers.
(iii) Statement of Directors (Form CAC7) – this should be signed by the entire director-
named therein.
(iv) Statement of Shareholders (Form CAC ) – this should be signed by any of the
directors.
(v) Statement of Registered Office (Form CAC 7) – this indicatives the registered office
address. It should be signed by a director.
(vi) Statement of statutory compliance (FORM CAC ) – this should be signed by a legal
practitioner involved in the registration of the company.
(vii) Statement of Appointment of Company Secretary (Form CAC… ) – This is optional.
11/2 marks for each of the point in (i) to (vi) and one mark for point (vii). (10 Marks)

QUESTION 5
(a) A public company is any company other than a private company and its memorandum states
that it is a public company. A listed company is one whose shares or securities are quoted
on the Stock Exchange. (2 marks) one mark for each definition.
(b) To: Chairman
From: Company Secretary
Date:
TOPIC: Procedure of Converting a private Company to a public company

(i) Hold a Board Meeting to convene an EGM (2marks)

(ii) Hold an EGM to pass a special resolution approving the conversion (2marks)
(iii) Make necessary application to the Corporate Affairs Commission in a prescribed
form with supporting documents (2 marks)
(iv) Follow–up at the CAC to obtain new certificate of incorporation (2 marks).

(c) i. Reviewed Memorandum and Articles of Association incorporating necessary

amendments.
ii. Printed copy of the special resolution signed by two directors.
iii. A copy of a written statement by the Directors and the Secretary certified an oath by
them and showing that the paid up capital of the company as at date of the
application is not less than 25% of the authorized share capital as at that date.
iv. A copy of the Balance Sheet of the company as at the date of the special resolution
or the preceding 6 months, whichever is later.
v. A statutory declaration in the prescribed form by a director and the Secretary of the
company that the special resolution has been passed and that the company’s net
assets are not less than the aggregate of the paid up share capital.
vi. A copy of the prospectus or statement in lieu of prospectus.
2 Marks each for 5 Points (10 Marks)

QUESTION 6
(a) The point of order is not appropriate because it is not required that the accounts be formally
adopted or a motion proposed for acceptance. Chairman’s action is in order as there is no
formal requirement for adoption of accounts. (4 Marks)
(b) The motion is not in order since it was not listed on the item of the AGM. No business other
than those listed on the notice of AGM can be transacted at the meeting.
(2 Marks)
(c) Members voluntary liquidation (2 Marks)
(d) To: Chairman
From: Company Secretary
Date:
Topic: Procedure on members voluntary Winding up
(i) Hold a board meeting to approve statutory declaration of solvency and convene
EGM.
(ii) Hold EGM to pass necessary resolution approving the winding up and appointing a
liquidator.
(iii) Give notice of the winding up in a Gazette or advertisement by publication in 2 daily
newspapers and to the CAC.
(iv) Give notice of the appointment of a liquidator in a Gazette or publication in 2 daily
newspapers.
(v) Convene final meeting of liquidation and give notice by publication in a Gazette or
some newspapers circulating in the community where the meeting is to be held
within one month before the meetings.
(vi) Hold final meeting to receive final accounts of liquidation.
(vii) Within 7 days after the meeting send the final accounts to CAC with returns relating
to the holding of the meeting.
(viii) On receipt of the documents in (vii), CAC will register them and 3 month thereafter,
the company is deemed to have been wound-up.
2 Marks should be Given for Each Point (12 Marks)
 CORPORATE SECRETARYSHIP
Examiner’s Report
General Comments
QUESTION 1
- In setting the six questions, the Institute seems to have set its mind on testing the
candidates’ practical knowledge of statutory company secretarial practice. The questions
are not too academic, as such, candidates with no prior experience as a Company Secretary
may have difficulties in giving the correct answers. This is how it should be as the essence of
the course is to be able to apply academic knowledge in professional practice.
- Attention should be drawn to candidates’ lack of respect for examination instructions
particularly the need to start each question on a fresh page.
- As usual many candidates write as if they are taking short-hand notes. Their hand writings
are so illegible that examiners have to strain their eyes to decipher what has been written.
This waste the examiner’s time unnecessarily.
- Generally, the standard of candidates’ written English expression is noting to write home
about. There is need to pay attention to tenses, syntax and the like.
- On the whole, most of the candidates demonstrated that they were well prepared for the
examination. This was demonstrated in the way many of them cited relevant sections of the
CAMA correctly and evedn referred to the newly released regulations from CAC.

SECTION A
QUESTION 1
a) This is a straight forward practical question that any company Secretary that s familiar
with filing of Annual Returns will have no problem answering. Unfortunately, many of the
candidates confused the information on the Annual Return Form (CAC 10) with the financial
information contained in the Annual Reports and Accounts.
b) This is another straight forward question. Many of the candidate would not explain the term
“All Employee Schemes”, let alone provide relevant example. However, quite a number got
the “Discretionary Schemes” correctly with appropriate examples.
c) A good majority of the candidates had no problem answering this question and the provided
enough answers to earn the maximum four points.
d) Almost all the candidates provided the correct answers to the two parts of this question.
e) The answers provides by many of the candidates were not detailed enough. Many of them
omitted the need to the proposed allottee the outcome of the independent valuer’s report.
This is an important part of the answer to the question.
f) Most of the candidates were detailed in their answer to this question, taking the steps in
sequential order.
g) A good majority of the candidates knew the correct four circumstances. However, many of
them did not distinguish between the following
- Removal of an Auditor vis-a-vis Removal of an Auditor before the expiration of his
tenure.
- Appointment of a Director vis-a-vis Appointment of a Director who has attained the
age of 70 years.
h) Many candidates provided the corrected answers though some mixed up the sequence in
the procedure.
i) Many of the candidates could not satisfactorily explain what is meant by “Consolidation of
shares”, they confused it with conversion of shares. The same confusion was noticed in
“Sub-division of shares”. Most of them provided correct answers for “Declaration of
solvency” and “Special Resolution”
j) This question was a bit misleading as it taxed the candidate’s knowledge and experience.
Most of them assumed that a resolution is either ordinary or special. May be the question
would have been less confusing if it had been framed as “what Resolution.... “ instead of “
what type of Resolution...” Almost all the candidates answered (j) (i) – (iii) as “Ordinary
Resolution” instead of “Board Resolution”. They got only (j) (iv) correctly.

SECTION B
QUESTION 2
(c) A good majority of the candidates attempted this question and provided the appropriate
answer. However, many of them failed to realise that the question had two parts:-
(i) Actions needed to be taken
and
(ii) Documents needed to be prepared
Many of them only answered the first part. This explained why some candidates got low
marks in this question.
QUESTION 3
Compared to other questions, majority of the candidates avoided this question. Part (a) and (c)
were well answered but many of them failed to provide correct answer to part (b) that concerned
“listing rules compliance”. In general, candidates failed to address their angers to the question
regarding the filing requirements as regards amendment Article of Association at the Corporate
Affairs Commission (CAC) budget rather just listed the various resolutions that are required to be
filed with CAC. This is a demonstration of the candidates’ lack of understanding of the question.

QUESTION 4
This is a popular question with most of the students attempting same and scoring good marks.

QUESTION 5
This is another popular question with the candidates. However, many of them defined a listed
company correctly and could not explain the difference between public company simplicity and a
listed company. Most of the candidates stated that a board resolution was required for conversion
to a plc rather than stating that a Board meeting was required to convene an EGM for this purpose.

QUESTION 6
This is a practical question but many candidates went off-mark in parts (a) and (b) of the question
thereby losing good six marks. They should know that what the law requires is for the Chairman to
lay before the AGM the Annual Reports and Accounts. No resolution is required to adopt same. In
the same vein, members in general meeting cannot raise for discussion what is not contained on
the agenda of the AGM.
 THE INSTITUTE OF CHARTERED SECRETARIES AND
ADMINISTRATORS OF NIGERIA

JUNE 2013 DIET: PROFESSIONAL EXAMINATIONS

CORPORATE FINANCIAL MANAGEMENT

(Code: P203)

Tuesday Morning, 11th June, 2013

INSTRUCTIONS

1. Answer ALL questions in Section A. All questions carry equal marks.

2. Answer THREE (3) questions from Section B. All questions carry equal marks.
3. Time Allowed: 3 HOURS
4. Candidates are expected to show their workings using the inside page and the last
sheet of the answer booklet and NOT on the Question Paper.
5. Candidates are forbidden from bringing phones into the examination hall.
6. Only non-programmable calculators are permitted for use in the examination.
 SECTION A
(Answer all questions in this Section)

QUESTION 1
(a) Define the terms (a) “working capital” and (b) “working capital cycle”.
You are required to calculate the working capital cycle based on the following information in
respect of a manufacturing company:
Raw materials in stock 10 days
Work-in-progress 20 days
Finished goods stock 15 days
Period between dispatch and invoice to customers 10 days
Period from invoicing to customer payment 40 days
Period of credit taken from suppliers 50 days (4 Marks)
(b) Explain what you understand by (a) share option scheme and (b) profit-based bonuses as
forms of incentives for company managers.
Justify why such incentives may be appropriate. (4 Marks)
(c) Mention two (2) advantages and two (2) disadvantages of listing of a Nigerian company on the
Nigerian Stock Exchange (NSE). (4 Marks)
(d) What is a derivative? Apart from futures, what are two (2) other forms of derivatives you
know? (4 Marks)
(e) Distinguish between a management buyout and a management buy-in and mention one (1)
advantage and one (1) disadvantage of the former over the latter. (4 Marks)
(f) Distinguish between operating leases, finance leases and hire purchase. (4 Marks)
(g) Define capital gearing and give a brief explanation of what is meant by a highly-geared
company. (4 Marks)
(h) Distinguish between Net Present Value and Interval Rate of Return and show how, they may
offer complementary methods of evaluating investment. (4 Marks)
(i) What are the main costs associated with stockholding? (4 Marks)
(j) Explain why many companies use their weighted average capital investments to evaluate
capital investments and what particular assumptions they make in using WACC for this
purpose. (4 Marks)
(Total: 40 Marks)
 SECTION B
(Answer THREE questions from this Section)

QUESTION 2
Your company is considering two alternative projects, Project A and Project B. Project A costs N120
Million while Project B costs N80Million, both of which are to be paid for immediately. Project A has
net cash inflows of N80 in the first year and N100Million in the second year while Project B has net
cash inflow of N65Million in the first year and N55Million in the second year. Your company’s cost of
capital is 20% per annum.
(a) Evaluate and rank the two projects, using EACH of the Net Present Value (NPV) and Internal
Rate of Return (IRR) approaches [Hint: The IRR for Project A is found to be 30.2%. To
calculate the IRR for project B, you may wish to use the iterative interpolation method, given
as: IRR = low rate + x (high rate - low rate)/(NPV at low rate - NPV at high rate). You may
wish to start with 30% as low rate and 35% as the high rate and continue, if necessary, to
iterate until the resulting NPV converges to zero - specifically, not more than N0.05 Million in
absolute value]. (8 Marks)
(b) One disadvantage that is often claimed against the IRR approach is that a (smaller) project
with a higher IRR (but a lower NPV) is not better than a bigger-sized project with a lower IRR
(but a higher NPV) because IRR is a relative measure. But it is also known that this drawback
can be rectified and its contradiction with the NPV approach shed light upon through the use
of incremental IRR approach (involving creation of a hypothetical Delta Project that is made
of the difference in cash flows between the two projects under consideration and solving for
the IRR of the resulting cash flow differential). You are, accordingly, required to apply the
incremental IRR approach to the cash flow differential between the two projects apply and
use your result to further analyse and shed light on the outcome of your computations in (a)
above. (Hint: In calculating the IRR of the incremental cashflows, you may wish to start the
interpolation by using a high IRR of 28% and a low IRR of 24%) (4 Marks)
(c) Assuming the ranking that emerges from your calculation in (a) above on the basis of NPV
approach contradicts the ranking you get through the use of IRR approach and you present
the outcome to your Managing Director, who is not well versed in financial analysis but is
ready to learn and get to the root of such seemingly confusing issue, tell your Managing
Director. The difference in the assumptions underlying each of the two approaches that
explain the contradiction and then explain to him the results, using a well prepared suitable
 sketch of the commonly used line graphs for the two projects (with NPV on the vertical axis
and IRR or cost of capital on the horizontal axis) that shows:
(i) For each project, the intersections on both horizontal and vertical axis as well as
their respective NPV at the 20% cost of capital; and
(ii) Their common IRR and NPV at their point of intersection. (8 Marks)

QUESTION 3
You are provided the following information in respect of shares and debentures of Hypothetical Plc
at a point in time.
Annual standard deviation of return on ordinary shares = 15%
Correlation of return on ordinary shares with market returns = 0.5
Actual annual rate of return on Hypothetical Plc’s ordinary shares = 18%
Profits (in (Nmillion) after payment of Dividends on preference shares 24
Market value (in N million) of 20 million 9% preference shares of N1 par value 18

Market rate of return is 10% per annum; annual standard deviation of market rate of return is 12%
and annual rate of return on government bonds (assumed to be risk-free) is 4%.
You are required to:
(a) Calculate the: (a) Beta (β) value, and hence, (b) the cost of equity capital and (c) market
capitalization for the company’s ordinary shared on the assumption that the current profits
will continue to be earned in the foreseeable future. (8 Marks)
(b) Explain what you understand by: (a) Alpha (α) value of securities and (b) calculate it for the
Hypothetical Plc ordinary shares, indicating whether the shares are undervalued or
overvalued. (6 Marks)
(c) Cos of capital for the company’s (Hypothetical Plc) preference shares. (2 Marks)
(d) Weighted average cost of capital, based on the market value of the debt and shares.
(4 Marks)
(Total: 20 Marks)

QUESTION 4
Multipak Ltd needs to replace its polishing machine. The polishing machine forms part of the
production process equipment and most products manufactured requires polishing at various stages
of their production. A polishing facility is expected to be required for as long as the factory remains
in operation and the company expects to continue in its existing factory for the foreseeable future.
Details of the 2 machines under consideration are set out below:
Machine A B
N N
Initial Cost 50,000,000 50,000,000
Life Span 4 years 7 years
Salvage value at the
end of year 4 - Machine A 5,000,000
7 - Machine B 7,000,000
Annual Running Costs (Cash) 10,000,000 8,000,000
Both machines fulfill the same function and have equal capacities. The company’s target rate of
return for evaluating capital investment projects is 10%.
Required:
(a) (i) Determine which machine should be purchased.
(ii) Explain your method and specify and assumption made. (15 Marks)
(b) What would the initial cost of Machine A have to be to make the two machines equally
finally attractive? (5 Marks)
(Total: 20 Marks)

QUESTION 5
You have been recently appointed Company Secretary of PIONEER PLC and have been asked by the
Managing Director to estimate the company’s weighted average cost of capital. You have
ascertained the following information:
(a) The company is financed by 50 Million N1 shares with a market price of N1.20 and reserves
and share premium accounts totaling N100Million.
(b) A dividend of 2.25 per share has just been paid, an increase of 20% on the previous year
(this is the normal annual increase in dividends for the company).
(c) The rate of company’s fare is 30%
(d) The company’s shares have a beta of 1.6
(e) The return on government stock is 4.5% and the return on the market is 14%
(f) In addition to share capital, the company has N20million (at market value) debt in its capital
structure at a pre-tax cost of 12%.
The Managing Director has recently read that there are different methods available for calculating
the cost of equity and is particularly interested that you calculate the overall cost of capital using
the:
(a) dividend valuation model first and
(b) the Capital Asset Pricing Model (CAPM).
Secondly, you are required to prepare a report providing the Managing Director with figures he
requires, explaining any resulting difference. (20 Marks)

QUESTION 6
Easyway Plc is considering marketing a new product with a four year-life span. Easyway will need to
install new equipment to manufacture the product. Easyway has to choose between two machines
both of which would be suitable. Machine A cost N460,000 to purchase and install and has a residual
value of N20,000 at the end of four years. Machine B cost N630,000 to purchase and install, and has
a residual value of N30,000 at the end of four years. Machine B takes slightly longer to install and
commission, but once in operation, it has slightly lower operating costs per unit and will eventually
produce more output. The following projects have been prepared of the cash flows from product
sales and operating costs of the two machines.

Machine A Machine B
Sales Income Operating Costs Sales Income Operating Costs
N (000) N (000) N (000) N (000)
Year 1 1340 1160 700 610
2 1460 1260 1400 1100
3 1300 1140 1600 1240
4 820 760 900 750

The company’s cost of capital is 12% p.a. All capital investments have to achieve a payback period of
three years or less.
Required:
Do calculations to show which project should be accepted, and advice the management using both
the Pay-Back Period and the Net Present Value methods of evaluation projects.
(20 Marks)
 CORPORATE FINANCIAL MANAGEMENT
MARKING GUIDE
SECTION A

QUESTION 1
(a) Working capital is the totality of current assets, less current liabilities (1 Mark)
Working capital cycle (also called operating cycle, trading cycle or cash cycle) refers to the
period taken for an organization to convert its most liquid current assets to cash, after
netting out the period of credit taken from its own creditors too. (1 Mark)
Working capital cycle for the manufacturing company =
10 + 20 + 15 + 10 + 40 - 50 = 45days (2 Marks)

(b) Share option scheme is an incentive scheme that often gives company senior managers the
right to buy a certain number of company’s shares at a pre-determined (usually, generous)
price at a specified time in future while profit-related bonus is an incentive whereby the
bonus to senior managers is based on the profits made by the company in relation to
budget, profits of other companies or profits made in previous periods. (2 Marks)
Such incentives are given so as to align the objective of the senior managers with that of the
shareholders, which is maximization of the value of the firm. The incentives also serve to
attract competent managers to the company, just as high executive salaries. (2 Marks)
(c) 1 Mark for each advantage and each disadvantage, making 4marks)

Advantages and Disadvantages of listing in the NSE

The company will find borrowing easier It may attract publicity that the company
because its credit rating will be enhanced owners may not desire
It will be able to raise funds through issuance Some costs are incurred to get quotation
of shares and bonds
Its shares and bonds will become liquid due to The original shareholders will lose some
ability to trade them in the stock market. This controls due to the spread of share ownership
will endear its newly issued shares and bonds
to subscribers
A basis for valuation of its shares will be The company will be more vulnerable to
provided, particularly for the purpose of hostile takeover bid.
acquisition and merger
Corporate governance will be enhanced as the
company would now be a focus of attention
by the investing public and other stakeholders
(d) A derivative is a financial instrument whose value derives from the value of an interest rate,
exchange rate or an underlying asset like foreign currency, shares, bonds and commodities.
(2 Marks)
Two other forms of derivatives are: Options and swaps (although some do include forward
contracts as yet another form, although this is not generally agreed upon but).
(1mark for each form of derivative mentioned, including forward contract too, subject to
limit of 2 Marks).
(e) Management buyout is the purchase of a company by the existing management from its
owners while management buy-in is the purchase or takeover by a team of managers from
outside the company. (2 Marks)
One advantage of management buyout over management buy-in is that the existing
managers, as insiders, are very familiar with the company and their continued presence
should constitute an invaluable institutional memory for the company. A disadvantage,
however, is that they might not be in a very good position to turn the ailing business round
as they are likely to be a part of the problem of the business in the first place and they might
have run out of fresh ideas and initiatives. (2 Marks)
(f) An operating lease is a short term agreement for renting an asset; the agreement can be
cancelled during the contract period and the asset is returned to the lesser well before the
end of its life.
A finance lease is a long term non-cancellable agreement for renting an asset for virtually its
full economic life. The asset is usually selected by the lessee, and is bought by the lessees for
the specific purpose of leasing it out to the lessee only. The lessee is usually responsible for
maintaining and insuring the asset.
It is in fact a way of financing the acquisition of an asset without becoming its legal owner.
A hire purchase contract is another method of financing assets, which envisages that
ownership will ultimately pass to the user, who therefore receives the capital allowances. In
leasing the lessor receives the capital allowance which can be reflected in the level of lease
charges.

(g) Capital gearing is the ratio of debt to shareholders funds for the long term capital of a
company. A highly geared company has a high ratio. The expression “highly-geared” may
imply depending on the context that the level of borrowing is such as to cause a significant
risk of insolvency. The level of gearing at which this happens depends on the nature of it
business and in particular the steadiness of operating cashflow from which to pay interest.
 The level of gearing of a company is significant because the interest on debt is payable
whatever the operating profit of a company, where as dividends on ordinary share capital
can only be paid when there are sufficient distributable profits and can be passed (Not Paid)
or reduced if the directors think if sufficiently important to conserve funds.
(h) The Net Present Value of a capital investment project is the sum of the present values of all
the cash flows associated with the project. Present values are calculated by discounting the
future cash flows to today’s values using the cost of capital – which may be the weighted
average figure for the company or may be determined specifically for the project in question
to reflect how it is financed or the degree of risk. A positive NPV for the project means that
the project offers a surplus to the providers of capital over the return that they require (the
required return being what they need to compensate them for the cost of capital and the
projects risk).
Internal Rate of Return (IRR) is the discount rate (Cost of capital) that makes the NPV of a
project equal to zero. It represents the return that the project offers on the capital invested.
NPV and IRR are both based on discounting project cash flows but are complementary
because:
(i) NPV gives the project surplus in today money, while IRR give the percentage annual
return on capital invested.
(ii) NPV reflects the size, as well as the profitability naira for naira, of a project; IRR
reflects the return from each Naira invested for each year.
(iii) In order to calculate NPV, the cost of capital need to be known where as IRR is
determined solely by the project cash flows.
(iv) IRR may be intuitively easier to understand than NPV.
(i) The main costs associated with stock holding are:
(i) Space costs
(ii) Security
(iii) Handling
(iv) Cost of capital invested in stock
(v) Insurance
(vi) Holding cost including physical deterioration due to handling, perishability,
obsolescence and theft
(vii) Procurement and administration including accounting record keeping
(j) A company’s weighted average cost of capital is a weighted average of the costs of its
capital. It reflects the average value and cost, incorporating any risk premium, of all its
different kinds of capital.
In evaluating capital investment projects using discounted cash flow methods (NPV) and IRR)
a discount rate if sued to discount cash flows (for net NPV) or as a reference figure to
compare with the yield offered by a project (with IRR). This discount rate should reflect the
marginal cost of the capital invested and the risk of the project it is does; it will allow the
company to determine whether the project offers an adequate return on the capital
employed.
The WACC does this, provided the risk associated with the project in question is typical of
the overall risk of the company’s business. It is assumed that the marginal cost of capital is
the same as the company’s overall cost. There is a further assumption that the WACC will
continue to reflect the overall cost and risk associated with the company’s capital. This
means that the capital structure needs to remain the same or if it charges that it changes in
such a way as to leave the WACC uncharged it also means that the average level of risk
associated with all the company’s investments need to stay the same.

SECTION B
QUESTION 2
(a) NPV: As the NPV of N16.11 million of project A exceeds that of N12.36 million for project B,
project A is ranked to be preferred to project B on the basis of the NPV approach.
Year 0 1 2 Sum of NPV /
Cashflows
Discounting factor at 20% 1.000 0.8333 0.69444
cost of capital
Project A
Cashflow (N million) -120 80 100 60
NPV (N million) -120 66.667 69.444 16.11
Project B
Cashflow (N million) -80 65 55 40
NPV (N million) -80 54.167 38.1944 12.36
IRR of project B: NPV at the low rate of 30% is found to be N2.544 million while NPV at the
high rate of 35% is found to be N1.6735 million. Substituting this in the formula given gives:
 0.30 + (2.544 x (0.35-0.30) / (2.544 + 1.6735) = 33.02% or (approximately) 33%. As this 33%
yields NPV that is practically equally to zero, there is no need for a further iteration, so that
the IRR can be taken to be 33%, which is higher than their of 30.5% for Project A. this implies
that this Project B is ranked preferred to Project A, which is the reverse of the raking yielded
by the NPV method. (6marks)
(b) The incremental cashflows by moving from project B to project A are as follows:
Year 0 1 2
Cashflow (N million) -40 15 45
Applying the IRR method of calculation used in (a) above yields IRR of 26.5%. This implies
that the graph of the two projects intersect at a point corresponding to IRR of 26.5% with a
corresponding common NPV of N5.73 million. (4 Marks)

(c) The assumption built into the NPV approach is that surplus funds arising from a project is re-
invested at the company’s cost of capital while the IRR approach assumes that such surplus
funds are re-invested at the IRR and this is the reason why both can provide conflicting
ranking of projects (2 Marks)
The required graph is shown below. The overall diagram carries 1 mark while each of the
numerical figure shown also carries ½ of a mark, subject to a limit of 6 figures (to make 6
marks altogether).
NPV, N million
NPV, Nmillion

Project A
60
Project B

40

16.11

12.36

5.73
IRR, Cost of Capital (%)
(d) The Profitability index is the NPV divided
20 by the cost of
26.5 the project
30.5 and it is shown below for
the two projects;
 Year Project A Project B
Cost (N million) 120 80
NPV (N million) 16.11 12.36
NPV per N1 project cost (i.e, profitability index) 0.134 0.155
On the basis of the above calculation, project B has a higher profitability index and is
therefore ranked higher than project A. This means that the available N150 million should
first be used in implementing project B (costing N80 million) fully, with the balance of N70
million being used to execute only a fraction of project A (which costs N120 million to fully
execute). (4 Marks)

QUESTION 3
(a) Β = standard deviation of return on the security x correlation of the return with the market
return ÷ standard deviation of the market return = 15% x 0.5 ÷ 12% = 0.625 (3 Marks)
Therefore, cost of equity (Ke) = Rf + β (Rm – Rf) = 0.04 - 0.625 x (0.10 – 0.04) = 0.04 + 0.0375 =
0.075 or 7.75% (3 Marks)
Market capitalization = profit ÷ cost of capital = N24 ÷ 7.75% = N309.6774 million
(2 Marks)
(b) The Alpha (α) value of a security is the difference between the actual or anticipated rate of
return on the security and the required rate of return. If positive, it indicates that the
security is undervalued while it indicates that it is over-valued if negative. (3 Marks)
For the company’s shares, the actual rate of return of 18% exceeds the required rate of
return calculated above to be just 7.75% so that the shares are undervalued. (3 Marks)
(c) Cost of capital Kp for the company’s preference shares = preference dividend ÷ market value
of shares = 0.09 x N20 million ÷ N18 million = 0.1 or 10% (2 Marks)
(d) Weighted Average Cost of Capital (WACC) = (0.0775 x N309.6774 + 0.1 x N18) ÷ (N309.6774
+ N18) = 25. ÷ 327.6774 = 7.87% (4 Marks)

QUESTION 4
The cost of A and B can be compared by calculating equivalent annual costs, since one or other
machines will be needed for the foreseeable future and there whichever machine is purchased will
need to be replaced regularly at the end of its useful life.

Calculation of Annual equivalent Costs

A B
Present Value Cost (N’000) (N’000)
Initial cost 50,000 90,000
Running costs
10,000,000 x 3.170 (4years at 10%) 31,700
8,000,000 x 4.868 (7years at 10%) 38,944
Less salvage value
5,000,000 x 0.683 (3,415)
7,000,000 x 0.513 (3,591)
Total present value of costs 78,285 125,353

Annuity Factor 3.170 4.868

Equivalent Annual Cost 78,285 125,353
3.170 4.868
24,696 25,750

On the assumption stated, the assumption stated, machine A will be replaced on a 4-year cycle with
costs equivalent to identical cash flows of N24,696,000 whist machine B will be replaced on a 7-year
cycle with cost equivalent to annual cashflow of N25,750,000. Since the annual cash flows for
machine A are less, machine A should be chosen.

(b) For the two machines to be equally financially attractive, the initial cost of machine A needs
to rise until the equivalent annual cost of A is N25,750,000 the same as for machine B. an
equivalent annual cost of N25,750,000 for machine A would make the present value of the
total costs over the 4-year cycle for Machine A:
N’000
N25,750,000 x 3.170 = 81,628
Deduct Present Value = 78,285
Increase in PV of total cost = 3,343

If this increase is due to increase for the initial cost of machine A, this initial cost needs to
rise N50,000,000 to N50,000,000 + 3,343,000 = N53,343,000

QUESTION 5
REPORT
To: Managing Director
From: Company Secretary
Date: 1st December 20xx
Re: COST OF CAPITAL

One common method of calculating the cost of equity is the dividend valuation or divided yield
model, the precise form of which varies with the assumptions used. If the expected growth figure
has been determined we can calculate the company’s shares using the Gordon’s Model of Dividend
Growth.

WACC using the dividend valuation model

Ke = do (1 + g) + g
P
Ke = 2.25 (1.20) + 0.2
120
= 0.2225 = 22.25%

Kd = 12 x (1 – 0.30)
Kd = 8.4%

WACC = V e x Ke V d x Kd
Ve + Vd
= (N50m x 1.20) x 0.2225 + N20m x 0.084
N60m + N20m

= N60m x 0.2225 + N20m + 0.084

N80m
= 0.188 = 18.8%

Using CAPM for WACC

Rs = Rf + B (Rm – Rf)
Rs = 4.5 + 1.6 (14.0 – 4.5)
= 19.7%
WACC = V e x Ke V d x Kd
Ve + Vd

= N60m + 0.197 + N20m x 0.084

= 0.169 = 16.9%

Differing results may arise from using this model because of the different assumptions underlying
them:
Dividend Growth Model Assumptions
(a) Taxation rates are assumed to be constant across all investors and as such the existence of
hgier rates of tax is ignored.
(b) The cost of any share is ignored
(c) All investors receive the same perfect level of information
(d) The cost of capital of the company remains unaltered by any new issue of shares
(e) All projects undertaking as a result of new shares issues are of equal risk to that existing for
the company.

CAPM underlying assumptions:

(a) Investors are risk averse and require together return of taking greater risks
(b) There are no transaction costs
(c) There are equal borrowing and lending rates
(d) Homogeneous expectation
(e) No taxation
(f) There is no inflation
(g) There are no market imperfections

The generally accepted method of dealing with the different results from the two models is to
calculate the cost of equal using both models and to use an average of the two results or calculating
the overall cost of capital.

QUESTION 6
EASYWAY PLC
MACHINE A
PAYBACK METHOD

Year Capital Revenue Operating Total Cumulative

(N’000) (N’000) costs (N’000) (N’000) cashflow (N’000)
0 (460) - - (460) (460)
1 1340 (1160) 180 (280)
2 1460 (1260) 200 (80)
3 1300 (1140) 160 80
4 20 820 (760) 80 160
Payback period = 2years + 80/160
= 2.5years

NPV
Year NCF PV Factor PV
12%
0 (460) 1 (460)
1 180 0.893 160.75
2 200 0.797 159.40
3 160 0.712 113.92
4 80 0.632 50.88
NPV 24.94

MACHINE B
PAYBACK PERIOD
Year Capital Revenue Operating Total Cumulative
(N’000) (N’000) costs (N’000) (N’000) cashflow (N’000)
0 (630) - - (630) (630)
1 700 (610) 90 (540)
2 1400 (1100) 300 (240)
3 1600 (1240) 360 120
4 30 900 (750) 180 300
Payback period = 2years + 240/360
= 2.7years
NPV
Year NCF PV Factor PV
12%
0 (630) 1 (630)
1 90 0.893 80.37
2 300 0.797 239.10
3 360 0.712 256.32
4 180 0.636 114.48
NPV 60.27

Both Machines meet the requirement for a three-year payback period.

However, machine B should be selected since it has a higher NPV than machine A ever through the
payback period no longer than that of machine A.

CORPORATE FINANCIAL MANAGEMENT

Examiner’s Report
General Comments
32% of all candidates passed which was a lower proportion than in recent examinations. Most
candidates answered question one and three other questions whereas in the past there were a
number of times when this did not happen. This suggests that candidates may have been under a
little less time pressure this time than previously. It is possible that this was the result of better
preparation or examination technique.

Candidates often wrote more than they needed to earn full marks in Question One which wasted
their time. Some candidates also wasted time by writing out the questions before starting the
answer.

Discursive answers in Question One and elsewhere were generally better than answers including
calculations. However, some calculations using often - used formulae and equations were generally
well answered. These included Pay – Back Period and the Net Present Value methods of evaluating
projects.

As in the past, questions that required knowledge of basic parts of the syllabus or calculations of a
kind that candidates were likely to have seen before were generally well answered. Question 6
provided something of an encouraging exception in the June 2013 examinations as described below.
Finally, there were noticeable improvements in handwriting but there were some scripts that were
really difficult to read. The examiner wants you to do well but can only award marks if he can read
what you have written.

QUESTION 1
The question tests multi – dimensional areas of Financial Management. It actually covers some good
areas of the syllabus. Candidates’ performance in the question was encouraging because 63% of
them scored above average. However, there is still room for improvement. Candidates are advised
to use relevant books on Finance and journals to enable them score better in future.
QUESTION 1(A)
Most candidates did not understand in simple terms the definition of Working Capital as Current
Assets less Current Liabilities; and Working Capital Cycle as the period it takes to convert liquid
current assets to cash after taking up credit period available to pay suppliers or creditors. Most
candidates wasted time to define unsuccessfully these in depth.

QUESTION 1(B)
There were good answers to this question. It was however noted that some candidates spent more
time elaborating and sometimes confusing themselves on advantages of the various incentive
schemes.

QUESTION 1(C)
Any two (2) examples of advantages and disadvantages of listing on the Nigerian Stock Exchange
(NSE) would have earned candidates full marks without long epistles of negative criticisms of Listing.

QUESTION 1(D)
Key definition of Derivative as financial instrument with emphasis on underlying assets and also brief
description of forms as options and swaps would earn full marks.

QUESTION 1(E)
Most candidates could not understand the difference between Management Buy – Out (MBO) as
deals by management staff within and external deals which is represented by Management Buy – In
(MBIn).

QUESTION 1(F)
Most candidates do not understand the difference between Operating Lease as Short Term rental
agreement whereas Finance Lease is of a Long Term non – cancellable agreement. Ownership under
the first term resides with the Lessee and vice versa for Finance Lease. and legal ownership resides
with the Lessor.

QUESTION 1(G)
Candidates’ performances generally were encouraging with the key emphasis on Debt/Equity Ratio.

QUESTION 1(H)
Net Present Value (NPV) and Internal Rate of Return (IRR). The former is simply the sum of the
Present Value of associated cash flow, while IRR is the discounted rate of cost of capital that makes
the NPV of a project to be zero. To calculate NPV, cost of capital should be disclosed while IRR is
determined by the Project cash flow.

QUESTION 1(I)
Most candidates confused cost associated with stock holding with Investment in stock and shares.
What is required is Cost of Holding Raw Materials and Finished Goods.

QUESTION 1(J)
The use of Weighted Average Cost of Capital (WACC) in evaluating capital investment and the
underlying assumptions for this purpose. Most candidates do not have a clear understanding of the
various costs associated with WACC and the need to evaluate the associated risk involved.

QUESTION 2
The question tests candidates’ knowledge on Internal Rate of Return (IRR) for ranking projects and
evaluation of incremental cash flow using IRR.
Although this question was popular with the candidates as 30% attempted it, none of them passed
it. Barely a few candidates understood the main import of the question hence all the candidates that
attempted the question scored below average. The observed performance is obviously the result of
inadequate preparation by candidates.

QUESTION 3
The question tests returns, valuation and cost of capital. The performance of the candidates was not
encouraging as only 8% of candidates that attempted the question scored below average. There was
evidence of lack of understanding of the requirement of the question. Furthermore, presentation in
most cases affected many candidates and answers were not logically presented hence valuable
marks were lost. Candidates are advised to prepare well by going through the Institute’s syllabus and
past examination reports as part of their preparation.

QUESTION 4
The question examines candidates’ ability to calculate issues relating to asset replacement,
equivalent annual cost and reduction in equivalent annual cost. 55% of candidates attempted this
question with only 9% of them scoring above average. This underlines the fact that preparation is
essential to good performance in the examinations.
QUESTION 5
The question tests the calculation of cost of capital using dividend model and Capital Asset Pricing
Model (CAPM), and writing a report for the consideration of the Managing Director explaining the
reasons for the difference obtained in the results of their calculation. Most candidates could not
calculate the Cost of Capital for both models. Many candidates ignored the report to the Managing
Director which earned about 50% of the mark; and where they did, it was not properly presented.
QUESTION 6
87% of the candidates attempted this question and only 38% passed. Most of the candidates showed
a good understanding of what was requested in the area of pay – back period and Net Present Value
method of evaluating projects. There were some good attempts at computing Pay Back Period (PBP)
and the Net Present Value (NPV). Proper preparation by candidates and the use of relevant text
materials will improve performance in future examinations.

---------------------------- ----------------------------
DR. JOHN OYETADE DEACON M.B. ADEISA
 INSTITUTE OF CHARTERED SECRETARIES AND
ADMINISTRATORS OF NIGERIA

JUNE 2013 DIET: PROFESSIONAL EXAMINATIONS

CORPORATE GOVERNANCE
(Code: P204)

Tuesday Afternoon, 11th June 2013

INSTRUCTIONS

1. Answer ALL questions in Section A. All questions carry equal marks.

2. Answer THREE (3) questions from Section B. All questions carry equal marks.
3. Time Allowed: 3 HOURS
4. Candidates are expected to show their workings using the inside page and the last
sheet of the answer booklet.
5. Candidates are forbidden from bringing phones into the examination hall.
6. Only non-programmable calculators are permitted for use in the examination.

SECTION A
(Answer all questions in this section)

QUESTION 1
(a) What do you understand by ‘Responsibility’ in Corporate Governance? (4 Marks)
(b) What is the purpose of an Internal Audit function? (4 Marks)
(c) Briefly explain the three main principles of the South Africa King III Code. (4 Marks)
(d) Explain the ‘Enlightened Shareholder’ approach to Corporate Governance. (4 Marks)
(e) Mention the advantages of compulsory regulation of corporate governance issues. (4 Marks)
(f) What are the ways by which a public company can constructively use its AGM? (4 Marks)
(g) What corporate governance issues are of particular relevance when ‘the State’ is a
shareholder? (4 Marks)
(h) Explain four categories of Business Risks (4 Marks)
(i) State four principal duties of a Nomination Committee of the Board (4 Marks)
(j) In what ways may an Institutional Investor pursue an SRI Strategy? (4 Marks)
(Total: 40 Marks)

SECTION B
(Answer THREE questions from this section)
QUESTION 2
You are the Company Secretary of Advice Investment Plc. The board of directors is in the process of
appointing new directors. The Nomination Committee has shortlisted and interviewed ten (10)
candidates and has finally recommended three people to the board for approval. The Board has
decided to appoint the three new directors recommended by the Nomination Committee. The three
new directors are Mr. Kent who is to be appointed as an independent director, Mr. Georgefield,
who is presently the General Manager is to be appointed as an executive director, and Mrs. Adeo
who is to be appointed as a non-executive director.
You just received a memo from the Chairman of the Board and you are expected to respond with
your professional advice on the following issues:

(a) Prepare an induction manual which defines the corporate governance roles of the directors and
suggest best practices in boardroom behavior. (10 Marks)
(b) Identify the particular issues of relevance for the induction of the new executive director.
(5 Marks)
(c) Prepare a list of some of the questions the new independent direct is likely to ask and
documents that he may require. (5 Marks)
(Total: 20 Marks)

QUESTION 3
Paranoid International Plc is recently going through some financial challenges; the company is also
being investigated by the Securities and Exchange Commission. One of the allegations levied against
the board of directors is the role it has played in the financial reporting and audited accounts of the
past four years which have been discovered to be fraudulent. The directors are surprised at the
allegations because they claim that their responsibilities are limited to approving the financial
reports at the end of the year.
You have been asked to address the Board on the following issues:
(a) Who has the responsibility for the preparation and integrity of the financial report? (8 Marks)
(b) What is the purpose of the external audit of Interest (5 Marks)
(c) What forms of opinion may be given by the external auditors and why (7 Marks)
(Total: 20 Marks)

QUESTION 4
(a) What is Business Probity Risk? (5 Marks)
(b) From the provisions of the SEC Code of Corporate Governance 2011, explain a Company’s
responsibility for sustainability, disclosure and reporting. (10 Marks)
(c) What are the arguments for and against social, economic and environmental reporting?
(5 Marks)
(Total: 20 Marks)

QUESTION 5
The Chairman of a medium sized listed manufacturing company has called a Board meeting to
discuss risk and risk management within the company. He is concerned by a recent fall of about 40%
in the company’s share price following poor interim financial results and adverse media reports
claiming that the problems of the company were the result of poor risk management and exposure
to excessive business and other risks.
The Chairman has also been angered by a number of incidents reported to him by the Chief
Executive Officer.

(i) There has been a serious breach of health and safety regulations at a foreign subsidiary
resulting in a number of deaths and serious injuries to employees.
(ii) An important new IT system was introduced by the company a few months ago, apparently
without adequate testing of the backup system in the event of system failure.
(iii) Some large expenditure on capital assets was made without proper authorization and invoices
are not available for some of the money spent. Two managers have been dismissed as a
result.
Required
(a) Briefly outline the taxonomy of risk which commonly affect listed companies and state the
elements of risk management. (5 Marks)
(b) Explain the difference between risk and internal control. (5 Marks)
(c) Suggest how a system for the management of business risk should operate within the
company. (10 Marks)
(Total: 20 Marks)

QUESTION 6
You are the company secretary of XYZ International Plc. Recently there have been several disputes
about whether certain actions of the board of directors of the company have been properly
conducted. Although technically legal in each case, the newly approved remuneration packages of
the directors have been viewed as improper or as sharp practice by some of those aware of the
circumstances. The managing director and the company secretary are aware that one of the major
shareholders is likely to raise this problem at the next AGM. You are asked to brief the Board on
three main areas, at a meeting to be held before the AGM.
Required:
(a) Why is remuneration of directors a corporate governance issue? (7 Marks)
(b) What is the purpose of the Remuneration Committee? (5 Marks)
(c) Discuss the pros and cons of linking pay to performance. (8 Marks)
(Total: 20 Marks)
 CORPORATE GOVERNANCE
MARKING GUIDE
SECTION A

QUESTION 1
(a) Responsibility is one of the core principles of corporate governance. The managers of the
company including the directors must be aware of their responsibilities and accept full
responsibilities for the authority that they exercise. Where the managers of the company are
not aware of their responsibilities, it would be difficult for them to give account of such
powers. For good corporate governance to thrive in nay organization, everyone must be
aware of their responsibilities and be held accountable for it. No dormant player within the
organization.
(b) Internal audit is defined as an independent appraisal activity establishment within
organization as a service to it. It is a control which functions by examining and evaluating the
adequacy and effectiveness of other controls’ (CIMA Official Terminology). The objective of
internal auditing is to assist members of the organization in the effective discharge of their
responsibilities. To this end internal auditing furnishes them with analyses, appraisals,
recommendations, counsel and information concerning the activities reviewed (Institute of
Internal Auditors).
An organization might have an internal audit unit or section, which carriers out investigative
work, review of the effectiveness of the internal control system, examination of financial and
operating information.
(c) Leadership: Companies should be given effective leadership. The principle of ethical
leadership was also introduced.
Sustainability: The Company must operate its business without compromising the needs of
future generations.
Corporate Citizenship: A Company is a person like every other citizen and should act
responsibly and as a good citizen at all times.
(d) The Enlightened Shareholder Approach: directors should pursue the interests of the
shareholders but in an enlightened way. The interests of other stakeholder should be
considered and protected as much as its instrumental to the interests of the shareholders.
(e) There are areas of business where laws are essential to protect the interest of shareholders,
employees and other stakeholders in companies. For example, employment laws are needed
to give protection to employees against unfair treatment by employers. There should be a
legal requirement for companies to prepare annual financial statements and have them
audited, and the duties of directors should be subject to the law, in order to protect
shareholders. There may be different views about the extent of regulation that is required;
however the need for some regulation seems unquestionable.
Some aspects of corporate behavior may be considered unethical that should be illegal.
Bribery is an example of corporate behaviour that has been tolerated in the past but which is
now accepted as illegal by most countries.
Regulation may be needed to address public concerns and maintain public confidence in the
capitalist system. This has probably been most evident in the USA. The Sarbanes-Oxley Act
was public outrage against the many corporate scandals that emerged after the collapse of
Enron. Public fury against the banks following the financial crises in 2007-2008 prompted
demands for legislative action that would affect the governance of banks.
(f) Encourage attendance by shareholders at the AGM
Give shareholders an opportunity to ask questions and to hear about their company during
the meeting.
Give shareholders the opportunity to use their votes and greater openness in voting
procedures at the AGM
Role of Institutional investors should be greatly encouraged.
(g) Shareholders other than the government need to know what the interests of the
government are and how these might affect decision making by the Board, in order to put a
value to their own investment.
The board of directors may also take decisions in the belief that should they make mistakes,
and should the company get into financial difficulties, the government will be likely to
provide further financial support to prevent job losses.
In some cases, a government that privatizes a nationalized industry retains a ‘golden share’
giving it the right to veto decisions taken by the company of these appear to be against the
national interest, for example, giving it the right of veto any sale of the company to a foreign
buyer.
(h) Note: Any four of these will sufficiently answer the question.
Reputation Risk: The risk of loss in customer loyalty or customer supports following an event
that damage the company’s reputation.
Competition Risk: The risk that business performance will differ from expected performance
because of actions taken (or not taken) by business rivals.
Business Environment Risks: These are risks of significant changes in the business
environment from political and regulatory factors, social and environmental factors and
technology factors (the so-called ‘PEST’ factors). For example, business performance may be
affected by the introduction of new regulations, political upheaval in the country, economic
decline or growth, environmental issues, unexpected changes in social habits, or
technological change.
All Companies Face Financial Risk: These are risks that financial conditions may change, with
adverse changes in interest rates or exchange rates, higher losses from bad debt or changes
in prices in financial markets (such as changes in share prices).
Liquidity Risk: Is the risk that the company will have insufficient cash to settle all its liabilities
on time, and so may be forced out of business. The board of directors should monitor this
risk at least annually when they prepare their going concern statement for annual report and
accounts.
Strategic Risk: Are the risks of taking decisions on strategy that will result in exposures to
excessive business risk and so could lead to losses or even business collapse.
(i) Any four below earns 1 Mark each
- Responsibility for identifying candidates to fill vacancies that exists on Board
- Responsible for the evaluation of the balance of skills, knowledge and experience of
Board appointees.
- Consider candidates for appointment form a wide range backgrounds and look
beyond the “usual suspects”.
- Responsible for full consideration of succession planning for the Board.
- Keep under review leadership needs of the company, executive and non-executive
with a view to ensuring that the company remains competitive.
- Annually review to the required by Non-Executive Directors to perform their duties
to the Board.
- Regularly review the structure, size and composition of the Board and make
recommendations for any changes to the Board.
(j) There are several different ways in which institutional investors may pursue a SRI strategy:
  Engagement
 Investment preference
 Screening

With an engagement strategy, the institutional investors acquires shares in which it wants to
invest (for financial reasons) but then engages with the board of directors and tries to
persuade the company to adopt policies that are socially responsible, or to make
improvement in its CSR policies.
Engagement may therefore involve expressing the views of the investors about telling what
the CSR policies of the company should be and persuading it to change its policies in some
areas (through regular meetings with its senior directors). If the company indicates its
willingness to make changes, the investor may also offer to help with the formulation of new
policies.
With an investment preference strategy, the investor develops a set of guidelines that
companies meet. The investor will then invest only in the shares (or other securities)
companies that meet the guidelines, some of which will be social, ethical or environmental
in nature. With this strategy is investment decisions need not to be based entirely on SRI
consideration.
The investor can also consider the expected financial returns from an investment, and the
selected investment portfolio can be a suitable balance of investments that are ethically
sound and those that are not ethical (or are ‘more risky’ in social or environmental terms)
but should provide better financial returns.
With a screening strategy, investments are restricted to companies that pass a ‘screen test’
for ethical behavior. Screening may be positive or negative. Positive screening means that a
company must meet certain criteria for ethical and socially responsible behaviour, otherwise
the investor will not buy its shares. Negative screening means that an investor will identify
companies that fail to meet certain criteria for socially responsible behaviour and will refuse
to buy shares in those companies.

SECTION B
QUESTION 2
Note: The answer here should be in form of a memo. Candidates are expected to write a meaningful
introduction before proceeding to answer the questions and the questions should be answered
together in one memo. The answers should include most of these details:
 (a) Corporate Governance roles of directors:
The Corporate Governance roles of the Board (from the SEC Code 2011) include the
following:
 Formulation of policies and overseeing the Management and conduct of the
business;
 Formulation and management of risk management framework;
 Succession planning and the appointment, training, remuneration and replacement
of board members and senior management;
 Overseeing the effectiveness and adequacy of internal control systems;
 Overseeing the maintenance of the company’s communication and information
dissemination policy;
 Performance appraisal and compensation of board members and senior executives;
 Ensuring effective communication with shareholders;
 Ensuring the integrity of financial reports;
 Ensuring that ethical standards are maintained and
 Ensuring compliance with the laws of Nigeria
Note: Candidates must mention at least 5 of these roles to earn full marks.

Suggested best practice in boardroom behaviuor:

 A clear understanding of the role of the board
 The appropriate deployment of knowledge, skills, experience and judgement
 Independent thinking
 The questioning of assumptions and established orthodoxy
 Challenge which is constructive, confident, principled and proportionate
 Rigorous debate
 A supportive decision-making environment
 A common vision, and
 The achievement of closure on individuals items of board business

(b) For an individual who is already an executive manager of the company and now appointed
as executive director, the induction process needs a different focus. A senior executive of
the company should already be familiar with many aspects of the company operations
(although his induction might include visits to parts of the company he has not worked
with before).
 An executive manager promoted to the board is much more likely to lack knowledge and
experience about being a director and corporate governance. (However, some large
companies try to give senior executive experience as a director, by allowing them to take a
position as NED in another company).
An induction programme for such an individual may therefore need to focus on matters such
as:
 The role of the board, including matters reserved for the board and oversight of
management
 The powers and duties of directors, and the right of shareholders (the new director
should be given a copy of the company’s constitution (article of association).
 The role of board committees
 The role of the board in monitoring risk and internal control
 Membership of the board and its committees, how the board operates and the role
of the company secretary.
 Frequency of board meetings
 What the new director will be expected to contribute
 Who the major shareholders are and their relationship with the company
 Compliance with corporate governance requirement
 The law relating to fair dealing by directors (the law on insider dealing), money
laundering etc
 The potential liabilities of directors
 Director’s liability insurance
 Company policy on corporate asocial responsibility
 Arrangement for monitoring the performance of board members.
This list is not exhaustive. However, in some cases it might be considered too long. The main
point is that an executive manager appointed as a director needs to learn about differences in
the roles of manager and director, and that he has been appointed as a director simply to be
a ‘high level’ executive of the company.

(c) Before accepting an appointment, the prospective independent NED should carry out ‘due
diligence’ check or examination of the company. The ICSA has commented:
‘By making the right enquiries, asking the right questions and taking care to understand the
replies, a prospective director can reduce the risk of nasty surprises and dramatically
increase the like hood of success’.
 Questions that the prospective independent NED should ask should cover the following:
 Those about the business, e.g. its nature and size, and the company’s market share,
financial performance and financial position.
 Those about governance and investor relations-who the major shareholders are, and
about the structure of the board of directors and its committees.
 Those about the role that the NED would be expected to perform, including
membership of board committees. The prospective NED should be satisfied that he
has the necessary qualities or experience to make an effective contribution to work
of the company’s board.
 Those about the company’s risk management systems and controls.
 Those about ethical issues and whether there are any ethical matters that might give
cause for concern.
Documents that the prospective independent NED may require include:
 Past minutes of meetings of the board
 Memo and articles of the company
 Records of past decision, resolutions or policies of the company

QUESTION 3
Note: The answer here should be in form of memo. Candidates are expected to write a meaningful
introduction before proceeding to answer the questions and the questions should be answered
together in one memo. The answers should include most of these details.
(a) Shareholders would probably like to assume that if the auditors provide a favourable audit
report, the financial statements must be ‘correct’, and there has not been any fraud or error
that has resulted in:
 Incorrect use of accounting policies
 Omission of fact
 Misinterpretation of fact
(‘Fraud’ is intentional, ‘error’ unintentional: both lead to incorrect figures in the financial
statement, if they have not been discovered).

This view is based on the belief that if professional accountants have checked the figures,
they must be correct-unless the accountants have been negligent and have failed to do their
job properly. However, it is a popular misconception that the auditor is responsible for
detecting fraud or error in a company’s financial statements. This is not the case.
  The board of directors is responsible for preventing fraud in their company or
detecting fraud if it occurs. The company’s system of internal control should be
designed to limit the risk of fraud and error, and the board is responsible for
monitoring the effectiveness of the internal control system. The responsibility of the
board (with delegated responsibility of management) for the prevention and
detection of fraud and error is a core principle of corporate governance. The
directors are fully accountable to the shareholders and so are fully responsible for
the information presented in the annual report and accounts.
 It is not the primary responsibility of the external auditors to detect fraud. The
auditors will assess risk or possibility that fraud or error might have caused the
financial statement to be materially misleading. The auditors should therefore
design audit procedure that will provide reasonable reassurance that material fraud
or error has occurred, and that the financial statements give a true and fair view of
the company’s financial position and performance. The external audit might also act
as a deterrent to fraud, because the auditors will carry out checks of control
procedures, documents and transactions in the course of their audit work. They
might discover fraud during the course of their audit work, in which case it would be
their responsibility to report the matter to the directors.

(b) Investors, creditors and other stakeholder in a company rely on the information contained in
the annual report and accounts, which are audited each year by a firm of independent
auditors. The purpose of an independent audit is to make sure that the financial statements
are objective and can be relied on.
After completing their annual audit, the auditors are required to prepare a report to the
shareholders of the company, which is included in the published report and accounts of
public companies. The audit report has two main purposes:
 To give an expert and independent opinion on whether the financial statements give
a true and fair view of the financial position of the company as at the end do the
financial year covered by the report, and of its financial performance during the
year.
 To give an expert and independent opinion on whether the financial statements
comply with the relevant laws.
The purpose of the external audit: The audit report is contained in the company’s annual
report and accounts, and is addressed by the auditors to the shareholders of the company.
 The main purpose of the audit report is to give the users of a company’s financial statements
(and in particular the shareholders) some reassurance that the information in the
statements is believable and that the financial statements present a ‘true and fair view’ of
the company’s financial position and performance. The opinion of the auditor’s should be
the opinion of independent professional experts, based on an investigation of the company’s
control system, accounting systems and financial/business transactions.

(c) The audit report itself provides only limited information to shareholders, even though
shareholders often assume that an unqualified audit report means that the financial
statements of the company are accurate and reliable.
An unmodified audit report (sometime called an ‘unqualified opinion’) is given when the
auditor believes that the accounts give a true and fair view of the company’s financial
position and performance. The wording of an unmodified audit report is usually fairly
standard, although reports are longer for public companies (where the auditors might also
report on some corporate governance statements) and differ between countries.
An unmodified audit report may include an ‘emphasis of matter’ paragraph. Although the
audit report is not modified, and the auditors consider that the financial statements present
a true and fair view, there is an item that the auditor wants to bring to the attention of users
because it is of some importance for an understanding of the statements.
An audit report may be modified. It is unusual for auditors to present a modified report.
When this happens, there is potentially serious problem with the financial statements and,
by implication, the financial condition of the company. It also means that the auditors have
been unable to agree with the directors of the company about what information the
financial statements should contain. Because the directors and auditors cannot agree, the
auditors have considered it necessary to give statement to shareholders effect. There are
three types of modified audit opinion:
 A qualified opinion
 An adverse opinion, and
 A disclaimer of opinion
A qualified audit opinion is sometimes called an ‘expert for’ opinion. It is given when, in the
opinion of the auditor, the financial statements would give a true and fair view except for a
particular matter, which the auditor explains.
 An adverse audit opinion is given when the auditor considers that there are material mis-
statements in the accounts and these are ’pervasive’. In effect, the auditor is stating that the
figures in the accounts are seriously wrong.
A disclaimer of opinion is given in cases where the auditor has been unable to obtain the
information that he needs to give an audit opinion. The lack of information means that the
auditor is unable to state that the financial statements give a true and fair view, and that
there may possibly be serious mis-statements that the auditor has been unable to check.

QUESTION 4
Note: The answer here should be in form of an essay. Candidates may not write an introduction
before proceeding to answer the questions and the answers may be separated. The answers
should include most of these details:
(a) Business probity risk is the risk to a company from a failure to act in an honest or ethical
way. Dishonest activity can expose a company not only to reputational risk, but also the risk
of regulatory or legal action for breaching rules and laws. Bribery is a well-recognized but
seemingly widespread dishonest practice.
In order to win sales in some countries, companies might pay bribes (or ‘commissions’) to
individuals. They might take the view that unless they pay bribes, they will not win major
contracts. However, by paying bribes companies act dishonestly, and could be exposed to
regulatory action or criminal action by the authorities if evidence of bribery is uncovered.
Companies should be aware of the risk of unethical practices to their reputation and
business. This should extend to avoiding the use of suppliers who make use of child labour,
and avoiding trading with countries where there are human right concerns.
Note: Practical Examples given in Answering this Question Should Earn More Marks

(b) Companies should pay adequate attention to the interests of its stakeholders such as its
employees, host community, the consumers and the general public. Public companies should
demonstrate sensitivity to Nigeria’s social and cultural diversity and should as much as
possible promote strategic national interests as well as national ethos and values without
compromising global aspirations where applicable.
Companies should recognize corruption as a major threat to business and to national
development and therefore as a sustainability issue for businesses in Nigeria. Companies,
Boards and individual directors must commit themselves to transparent dealings and to the
 establishment of a culture of integrity and zero tolerance to corruption and corrupt
practices.
The Board should report annually on the nature and extent of its social, ethical, safety,
health and environmental policies and practices. Issues should be categorized into the
following levels of reporting:
 Disclosures of the company’s business principles and codes of practice and efforts
towards implementation of same;
 Description of workplace accidents, fatalities and occupational and safety incidents
against objectives and targets and a suitable explanation where appropriate;
 Disclose the companies policies, plans and strategy of addressing and managing the
impact of HIV/AIDS, Malaria and other serious disease on company’s employees and
their families;
 Application, in the company’s operations, of options with the most benefit or least
damage to the environment, particularly for companies operating in disadvantaged
region or in regions with delicate ecology in order to minimize environmental impact
of the company’s operations;
 The nature and extent of employment equity and gender policies and practices,
especially as they relate to the executive level opportunities;
 Information on number and diversity of staff, training initiatives, employee
development and the associated financial investment;
 Disclosure on the conditions and opportunities created for physically challenged
person or disadvantaged individuals;
 The nature and extent of the company’s social investment policy; and
 Disclosure on the company’s policies on corruption and related issues and the extent
of the compliance with the policies and the company’s code of ethics.
Note: Candidates should discuss at least 7 of these Points to Earn Full Marks.

(c) There are various reasons why companies might want to report voluntarily on SEE issues.
 They might have a genuine concern for social and environmental issues, and
consider that they are fulfilling their responsibilities to stakeholders by reporting on
these matters.
 The company might recognize that its reputation with the public may be at risk
because of the nature of their business activities. Mining companies and oil
companies are examples, since the public is aware that they deplete the world’s
 natural resources and pollute the environment. Reporting on social and
environmental issues allows the company to demonstrate that it understands the
concerns of the society and explain how it is addressing them with its social and
environmental policies.
 A company might see an opportunity to gain a competitive advantage over rival
companies by reporting on it social and environmental policies. A company whose
policies are ‘greener’ and more environmentally friendly than it s competitors may
hope to build their reputation and attract more customers.
 There might be pressure on companies to report more extensively ESG issues from
major shareholders or bodies representing investment institutions.
 Companies might recognize that the general public has lost trust in the ethical
behavior of companies, and reporting on ESG issues is a way of trying to rebuild such
trust.
Reasons against voluntary social and environmental reporting
Although many listed companies do publish social and environmental reports, they can
control the content of their reports. There might be an inclination to include ‘good news’
and exclude aspect of the company’s social and environmental performance that would
attract stakeholders’ disapproval. For example, a chemical manufacturing company might
include a section on health and safety measure as its processing plants without reporting the
actual number of accidents and injuries sustained by employees during the year.

There are various reasons why companies might not report social and environmental issues
voluntarily.
 The company’s directors and senior management might be insufficiently aware of
social and environmental issues.
 Companies might be deterred by the cost of obtaining relevant information of
reporting, or the difficulty in collecting reliable and useful social and environmental
information
 The company might be reluctant to disclose any information that is under no legal
requirement to provide, possibly to avoid giving sensitive data to competitors or
regulators.
 The company might want to avoid the risk of damage to its reputation if it were to
present unfavorably information about itself.
QUESTION 5
(a) Risks are either internal or external. Internal risks are dealt with using internal control
systems, financial controls, operations controls and compliance controls. External risks can
be broadly divided into business risks or strategic risks, financial risks, and reputational risks.
All risks should be effectively managed. The elements of risk a management are risk
identification, risk evaluation, risk management measures and risk control and review.

(b) Risks may be categorized in many ways. One approach is to identify risks as wither business
risks or internal control risks. Business risks are risks that exist in the business environment
in which a company operates and the risk that selected business strategies will fail to
achieve their desired objective. Risks arise from the nature of the industry in which the
company operates potential actions by competitors, macroeconomic changes, potential
changes in customers or suppliers, and the risk of regulatory action and so on.
Business risk is two way risks, in the sense that actual development in the business
environment may turn out to be better than expected as well as worse than expected.
Companies must accept business risk in order to make a financial return and a problem for
the leadership of a company is to decide what level of business risk is acceptable and select a
suitable balance between risk and return.
Internal control risk is a risk that arises from factors within the company itself. It is a
generally downside risk that events may turn out worse than expected but not better.
Management should devise a system of internal control with internal controls to prevent
adverse events or to detect and correct them if they occur.

(c) Business risk strategy should be a part of the strategic business planning of the company.
The board of directors should decide what the company policy on risk and risk acceptance
should be and what levels of risk are unacceptable. This involves deciding on matters such as
risk appetite and risk tolerance. Strategies that would expose the company to unacceptable
business risk would then be rejected in favour of strategies with lower business risk involved.
There should be a formal structure for the identification and assessment of risk. The
company may establish a risk management committee consisting of Executive Directors and
possibly also the Head of Internal Audit. The Company may also employ risk management
professionals who may also be members of the risk committee.
The risk management committee should meet regularly to discuss identifiable risks, their
potential impact and the probability of an adverse outcome because of the risk. The
 committee should then communicate information about risk to senior executive managers
should then be responsible for considering measures to manage the risk. Managers should
report back to the risk management committee on the measures they have taken to deal
with significant risks.
The Committee may also request the internal audit department to carry out investigations
into some aspects of business risk. The company may also use business models to assess the
potential impact of risks of company performance, for example, by means of stress testing.
The risk management committee should also report regularly to the board of directors,
providing information about changes in identified risk and the measures that have been
taken by management. Alternatively, the Committee may report regularly to the audit
committee or if one has been established, a risk subcommittee of the board. There may also
be internal audit reports direct to the Board’s audit or risk committee.
At least once a year, the Board or possibly the audit committee, which should then report to
the Board, should assess the effectiveness of the company’s system of risk management.
This should include an assessment of changes in the nature of risks since the previous
investigation and the success or failure of risk management strategies.
The Board should report to shareholders each year on the significant business risks facing
the company, the measures that have been taken to manage them and business prospects
for the future.

QUESTION 6
Note: The answer here should be in form of a memo. Candidates are expected to write a
meaningful introduction before proceeding to answer the questions and the questions should be
answered together in one memo. The answers should include most of these details:
(a) Note: Any four of these points will sufficiently answer the question
There is a general belief that directors pay themselves far too much and this can have a
damaging effect on the stock market. Private investors may be reluctant to invest in
companies that reward their leaders far more than they deserve. It can be particularly
damaging to the capital markets when public anger is stirred against directors who continue
to pay themselves more when their companies are performing badly.
Remuneration of directors is a corporate governance issue for several reasons.
 As indicated earlier, excessive remuneration for senior executives that is not clearly
linked to good performance can undermine confidence in the stock markets.
Executives should not be rewarded for failure.
  Large companies need to attract and retain talented professional businessmen to
provide them with effective leadership. Top executives are attracted and retained by
the remuneration packages they are offered.
 Companies need effective boards and senior executive management. Remuneration
incentives can be used to motivate executives to perform better and to achieve
better results for the company.
 However, remuneration incentives should be designed carefully to align the interests
of the shareholders and executives as much as possible, in both the short term and
the long term.
 The remuneration of senior executives may antagonize employee (and employee
representatives), when it appears that senior executives are paid excessive amounts
in comparison with their own pay. A sense that benefits or rewards are unfairly
distributed could lead to industrial unrest within the company.
 Institutional investors have demanded greater transparency about senior executive
remuneration, and several countries (including Nigeria) now have laws that require
disclosure of directors’ remuneration in the annual report and accounts.
 Some concern has been expressed, following the banking crisis, that the incentive
elements of remuneration packages do not take risks into consideration, so that
executives are encouraged to take excessive risks in order to boost profit
performance and earn bigger rewards. The UK Walker Report into corporate
governance in banks (2009) commented: ‘It is of vital importance that (performance
objectives) are risk-adjusted to take account of the incremental capital, liquidity,
franchise or other risk that would be entailed in vigorous pursuit of market share or
revenue. Risk adjusted in remuneration structure is essential to counterbalance any
executive disposition to increase risk as the means of increasing short-term returns’.
Remuneration as a governance issue applies to senior executives below board level, as well
as to directors. This is because in most companies the board includes only a small number of
executive directors, and the use of remuneration packages as an incentive to management
applies to other powerful individuals who are not on the board.

(b) Note: Any six of these points will sufficiently answer the question
The functions of the remuneration committee should be guided by a written term of
reference or charter and should include the following:-
  Establish the criteria for board and board committee memberships, review
candidates qualifications and any potential conflict of interest, access the
contribution of current directors in connection with their re-nomination and make
recommendations to the Board;
 Prepare a job specification for the Chairman’s position, including an assessment of
time commitment required of the candidate;
 Periodically evaluate the skills, knowledge and experience required on the Board;
 Make recommendations on experience required by Board committee members,
committee appointments and removal, operating structure, reporting and other
committee operational matters;
 Make recommendations on compensation structure for executive directors;
 Provide input to the annual report of the company in respect of director
compensation;
 Ensure that the Board conducts a Board evaluation on an annual basis;
 Review the performance and effectiveness of the subsidiary company Boards on an
annual basis where applicable; and
 Review and make recommendations to the Board for approval of the company’s
organizational structure and any proposed amendments.

(c) It is widely accepted that senior executives should be able to earn a high level of
remuneration in return for the work they do and the responsibilities they carry. If a company
does not offer an attractive package, it will not attract individuals of the required caliber. It is
also generally accepted that the level of remuneration should be linked in some way to
satisfactory performance. If an executive performs well, he should receive more rewards
than if he performs reasonably well. THE CENTRAL ISSUE FOR CORPORATE GOVERNANCE IS
CONCERNED WITH THE LINK BETWEEN PAY AND PERFORMANCE.
 The remuneration package should include a performance0 related element. If the
director successfully achieves predetermined levels of performance, he should be
rewarded accordingly. There could be some debate as to how much remuneration
should be performance related, but there is a view that substantial part of a
director’s total potential remuneration should be linked to performance.
 The purpose of performance-related remuneration is to give a director an incentive
to achieve the performance targets. This is why potential performance-related pay
should be substantial.
 It is clearly in the interest of good corporate governance that directors should be
motivated to perform, but it is equally important that the performance targets set
for each individual director are: (1) sufficiently challenging; and (a) related to
objective that are in the interests of the company and its shareholders. Performance
targets should therefore be challenging, and large rewards should not be paid for
average performance.
The purpose of incentive schemes is to provide an incentive to an executive director or
senior manager to improve the company’s performance by linking rewards to performance.
However, experience has shown that there are a number of severe practical problems in
devising a satisfactory scheme.
 There may be disagreement about what the performance targets should be, and at
what level they should be set. For example, should short-term incentives be base
exclusively on one or more financial targets, or should there be rewards for the
achievement of non-financial targets?
 Executives are usually rewarded with a cash bonus for achieving short-term (annual)
financial targets, such as a target for growth in earnings per share. Short-term profit-
based incentives are often set without any consideration being given to the potential
long-term consequences for the company.
 Executive might develop an expectation that they should receive annual rewards
regardless of the actual performance of the company.
 Newly appointed executive might benefit from a ‘legal effect’ from their predecessor
in the job. The bonuses paid to a new director, for example, might arise because of
the effort and work of his predecessor in the job.
 Occasionally, rewards are paid to incentivize directors for doing something that
should be a part of this normal responsibilities, such as rewarding a CEO for helping
the nomination committee to find a successor to replace him when retires.
MANAGEMENT PRINCIPLES AND PRACTICE
MARKING GUIDE
SECTION A

QUESTION 1
(a) Characteristics of Management as a profession
(i) It must be a specialized body of knowledge
(ii) It must be acquired by means of formal education and experience
(iii) It must have a professional organization
(iv) It must have an ethical code of conduct for members
(v) It must be given authority to licence management practitioners (4 Marks)
(b) The Unity of Command Principle of Management states:
That one man should receive orders from and be responsible to only one superior
While The Unity of Direction Principle of Management states that all members of the
organization should work together towards achieving the same objective. (4 Marks)
(c) The Systems Approach to Management considers an organization as an open social system
which is made up of different parts that work towards achieving predetermined goals.
While the Contingency Approach emphasizes that what managers do in practice depends on
a given set of circumstances or situation. (4 Marks)
(d) Formal groups are groups that are specifically designated by the organization and are set up
to further the attainment of its goals, while informal groups are groups that emanate out
social informal interactions among people in organizations and are not represented on an
organizational chart. (4 Marks)
(e) Sources of organizational change include:
(i) Growth and Decay: This arises when an organization grows in size either by getting
smaller or bigger. Or when there is a decline in organizational activities.
(ii) Changes in the Environment: Changes may occur in organizations as a result of the
forces within the internal and external business environment.
(iii) New Personnel: Once the manpower of an organization is changed or new one are
brought in, there is bound to be changes in the way things are done.
(iv) Change Agents: These are people whose main roles are to develop strategies and
procedures for bringing about change. (4 Marks)
(f) Authority is the right to give orders and the power to exert obedience. It is the power to
assign responsibility.
 While responsibility is the obligation to use authority to see that duties are performed. It is
an obligation owed to a superior in an organization. (4 Marks)
(g) Ecological Environment: The term ecology means the relationship of people and other living
things with their environment. A variety of legislations have been passed to address
environmental managers. Managers and organization must incorporate ecological concerns
into their decision making.
Technological Environment: The term technology is used to denote the applications of
scientific principles to solve industrial problem changes in technology may affect the action
of competitors and even strengthen the competitive position of organizations. (4 Marks)
(h) Job Enrichment: This is refers to the design of the Job to contain an optimum number of
motivators i.e. upgrading responsibility challenge and context of the work.
Job Enlargement: This is rather limited in its ability to improve staff motivation. It is the
process of increasing the number of operation in which a worker is engaged.
Job Rotation: This is a planned operation whereby staff members exchange positions with
the intention of breaking monotony in the work and providing fresh job challenges.
(4 Marks)
(i) The main channels of communication in an organization are:
 Downward Communication
 Upward Communication
 Horizontal Communication
 Outward Communication (4 Marks)
(j)

SECTION B
QUESTION 2
(a) Reasons for resistance to change include:
 Differences in goal orientation; When there are differences in goal orientations of
the people in the organization, then they will resist any change that does not follow
their goals.
 Preference for present status: Naturally, people have a preference for their present
status especially if things are good for them hence they will resist radical change.
 Lack of Plan: If a change is not properly planned, people will resist it.
 Uncertainty Fear: The fear of uncertainty and not knowing the causes and the effects
of change make people resistant to change.
  Unfavourablenss of change: Any change that is perceived to be unfavourable to
employees and that can be lead to instability and job insecurity is resisted.
 Lack of Communication: If there is lack of communication and involvement of
organizational members in the process of designing the change, they will resist it.
(2 Marks Each for any 5 Reasons = 10 Marks)
(b) Planning is an organizational function that helps the organization define its purpose and
activities. It is a continuous effort of thinking through what is desired and how it will be
achieved. (5 Marks)
The stages in the Planning Process are:
 Establishment of goals/objectives
 Development and selection of best course of Action
 Development of detailed plans
 Implementation of developed plans
 Control and evaluation (1 Mark Each = 5 Marks)

QUESTION 3
i. Motivation is an inner state that energizes moves, activates, propels or directs behavior
towards goals. (2 Marks)
ii. Abraham Maslow developed the Needs Hierarchy Theory of Motivations. According to him
human beings have needs and these needs can be arranged in a hierarchical order of
importance. Once these needs are satisfied, human beings are motivated to perform better,
however, once a need has been satisfied, it seizes to be a motivator. He added that the
lower level needs have to be satisfied before moving to the higher level one. The Maslow’s
Hierarchy of Needs is represented diagrammatically as follows: (5 Marks)

NEEDS
FOR
SELF-
ACTUALIZATION

ESTEEM NEEDS

SOCIAL NEEDS (3 Marks)

SAFETY/SECURITY NEEDS

PHYSIOLOGICAL NEEDS
b. Job design is an important managerial activity. However, in designing jobs managers can use
job enrichment as a method to motivate employees to perform the jobs effectively. Job
enrichment emphasizes on the significance of making jobs to contain factors such as
challenge, achievement, recognition and responsibility. Once these job enrichment factors
are incorporated in the job design process then the jobs designed are going to be better and
employees will be motivated to perform their jobs more effectively and efficiently. This will
result in improved moral, reduced labour turnover and increased productivity.

Job enrichment could be achieved by means of: -

 Allowing employees participate in decision-making relating to work methods
sequence and pace
 Provision of prompt feedback to employees about contributions of their jobs to
goal(s) attainment.
 Involvement of workers in the analysis and change of work environment
 Giving employees a feeling of personal responsibility for their tasks.
(2 Marks Each for a Maximum of 5 points = 10 Marks)
(Total: 20 Marks)

QUESTION 4
ai. Time Management is the art of utilizing time effectively and efficiently. (3 Marks)
ii. The three (3) categories of time stealers are:
 Personal Time Stealers e.g. indecision, insecurity, habits etc
 Managerial Time Stealers e.g. lack of priorities, planning etc
 Organizational Time Stealers e.g. meetings, superiors etc
 Environmental Time Stealers e.g. visitors, interruptions etc
(1 Mark Each for any 3 = 3 Marks)
iii. Ways in which you can deal with time stealers: -
 Getting into a routine
 Planning of activities
 Prioritizing activities
 Division of tasks
 Avoiding procrastination
 Proper delegation (1 Mark Each for maximum of 4 = 4 Marks)

b. Organizations have social responsibilities to stakeholders like:

  Employees: It has the responsibility to provide good working conditions, prompt
payment of wages, industrial harmony, adequate opportunities for training,
development and promotion.
 Subscribers of Capital: These are shareholders; it has the responsibility to provide
them with annual statements of accounts, fair reward for the use of their capital.
 Consumers: Responsibility to supply/manufacture qualitative goods at reasonable
prices, fair trading practices, and avoidance of unethical practices.
 Society: Responsibility to refrain from causing damages/pollution to the
environment, increase productivity and qualitative products and create favourable
relationship.
 Government: Responsibility to pay taxes and other dues or fully and honestly, obey
the laws of the land among others. (2 Marks Each x 5 = 10 Marks)
(Total: 20 Marks)

QUESTION 5
 Management, In Broad concept encompasses activities such as planning, organizing, staffing
and controlling as well as leading.
 Leadership on the people aspect of getting job done, emphasizing, inspiring, motivating,
directing and gaining commitment to organizational activities and goals.
 Leadership compliments the managerial functions and has to do with coping with the
dynamic, every changing market place with rapid technological innovation and other
fluctuating market forces.
 Management is more usually viewed as getting things done through other people in order to
achieve stated organizational objectives. The manager may react to specific situations and
be more concerned with solving short-term problem. Management is regarded as relating to
people working within a structured organization and with prescribed roles. On the other
hand, the emphasis on leadership is on interpersonal behavior in a broader context. It is
often associated with the willing and enthusiastic behavior of followers. Leadership do not
necessarily take place within the hierarchical structure of the organization.
 Managers tend to adopt impersonal or passive attitudes towards goals. While leaders adopt
a more personal and active attitude towards goals.
 In order to get people to accept solutions, the manager needs to continue to coordinate the
set balance in order to compromise conflicting values. While the leader creates excitement
in work and develops choices that give excitement in work and develops choices that give
substance to images that excite people.
 Managers see themselves more as conservative and regulators of the existing order of
affairs; leaders work in but donote leching to the organization.
 In their relationship with other people, managers maintain a low level of emotional
involvement as leaders; they have empathy with other people and give attentions to their
events and actions.

Similarities
 They both involve deciding what needs to be done, creating networks of people and
relationship that can accomplish an agent.
 In the same view people who think of leadership as only part of the implementation aspect
of management ignore the direction setting aspect of leadership

B. Performance appraisal should be conducted taking the following principles into

consideration:
 Avoid rating subordinates by different standards
 Uniformity in rating standards must be maintained as far as possible
 It should focus on the performance of the employees rather than on the employees
themselves
 The personal prejudice of the rater should be minimized as far as possible
 Avoid Halo effect; the tendency to rate subordinates high or low on all performance
measure based on one of their characteristics.
(Total: 20 Marks)

QUESTION 6
A. Job Description
 Position: General Manager
 Reporting System: To report to the Managing Director
 Role & Responsibilities: * To supervise the activities of the managers
* To oversee and report to the managing
director with respect to business activities
* To serve as liaison officer for the organization
Job Specification
 B.Sc. in Business Administration and related discipline
 10 years cognate experience in similar capacity
 Holders of MBA will be an added advantage
  The person must be able to speak both English and French fluently.

B. Selection Procedure
 Filling of Application letter
 First Interview
 Selection Test
 Second Interview
 Medical and Physical exam
 Reference Check
 Offer of Employment

C. An effective Job advertisement should contain the following features:

 Provide details about the employing organization
 Make available details of all essential personnel requirements
 Make reference to any desirable personnel requirements
 State the main conditions of employment especially salary
 State to whom the applications or enquiry should be directed to
 Present the above information in an attractive form
 Employee referral
 Unsolicited application
(Total: 20 Marks)

QUANTITATIVE TECHNIQUES
MARKING GUIDE
SECTION A

QUESTION 1
i) Demand, D = 60,000 units
Cost of placing an order, CO = N120
Cost of holding a unit, Ch = N0.40
EOQ = 2 CO D
Ch
= (2) (120) (60,000)
0.40
= 6,000 units
ii) Average life span = 1.95months
No. of bulbs installed = 580
 Average No of monthly replacement = no. of bulbs installed
Average life span
= 580
= 297.4359
1.95
= 297 bulbs/month
iii) Mean = 50
Variance 2 = 64  Standard Deviation  = 64 = 8
Co-efficient of variation =  100
x
Mean 1
8 100
= /50 x /1
= 16%
iv) Laspeyres Price Index = ∑Pn qo 100
x = LPI
∑Po qo 1
v) Paasches Price Index = ∑Pn qn 100
x = PPI
∑Po qn 1
Fishers Ideal Index = (LPI) (PPI)
= ∑Pn qo ∑Pn qn
x 100 x 100
∑Po qo ∑Po qn

∑Pn qo ∑Pn qn
= 100
∑Po qo ∑Po qn

vi) Periodic Payment = N2,000 (Semi-Annually) A

n = 5yrs
 Rate i = 5% Compounded semi-annually
 PV = A (1 - (1 + i/2)-n)
i
/2
0.05
= 2000 (1 - (1 + /2)-5)
0.05
/2
= 2000 (1 - (1 + 0.025)-5)
0.025
= 2000 (1 - 0.88385)
0.025 = N9,292.00

vii) Price Index = Pn 100 standard

x
Po 1
Where Pn = P2012, Po = P2009
 140 Pn
=
100 360
Pn (140) (360) (140) (360)
=
100 100
= N504
viii) n (B) = 14
n (R) = 16
ss 30
14 16
 P (B) = /30, P (R) = /30
 P (R or B) = P (R) + P (B)
16 14
= /30 + /30
30
= /30
= 1
ix) n (Casual workers) = 50
Payment /day/casual worker = N400
 Total pay for the Casual Workers = N400 x 50 = N20,000
n (Labourers) = 30
Payment /day/labourer = N300
Total pay for the labourers = N300 x 30 = N9,000
 Daily mean wage for the workers = Total pay for the workers
Total no of workers
 = N (20000 + 9000)
50 + 30
= N 29000 N2900
80 8
= N362.50
x) No of voters = 400
% of favoured candidate = 40%
40 400
 No in support of favoured candidate = /100 x /1 = 160
 Proportions of favoured candidates voters = 160
400
= 160
= 0.4
400
at 5% significant level
/2 = 0.025 = 1.96 (from the table)
  = 0.4  1.96
xi) First Year Salary = N50,000
Annual Increment = N8,000
n = a + (n - 1) d
10 = a + (10 - 1) (8000)
= 50,000 + a (8000)
= N (50,000) + 72,000)
= N122,000

Section B
Question 2
(ai) Class Interval Tally Frequency
0-9 4
 BUSINESS LAW
MARKING GUIDE
SECTION A
QUESTION 1
(a) Vicarious liability is a liability for torts of others and it arises because of a relationship
between the parties such as employer/employee (master/servant), employer/independent
contractor. The general rule is that the employer is liable for the torts of his servants upon
whom he retains the right to control not only the work he does, but also the way in which he
does it.
For the employer to be vicariously liable to acts of his servants, the tortuous act must not be
a wrongful way of doing what the employee is employed to do. Examples are negligence
acts, fraudulent act or forbidden act and it is not within the scope of his employments. See
Rose V Plenty (1976). (4 Marks)
(b) Implied terms under the sale of Goods Acts include the following:
- Implied term as at title or the right to sell.
- Implied condition as to description
- Implied condition as to fitness for a particular purpose
- Implied condition on Merchantable quality
- Implied condition on sale by sample
- Implied term as to time (1 Mark Each for Any 4 = (4 Marks)
(c) A disclosed principal is one whose existence is known to the third party. It does not have to
be his name and the third party must be informed by the agent at the time of the contract
that he is acting on behalf of another person. (1 Mark)
An undisclosed principal on the other hand is one whose name and existence is concealed
from the third party by the agent to the extent that the third party is made to believe that
the agent is acting for himself. (1 Mark)
An undisclosed principal will not be bound by the contract made by the agent under any of
the following circumstances:
- Where the contract terms implicitly or explicitly deny the existence of an agency.
- Where the identity of the parties is material to the third party. (2 Marks)
(d) One of the general rule of insurance is that an insured person is entitled to claim the full cost
of repairs in the case of partial loss provided it comes within the total amount covered by
the policy.
Where the policy contains a “subject to average “clause and the property is under- insured,
the insurers will only be liable for the proportion of the actual loss which the sum insured
bears to the value of the property. (See Acmewoed Flooring Company V Martin).
 In the circumstances, Mr. & Mrs. Mofolorunso would be entitled to recover only N4.5 million
from the insurance company as the property was insured for half the actual value and the
policy contains “subject to average” clause. (4 Marks)
(e) In the circumstance, Austin cannot succeed in any claims, because he had an information
from somebody that Best Choice Automobile Limited were not the rightful owner of the car.
(Re: Dickson V Dodd).
The rightful owner could recover the car from Austin. However, Austin can sue Best choice
Automobile Limited to recover the money paid so far to them.
It is to be noted that possession had only passed to Austin and not ownership which is the
key principle in hire purchase agreement.
Again, the rightful owner could also sue and claim compensation from Best Choice
Automobile Limited for hiring out a car that was not theirs. (4 Marks)
(f) Consideration is defined as some right, interest, profit or benefit accruing to benefit accruing
to one party or some forbearance detriment, loss or responsibility given, suffered or
undertaken by the other. Consideration is an essential element in the formation of every
contract.
Rules governing consideration include”-
(a) It must be sufficient, but need not to be adequate.
(b) It must move from the promise, though not necessarily to the promissor
(c) It may be executed or executor, but it must not be past.
(d) It must not be illegal, immoral or contrary to public policy. (4 Marks)
(g) The basic characteristics of negotiable instruments include the following:-
It must be recognized as a negotiable instrument by law e.g. cheques, promissory notes,
treasury bills, travelers cheque, bills of exchange.
The rights represented by the negotiable instruments can be transferred by mere delivery of
the instrument.
No formality is required, neither is it necessary to give notice of the transfer to the party
against whom the transferee will ultimately enforce the right.
- The transferee can sue the parties who are liable to pay in his own name without joining
the transferor.
- Good title passes to any “bonafide transferee for value” free from all equities.
(Any Two Points Attract 2 Marks Each = 4 Marks)
(h) A receiving order has the following effects:-
 - Unsecured creditor no action can be brought against the debtor by an unsecured
creditor without the consent of the court.
- Secured creditor: The receiving order has no effect as his debt is secured.
- The debtor: The order has no effect as t does not make the debtor a bankrupt until
the adjudication order is given against him. (4 Marks)

(i) - The principle of “Ubrimae Fidel” requires the parties to an insurance contract to
disclose to each other all material facts.
- There is a duty not to misrepresent material facts.
- There is a duty not to make fraudulent claim.
We must note that the onus of disclosure of material fact lies more on the insured who
knows more about the risks to be insured than the insurer. (4 Marks)
(j) - if there is insufficient fund in the account of the customer
- If the bank had received notice of death of the customer
- If there is legal bar by the court e.g. garnisheed order
- If the cheque is drawn irregularly e.g. irregular signature, mutilated cheque, post
dated cheque, stale cheque, wrongly endorsed or altered cheque. (Any 4 = 4 Marks)

SECTION B
QUESTION 2
2. A contract will be frustrated under any of the following circumstances:-
(i) If there is fundamental charge of circumstances. See Metropolitan Water Board V.
Dick, Kerr & Co. The defendant undertook to build a large reservoir for the plaintiffs
within six years. The British government, on the outbreak of war, prohibited under a
statutory authority the circumstance of the work. Held: The intervention is
substantial enough as to cause the termination of the contract.
(ii) Subsequent Illegality e. g. subsequent change of law which renders the whole
performance of contract illegal.
(iii) Destruction of the Subject-Matter: Taylor V Caldwell. The defendants agreed to let
a music hall to the plaintiffs for a series of concerts to be staged at a future date.
The hall was before the scheduled dates, accidentally destroyed by first and the
plaintiffs sued for breach of agreement.
Held: The destruction of the hall determined the contract and so absolves the
defendant from liability.
 (iv) Personal Incapacity: See Unger V Preston Corporation
A German refugee was employed by Preston Corporate as a School Medical Officer.
On the outbreak of war with Germany, he was interned as an enemy alien and was
not released until ten months after.
Held: On the internment, the contract of employment was discharged. This goes to
say that subsequent illness, death, internment or compulsory call up for military
service will discharge the contract.
(v) Non Occurrence of an Event: see Krell V Henry.
Henry agreed to hire a flat to view the coronation procession of Edward VII. The
procession was cancelled because of the King’s illness.
Held: The cancellation of the procession discharged the contract.
Thus, if the occurrence of a particular event is vital to the contract, the non-
occurrence of the event will discharge the contract (10 Marks)
A contract which is frustrated is automatically determined with the following
consequences.
(a) Money due but unpaid at the time of the dissolution was enforceable
(b) The contract becomes void only from the time of frustration.

2b The scenario created is simply an instance of agency of necessity being created by the
action of the Transport Company Limited, which because of the emergency condition of the
accident was obliged to act by selling the wounded cows to prevent irreparable los to Alhaji
Ijadola.
The three conditions which must be satisfied before an agency of necessity can be implied
were present in the case study thus:
(i) it must be impossible or impracticable to communicate with the owner of the
goods in order to get his instructions – in the circumstance, Alhaji jaodola had
travelled on lesser Hajj (Umrah). See Springer v Great Western Railway Company.
(ii) There must be a real or imminent commercial necessity. In the circumstances, the
wounded cows were likely to die before reaching Lagos.
(iii) The agent must have acted in best interest of the principal
Conclusion:
Alhaji Ijaodola should be advised to drop the case as the transport Company acted impliedly
as an Agent of necessity for him. The transport company could not be liable in damages to
him as the three conditions necessary for creation of agency of necessity were met as
illustrated. (10 Marks)
QUESTION 3
Meaning of the rule, If a seller of goods has no property in the goods and does not sell by the
authority of the owner he cannot transfer a good title to the buyer. This is the rule expressed in the
maxim ‘nemo dat quod non habet ‘meaning that no one can give what he has not got.
Exception to the rule of “nemo dat quod non habet” are:-
(i) Sale by seller in possession
(ii) Sale by buyer in possession
(iii) Sale by a Mercantile Agent
(iv) Sale under common law power
(v) Purchase in a market overt
(vi) Owner affected by estoppels
(vii) Sale by persons with voidable title
(viii) Sale under statutory powers
(ix) Sale under order of court
(x) Sale in market overt. (1 Mark Each = 10 Marks)
Candidates are to emphasize that’s the owners can sue the seller, not the innocent buyers (third
party)
Full explanations of any four with decided cases where applicable attracts. (2 ½ Marks Each)

QUESTION 4
Agency relationship can be created in the following ways:
- By express appointment, for which no special formality is required, except where the agency
involves the execution of documents under seal, in which case the power to so must be
conferred by the power of attorney (itself a document under seal)
- By ratification by the principal of some action taken on the principal’s behalf by another
without the principal’s authority.
The conditions necessary are:-
(i) The agent must have purported to act for the principal
(ii) The principal must have capacity to do the act in question.
(iii) The principal must ratify in time (i. e. not after the time fixed for the performance of
the act or contract).
 (iv) If by words or conduct, a person allowed another to appear to the outside world to
be his agent, with the result that a third party deals with that other person as his
agent, the first person cannot afterwards repudiate the agency.
(v) Agency of Necessity: This occurs when one person has taken some steps in the
interests of another under circumstances of urgency, provided that he acted
bonafide, that there was real urgency and that at the time there was no means of
communicating with the principal.
(vi) By Implication: in the case of a wife or even a man’s mistress living with him, there
is a presumption that she has authority, as his agent, to pledge his credit for
necessities suitable to their style of life (6 Marks)

4b The case study required candidates to clearly differentiate between an offer and an
invitation to treat.
An offer in law consists of a promise to be legally bound by a contract. Whereas, an
invitation to treat is merely a statement that the maker is willing to entertain an offer. It
goes to say that a shop owner displaying an article in his shop window does so to attract
customers without making any promise that he will sell the article at the marked price, or at
all. See Pharmaceutical Society of Great Britain V Boots Cash Chemists (1953). The case was
concerned with goods displayed on the shelf of a self-service store. It was held that there
was no contract until the marked price was handed over at the marked price was handed
over at the cash-desk. The rule covers the situation where the would-be customer asks the
shop keeper the price of a particular article. The shop keeper’s reply, stating the price, does
not amount to an offer. Therefore, Mrs. Godknows cannot compel the shop attendant to
sell the chopper bicycle to them. She had only made an offer which may or may not be
accepted by the shop attendance, the display of the chopper bicycle was an invitation to
treat.
4c Insurable interest is that interest in property or the life of a person which entitles someone
to insure that property or person.
In property or indemnity insurance, the insurer must have a prospect of loss from
destruction of the property. In life insurance, the insurer must show that he faces financial
loss if the person insured perishes.
Insurers with insurable interest are:-
- Spouse to the insured
- Creditors to debtors
 - Business partners
- Employer to employees e.g. Key personnel
- Son to parents, step parents or ground parents (4 Marks)
Mr. Omotanwa has a claim against the lorry driver or his employers. If he wishes to pursue
this and succeeds, then he cannot claim from the two insurance companies as he would not
have lost anything. Again, the insurance companies cannot insist that Mr. Omotanwa should
pursue this claim against the drunk driver.

Their liability is a primary liability, to indemnify him should he suffer losses. Thus, Mr.
Omotanwa may, if he chooses, claim against one of the Companies, each is liable for far in
excess of what he has lost. If he does this the insurance company which pays will claim
contribution from the other company, in this case, one-half of what has been paid, but again
this is not of interest to Mr. Omotanwa. His claim against only one Company cannot be
rejected or modified on the ground that other insurance company exists. Also, he cannot
claim from each of the company for the whole amount thus making profit.

Once the insurers pay Mr. Omotanwa, they can take over the claim against the author of the
loss i.e. the lorry driver. Thus, they are said to be subrogated to the claim. (4 Marks)

QUESTION 5
He can register Aponbeproe to enjoy patent right there on. The Paten right, if granted will enable
him to enjoy the right for a limited period to stop others from making, using or selling the invention
without the permission of the inventor.
The process of registering patent right is rigorous and lengthy but once it is granted, it lasts for
20years from the date of application provided annual renewal fees are paid starting from the 5 th
year from the filing of the application.
To be patentable and capable of being registered, “Aponbepore” must meet the following
requirements:-
Be novel
- it must not have been known, used or made public in any way or anywhere in the world
before the date of presenting/filing the application
- It must involve an inventive step
- It must have utility
- It must be described fully
- It must be capable of industrial application
- It must not be excluded
Registration is done at the Patent office in the Federal Ministry of Trade and investment following
the under listed process:-
(a) Conduct a search
(b) Prepare specifications
(c) Initial filing
(d) Fill full application and file
(e) Examination and searches by the Patent Office
(f) Publication in the official gazette
(g) Final publication (20 Marks)

QUESTION 6
a. The negotiable items of employment relationship allow workers to go on strike if a deadlock
is reached. Among the items for negotiation are:-
- Wages
- Hours of work
- Leave
- Overtime pay
The issues for consultation do not require parties to negotiate but they can discuss it.
Employees cannot go on strike if a deadlock is reached. Among the issues for consultation
are:
- Recruitment
- Promotion
- Termination of employment
- Training
- Some aspect of welfare and safety.
b. Conciliation, Medication and Arbitration are the main alternatives to civil litigation.
Disputing parties use these Alternative Dispute Resolution (ADR) method because they are
very expeditious, private and generally much less expensive than a trial.
ARBITRATION is an ADR method where the disputing parties involved presents their
disagreement to one arbitrator or a panel of private, independent and qualified party
“arbitrators”, who determine the outcome of the case. An arbitration decision generally has
the force of law behind it, but does not set a legal precedent.
MEDIATION:
It is an ADR method where a neutral and impartial third party, the mediator, facilitates
dialogue in a structured multi-stage process to help parties reach a conclusive and mutually
satisfactory agreement. It is a peaceful dispute resolution tool that is complementary to the
existing court system and the practice of arbitration.
A mediator does not decide or judge, but instead, becomes an active driver during
negotiation between the parties. He uses specialized communication techniques and
negotiation skills to assist the parties in reading amicable solutions.
In mediation, the parties have the right to stop anytime and refer the dispute to the court
system or perhaps arbitration. One distinguishing feature of mediation as opposed to
arbitration is that any party can unilaterally decide to stop the mediation at anytime if they
believe the process is not productive without a common approval from the other party.

CONCILIATION:
Conciliation is another dispute resolution process that involves building a positive
relationship between the parties to a dispute. The conciliator is an impartial person that
assists the parties by driving their negotiations and directing them towards a satisfactory and
amicable agreement.
Conciliating, unlike arbitrating, is much less adversarial proceeding.
The conciliator, not the parties, often develops and proposes the terms of settlements. The
parties come to the conciliator seeking guidance and the parties make decisions about the
proposals, made by the conciliator. (20 Marks)
 GENERAL PRINCIPLES OF LAW
MARKING GUIDE
SECTION A

QUESTION 1
1. Personal property
2. There must be a master/servant relationship. The servant must have acted in the course of
his employment.
3. The existence of : (i) a duty of care, (ii) breach of the duty of care, (iii) damage resulting from
the breach.
4. Counter offer
5. Orally, in writing or by conduct
6. The right to call guarantee. The right to set-off
7. An indemnity
8. i. Right to life
ii. Right to dignity of human person
iii. Right to personal liberty
iv. Right to fair hearing
v. Right to private and family life
vi. Right to freedom of thought, conscience and religion
vii. Right to freedom of expression and the press
viii. Right to peaceful assembly and association
ix. Right to freedom of movement
x. Right to freedom of discrimination
xi. Right to acquire and own immovable property anywhere in Nigeria (see section 33 -
43, of the 1999 Constitution).
9. Duress is a common Law concept which vitiates consent in a contract and makes the
contract voidable.
10. Res judicata means that parties to a litigation, which has been adjudicated upon by a court
of competent jurisdiction, cannot bring up the same issue before another court of similar or
co-ordinate jurisdiction. (40 Marks)
SECTION B
QUESTION 2
A counter offer cancels the original offer and the offeree may accept or reject it.
The offer, in this case, was made by Bello and Audu made a counter-offer by accepting the offer
subject to certain works being carried out by Bello.
Bello did not accept the counter-offer but rather made another counter-offer by his proposal that
Audu should carry out two of the three sets of work.
Again, this was not accepted, but Audu made a counter-offer to effect that Bello should carry out all
works.
Audu eventually accepted this. Thus the contract came into effect on 1 st June, 2012 and the refusal
of Audu to take the lease is a breach of contract.
Therefore, Bello can sue Audu for damages or for specific performance. (20 Marks)

QUESTION 3
(a) Negligence is a breach of legal duty to take care which results in injury to the plaintiff, and
for the latter is entitled to an unliquidated damage.
(b) Vicarious liability arises in a situation where a master/employer is held liable for the tort
committed by a servant/employee in the course of his employment and within the scope of
his authority.
(c) The case in question is on whether an employer can incur liability for the tort committed by
the servant.
(d) Before a master is rendered liable, a master/servant relationship must be established
through the control test, integration or the multiple tests. The tort must be committed
within the servant’s authority and in the course of his employment. See CASSDY V. MINISTRY
OF HEALTH.
(e) Therefore, Fathercare Surgical Hospital can incur liability vicariously for the negligent
performance of Olu who committed the tort in the course of his employment, although the
Hospital management may, in turn, sue Olu, their servant for negligence. (20 Marks)

SOLUTION 4
(a) Contracts which are deemed to be illegal at Common Law include:
(i) Contracts to commit a crime or civil wrong, such as an agreement to kill or assault a
human being.
(ii) Contracts involving sexual immorality, such as soliciting for prostitution.
 (iii) Contracts prejudicial to the administration of justice such as procuring a witness to
give false evidence.
(iv) Contracts to defraud the Revenue office such as tax evasion by procuring fake tax
clearance in exchange for money.
(v) Contracts that tend to promote corruption in public life such as giving bribe or
kickback on government contracts
(vi) Contracts affecting public safety, such as contracts made with a person living in
enemy territory during period of war.
(vii) Contracts prejudicial to the status of marriage as decided in Alake v Oderinlo (1975).

(b) This issue is whether or /not the contract between Madam Wobia and Ezego is an illegal
contract.
The contract is an illegal contract and is void ab initio. Thus, it is unenforceable. Madam
Wobia cannot recover the money from Ezego, since the contract between them is a contract
tends to promote corruption in public life and is therefore illegal at Common Law.
(20 Marks)

QUESTION 5
(a) A contract of guarantee and suretyship is an agreement by which one person promises to
answer for the debt, default or miscarriage of another person if that person fails to do so.
The parties are:-
(i) The Debtor
(ii) The Creditor
(iii) The Guarantor
(b) X, being a thief, has no title in the car; hence he could not pass any valid title to Y, the
purchaser.
B still has a better title in the car as the original owner, while Y has no title at all.
Y could commence action against X to recover the N3m paid to X since X had sold nothing to
him. (20 Marks)

QUESTION 6
(a) The question involves discussion of the fundamental human right of fair hearing.
 Right to fair hearing encompasses the twin phrases of audi alteram partem, that is (nobody
must be condemned without giving him an opportunity to defend himself) and nemo judex
in causa sua (nobody must be a judge in his own cause).

Barau was not allowed to make any defence to the allegation of receiving bribe. His right to
fair hearing had been violated.

Barau could commence action to have his right redressed.

(b) (i) Right to liberty is provided for under S.35, 1999 Constitution. It provides that every
person shall be entitled to personal liberty and, that nobody shall be incarcerated
unlawfully. This right is, however not an absolute one. It is qualified by some
exceptions.
(ii) Right to fair hearing is provided for under S. 36 199, Constitution. It provides that a
person must not be condemned unheard and that a person must not be a judge in
his own cause.
(v) Right to freedom against discrimination is provided for under S.42, 1999
Constitution. This right provides that no citizen of Nigeria must be discriminated
against on ground of sex, religion, political opinion, ethnic group or place of origin.
(20 Marks)
 MANAGEMENT INFORMATION SYSTEM
MARKING GUIDE
SECTION A

QUESTION 1
1. Information
2. Internet Protocol or TCP/IP
3. Test data
4. Topologies
5. Reduced
6. Humanware
7. Hardware
8. Distributed
9. Outsourcing
10. Ergonomics

SECTION B
QUESTION 1

(a) Computer Bureaux.

(b) Data preparation
Program preparation
Training of Staff
Repairs and Maintenance
Act as Information Centres
Feasibility study consultant

(a) Software is a generic name given to all program that run on the computer system.
(b) System Software
(c) Operating System
Language processor
Utility routines
Loaders
Editors
Operating System: It is a collection of programs that manage the CBIS resources in the wisest
manner possible.
Language Processor: Is a program that converts the user’s code (i.e. source code) into the machine
code. The user’s code is called the Source Code while the Machine code is called the object code.
Utility Programs: These are also called service or General-purpose programs as they are used for
application in general regardless of the nature of specific programs.

QUESTION 3
(a) Application software/Application packages
(b) Electronic spreadsheet
Mathematics packages
Statistics packages
Desktop publishing
Word processors
File Manager
Database Management System..

QUESTION 4
(a) Outsourcing Involves purchasing from outside the organisation, the services required to
perform certain business functions.
(b) Good Technical personnel
Good Equipment
Provision of some special skills.

QUESTION 5
(a) Off –the – shelve
o Through the Internet
o Through “software Houses”
o Through the Vendor
o Through Computer Manufacturers. Who also develop software.

(bi) Advantages
o It can easily be notify by the in house programmer.
o It is written for the exact user activities of the Company.
 o Problem of troubleshooting can easily be solved.

(bii) Disadvantages
o Written by single programmer in house.
o It takes a long time to develop.
o It will not be well tested before been put into use.
o Very expensive to develop.
o It may not be useful for other company.
 ECONOMICS
MARKING GUIDE
The marks scheme is designed to test the following abilities
1. Recall: These are based on facts, principles, formulae or laws of the discipline of the paper.
The candidate is expected to be able to obtain the answer either from his/her memory of
the subject
2. Comprehension: These questions will test the candidate’s understanding of the basics of
his/her field, by requiring him/her to draw simple conclusions from fundamental ideas
3. Application: In these questions, the candidate is expected to apply his/her knowledge either
through computation or by logical reasoning
4. Analysis & Synthesis: These can be linked answer questions, where the answer to the first
question of the pair is required in order to answer its successor
Short Descriptions: In two or three articulate sentences, students are expected to define and/or
explain.
How to award mark for grade of 5 point
 Full Marks for Accurate and reasonable detailed: Accurate and reasonable detailed outline
that demonstrate sound knowledge and understanding of the question
 3-4 for less detailed but generally accurate; Less detailed but generally accurate outline that
demonstrates relevant knowledge and understanding
 2-3 marks for Basic understanding: Outline that demonstrate some relevant knowledge and
understanding but lacks and lack detail and may be muddled
 1 mark for very briefly flawed or inappropriate: Basic understanding: very brief or flawed
outline demonstrating very little knowledge of the question.
 0 marks: No creditworthy material

SECTION A
QUESTION 1
1. Marginal utility is the utility of an additional unit. It can also be defined as the utility of the
last unit for the time being. Marginal utility diminishes because utility declines as you have
more units of a community. It eventually approaches zero as saturation is approached.
2. An intersection would violate the more-is-better rule. An intersection would imply that you
switch from a higher indifferences curve to a lower one vice versa. The lower one has fewer
units of both goods everywhere
3. Autonomous expenditure is that part of expenditure that takes independent of the level of
or changes in economic activity, while Marginal efficiency of investment is the rate of
discounts for which the discounted stream of revenues from a given level of investment
equals the discounted cost stream
4. By definition Y=C+I+G
And saving is S=Y-C-T
Thus substituting in (1) one gets
S+T=I+G
If S remain constant and T Increase obviously either I or G (or both) must increase. Either I or
G alone might decrease-only their total must increase
5) At 200 units
The following equation can be derived from the information above:
50 x Q = 8000 + 10Q
The solution of this equation is the answer to the question
50Q = 10Q + 8000
40Q = 8000
Q = 8000
4O
Q= 200
6) The declining part of the average variable cost curve is caused by specialization of the
workforce which causes the productivity of each worker to rise. The increasing part of the
average variable cost curve is caused by the law of diminishing returns. This law states that
as you add more and more of a variable factor of production, to a fixed factor of production,
eventually a point will be reached whereby the increase in output, as a result of employing
the last factor, begins to decline
7) Inflation, inconsistent with Cashless Policy, Cash Hoarding/Money laundering/corruption
/counterfeiters and Disappearance of lower denomination notes and coins
8) Candidate is expected to mention any 5 out of 6 answers
* Essentially of the product of the buyers. The less elastic e.g. food and shelter
* Availability of substitutes. The demand tends to be elastic e.g. textile
* Proportion of income spent on the product tends to be more elastic e.g. car
* Durability of products. The more durable the less elastic e.g. house
* Market saturation. This tend to be highly inelastic e.g. television
 * Time. The shorter the time span, the less elastic the demand, and the longer the
time, the more elastic its demand
9) Step 1: Definitions of terms and assumptions about economic behavior- the terms should be
specifically identified and defined in clear words in order to avoid any confusion and
misunderstanding. We are also required to lay down conditions/assumptions about behavior
of different units involved in the economic analysis just as household and firms. Economic
hypothesis etc.
Step 2: process of logical reasoning ( deductions) – this is to draw conclusions regarding
economic phenomenon on the basis of assumptions made e.g increase in demand of normal
goods in case of fall in price and vice versa is an assumption.
Step 3: Prediction and implication of theory- conclusion drawn are called predictions and
assumptions. Economic predictions are conditional statements, because they hold good if
certain assumptions are satisfied, hence the use of ceteris paribus
Step 4: Testing of the theory- economist is further required to test his conclusion and
prediction. By having empirical observation and testing of his conclusion in the same
situations. This painstaking exercise is a must before the theory could be generalized. If the
testing reveals that the behavior in all the tests is the same, the conclusions are accepted as
economic theory.
10. GNP account items:
1. Transfer payments
(a) Interest paid by government I-ncluded
(b) Rent E-xcluded
(c) Unemployment Compensation I-ncluded
(d) Indirect Taxes E-xcluded
(e) Social Security benefits Included

SECTION B COMPULSORY
QUESTION 1
*a) Here is your budget constraint;
Option Leisure Work
A 0 50
B 5 45
C 10 40
D 15 35
 E 20 30
F 25 25
G 30 20
H 35 15
I 40 10
J 45 5
K 50 0

*b) The calculation of utility with the help of your utility function shows you your options in
terms of utility.
Option Leisure Consumption Utility
A 0 500 0
B 5 450 2250
C 10 400 4000
D 15 350 5250
E 20 300 6000
F 25 250 6250
G 30 200 6000
H 35 150 5250
I 40 100 4000
J 45 50 2250
K 50 0 0

*c) Optimal bundle: F

Please note that such questions are very, very frequent. The utility function for leisure and
money is an instrument to prove that unemployment is voluntary.

d) The Substitution Effects: as the price of good X falls the consumer buys more of this cheaper
good because of the law of equi-marginal returns, and the consumer not being in
equilibrium any more. The law of equi-marginal returns states that the consumer is in
equilibrium when he spends his income in such a way that the ratio of marginal utility to
price is the same for all the goods that he buys. When the price of good X falls the marginal
utility, for every cent spent, on good X increases, and in order to maximize his utility the
consumer buys more of X. Demand for good Y falls because it is relatively dearer.
 The Income Effect- A Fall in the price of good X causes a rise in real income. As both goods
are normal goods demand for both X and Y increases

e) Three assumptions of consumer behaviours

1) The consumer acts rationally which means that he acts in a way that is consistent
with his personal preferences. This means that if a consumer knows that the same
product is priced differently in 2 shops that are located nearby he will buy from the
cheaper store.
2) The consumer has limited income- Because the consumer has not enough income to
satisfy all of his desires he must make a choice between those goods that he wishes
to buy.
3) The consumer aims to get maximum satisfaction from his income. The consumer will
obey the Equi- Marginal Principal of Consumer Behavior which states that he will
spend his income in such a way that the ratio of marginal utility to price is the same
for all the goods that he buys.

QUESTION 2
a) Mention 4 shortcomings of Gross National Product in National Income Accounting with
examples? (8marks)
* Non- market Transactions or Household Production: GDP excludes certain unpaid
activities, such as child rearing, do-it - yourself home repairs and services
* Neglect of leisure Time: it can be argued that GDP understate national well-being
because no allowance is made for the people working fewer hours than they once
did
* Distribution, Kind and Quality of Products: GDP is blind to whether a small fraction
of the population consumes most of a country’s GDP. GDP also wears a blindfold
with respect to the quality and kind of goods and services that make up a nation’s
GDP
* Underground Economy: if the underground economy is sizeable, GDP will
underestimate on economy’s performance. E.g. Illegal gambling, prostitution, tax
evasion, unreported criminal activities, Baby-seating services, illegal guns and illegal
drugs are good and services that meet all the requirement for GDP
* Economic Bads: Since the costs of negative by-products are not deducted, GDP
overstates the national well-being. More production means a larger GDP regardless
 of the level of pollution created in the process. E.g. pollution caused by steel mills,
chemical plant etc and negative externalities are economic bads that impose costs
on society not reflected in private market prices and quantity bought and sold.

b) The following partial information is available from the national product accounts for an
economy:
Consumption (C) N650
Gross Investment (GI) 220
Wages (W) 780
Interest and Rent (I & R) 75
Corporate Profits (After Taxes) (CP) 240
Personal Income Taxes (PIT) 300
Depreciation (D) 55
Government Expenditures (GE) 450
Corporate Income Taxes (CIP) 280
Indirect Taxes (IDT) 120
Transfer Payments from government (Tr.P) 145
Corporate Dividends (CD) 20

Using the Expenditure Approach

Compute saving in the:
a) Household Sector
Household savings = Income - Expenditure; (Equation 1)
Household Income = Wages + Interest & Rent + Transfer Payments (Equation 2)
1000 = 780 + 75 + 145
Household Expenditure = Consumption + Personal Income Tax (Equation 3)
950 = 650 + 300
Savings = P I (1000) - C (950) = 50 (Equation 4)
Or alternatively from Disposable Income approach, which is DPI-C
Household Savings = Disposable Income - Consumption (Equation 5)
Disposable Income = Personal Income- Personal Income Tax (Equation 5b)
= PI (1000) - PIT (300)
Personal Income = Wages + Interest & Rent + Transfer Payments (From Equation2)
House hold Savings = DPI (700) - C (650) = 50
 b) Business Sector
Savings = Gross Investment+ Depreciation (Equation 6)
= 220 + 55 = 275
c) Government sector
Income - Expenditure (Equation 7)
Income = PIT + CIT
Income = PIT + CIT + IDT = 300 + 280 + 120 = 700
Expenditure = GE + Tr.P = 450 + 145 = 595
Savings = 700 - 595 = 105
d) Compute Personal Disposal Income (From Equation 5b)
PDI = PI - PT
1000 - 300 = 700
e) Compute Net National Income
NNP = GNP - IDT - D
GNP = GDP + NFP
GDP = C + I + G = 650 + 220 + 450 = 1320
NNI = 1320 - 120 - 55 = 1145
f) Compute Net Investment
Net Investment = Gross Investment – Depreciation
= 220 - 55 = 165

QUESTION 3
a) The Factors that may influence a consumer’s demand schedule are;
1. The price of the product itself: Normally as the price of a good falls consumers buy
more of that good because consumers are getting better value for the money that
they spend. A change in the price of the product itself causes a movement along the
demand curve
2. Income of the consumer: For normal goods as income rises demand also rises,
witness the explosion in demand as a result of the substantial increases in income
over the last 10 years. For normal goods, a rise in real income causes a shift in
demand curve to the right.
3. Prices of other goods: if the price of a complementary good falls then demands for
our good rises, e.g. a fall in the price of cars may result in a rise in demand for petrol
as consumers may purchase bigger engine models and the demand curve for petrol
 shifts to the right. If the price of a substitute good falls then demand for our good
will fall as it has become relatively dearer and the demand curve for our product
shifts to the left
4. Consumer tastes or preferences- when a commodity comes into fashion there is an
increase in the quantity demanded at each price and of course advertising has a
major impact on consumer tastes and preferences.
5. Government regulations- a healthy education campaign to reduce the demand for
cigarettes may have had the effect of reducing demand for cigarettes

bi) Here is the schedule:

Y X
$2 80
$3 60
$4 40

Price Y

$4

$3

Demand 1
$2
Demand 2

$1

X
0
0 10 20 32 40 48 60 64 70 80 Units

bii) 60 units
biii) The curve shifts to the left. Textbooks always illustrate changes in demand with the help of a
parallel shift of the demand curve. It is noteworthy that a 20-percent decline in demand
does not lead to a parallel shift.
Ci) Explanation of law of demand,
Cii) Analysis of income distribution and
Ciii) Theory of Consumers Surplus
d) U = (XY) = 2X + 6Y
For 12 units of X and 8 units of Y, we have 2 (12) + 6 (8) = 24 + 48 = 72
For you to lower your purchase of X to 6 means 2 (6) + 6 (Y) = 72
6Y = 72 - 12 = 60
Y = 10 UNITS

QUESTION 4
(a) 1. There are large number of Buyers and Sellers: Each seller acts independently and
can influence the quantity sold by the price it charges for its output.
2 Product Differentiation Exists i.e. it has been established in the minds of the buying
public, through competitive advertising and branding, there are differences between
products. The products are however close substitutes.
3. There is Freedom of Entry to and Exit from the Industry: No barriers to entry exist
within the industry.
4. There is Reasonable Knowledge as regards Profits and Losses: made by other firms,
but consumers may not be fully aware of the prices being charged for different
products.
5. Each Firm tries to Maximize Profits: i.e. they endeavor to produce the level of
output where marginal cost is equal to marginal revenue and they aim to maximize
cost.

(b) Both types of market structures are wasteful of resources i.e they do not produce at the
minimum point on the average cost curve. 2 Both face a downward sloping demand curve
because both must lower price in order to increase demand.

(c) An example of an oligopolistic industry is the retail petrol market .In this market there are a
few sellers such as Mobil, AP, Total and so on. The products sold are very close substitutes
with companies maintaining brand loyalty by all sorts of product promotion schemes. The
firms are also interdependent taking into account the likely reaction of their competitors to
any changes they are going to make.
(d) i. To collude means that a number of firms come together to manipulate the market in
their favour, at the expense of the consumer, and at the expense of other firms that
are not in the agreement. They can do this in a number of ways such as limiting
production and forcing up the price, dividing up the markets, not competing in each
other’s section and not supplying those firms who buy from firms not in the
agreement.
ii. To be a profit maximiser the firm produces the level of output where MC=MR and
beyond that level of output MC> MR. Also in the short run a firm’s revenue must
cover its variable costs and make a contribution to its fixed costs. In the long run a
firm’s revenue must at least equal total costs including normal profit

QUESTION 5
a) The Law of Comparative Advantage states that each country should concentrate on the
production of those goods in which it has the greatest comparative advantage and trade
with the rest of the world for its other needs.
In the above example B has an absolute advantage over A in the production of both food
and machines. However it has a comparative advantage in machinery production.
This is because B is 4 times better than A at a machinery production but only twice as good
as A at producing food. Therefore B should devote all its resources to machinery production
and A to food production.
Both countries must then find a swapping rate ( terms of trade) where they will both gain
from trading. To determine this swapping rate we must now examine the opportunity costs.
Let us examine B first- From its own resources if B decided to produce one less machine it
would gain an extra two tones of food i.e 32/ 16 Therefore when trading with A,- From its
own resources, if A wished to produce one extra machine it would have to sacrifice 4 food
i.e. 16/4. Therefore when it trades with B it will want to give B less than 4 food for one
machine.
The terms of trade will be 1 machine > 2food<4food.
Any figure more than two food and B will gain .Any figure less than four food and A will gain
The terms of trade can also be stated as follows
- 1 food > 2.5 machines <.5 machines

b) An internal economy of scale is a factor that causes cost per unit to fall as the firm produces
a larger number of units .Example include the availability of bulk buying discounts and the
 specialization of the workforce. An external economy of scale is a factor that causes cost per
unit of the individual firm to fall as the industry, in which the firm operates in, grows in size.
Examples include the establishment of specialized firms producing component parts for the
larger firms and the provision of specialized training courses for the workforce. Both of these
lead to a fall in the long-run average cost curve of the firm.

QUESTION 6
a) The consumption function plays an important role in the analysis of aggregate economic
behaviour. List the principal theories of aggregate consumption and indicate their basic
differences.
1. Absolute Income Hypothesis: this method posits consumption as a function of an
absolute level of income and could be either real or nominal income term
2. Relative Income Hypothesis: this method posits consumption as being dependent
on one’s income relative to another measure of income such as average income.
This theory leads to a picture of long-run consumption which is not a single
relationship but rather is composed of a sequence of short-run consumption
relationships that yields a “racket effect” diagram
3. Permanent Income Hypothesis: This method posits consumption as being
dependent on some average measure of income that changes more slowly than year
to year variations would suggest .The measure used to reflect permanent income
could be real or nominal terms.
4. Life-Cycle Hypothesis: This method views the planning period for consumption
streams as being one’s life time and posits consumption in any one year as
dependent on the income stream one anticipates over one’s lifetime and one’s
subjective trade-off of present versus future consumption
b) The average propensity to consume (APC) and the marginal propensity to consume (MPC)
play important parts in the determination of the equilibrium level of income and in the
determination of the multiplier. From the following data compute the missing quantities
Income Consumption APC MPC
N300 N280 ?0.93 0.30
N400 ?320 0.80 ?0.40
?667 500 0.75 ?0.67
725 ?541 ?0.75 0.70
?1070 800 ?0.75 ?0.75
QUESTION 7
a) Market Failure occurs when free markets fail to be efficient because perfect market
conditions are not met. These conditions are: (1) perfect competition, in which there are
many buyers and sellers of homogenous goods, so that no individual has control over the
price; (2) perfect information, in which all buyers and sellers know all they need to make the
correct choices in what they buy and sell; and (3) complete markets, in which there is a
market for every possible transaction, so there are no externalities, no public goods, perfect
insurance and futures markets, and no thin markets.

b) Market Capitalism is ideally characterized by a predominance of private ownership of the

means of production, decentralized private decision-making in the economic sphere,
markets and the price system to coordinate the economy, material incentives such as profit
and incomes, an income distribution based on ownership of physical and human capital, and
the goals of economic freedom and efficiency. Of these, ownership and markets are
probably most important.
b) Command Socialism is usually characterized by state ownership, centralized decision-
making and varying degrees of planning to coordinate the economy Kornai argues that the
key element for such an economy is a Marxist-Leninist party with unchallenged political
power, since such a party by definition will have as its goal the elimination of capitalism

COMMUNICATION SKILLS
MARKING GUIDE
SECTION A

QUESTION 1
(a) The meeting of minds in the process of communication is the use of a common and
understandable language between the source and receiver. If the language the source used
is not common, then it will not be understandable to the receiver. The receiver therefore
cannot decode the mention, or at best will decode it his/her way that may not suit the
source in the long run. Therefore, if the source wants effectiveness he/she must use a clear,
accurate simple language that is common to both of them. (2 Marks)
(b) To separate two or more nous
- To mark off two main clauses
- To separate a descriptive group of word
- To separate a word/group of words from main part of a sentence
- To mark of works like, therefore, however, consequently and so on.
- To use it in listing
Any Four for ½ Mark x 4 = 2 marks
(c) Letter of organization are designed for it to carry a logo. The logo depicts what the
organization is into, manufacturing of goods and what types or a service oriented
organization and the type. As soon as you see the logo you are able to say what the
organization does.
The letter head is the document the office use both internally or externally. It is used
internally to write promotion and the like’s letter to staff of the office. Externally to transact
whatever kind of business with the outside world.
Only used by persons on authority. (2 Marks)
(d) The notice of a meeting is issued with nay of the following document, memo, letterhead,
schematic depending on the type of meeting.
- it has a title – Notice of meeting
- date of the meeting
- time of the meeting
- venue of the meeting
- the agenda of the meeting
- closure of the notice
- signature of the secretary who issued the notice (2 Marks)
(e) The two main advantages are:
 i. Has record and evidence
ii. Reinforcement of oral & non-verbal communication. (2 Marks)
(f) Difference between a coordinate clause and a subordinate clause are:
i. Coordinate clauses are compound sentence while subordinate are complex
ii. Coordinate clause are composed of 2 or more main clauses
iii. Coordinate clauses are introduced by coordinate conjunctions such as and, but or
etc.
While subordinate clauses are introduced by subordinate such as because, however, time,
place adverbial. (2 Marks)
(g) Effective communication skills is the ability of a professional an office worker or whoever, to
be able to read and comprehend fully, listening attentively with maximum concentration,
speaking fluently and articutely and minting legibly, correctly and accurately. (2 Marks)
(h) This term is used to describe one of the difficulties encountered in the line of communication
which make messages get larger as they move down through the different levels in the
organization.
(i) Intra-personal communication involves only one person while group communication involves
more than two people.
(j) Minutes if the official record of the deliberations of a formal meeting.

QUESTION 2
(a) Candidates should demonstrate a clear understanding of the term ‘Corruption’ which is
described as dishonest or illegal behavior especially of people in authority by the Oxford
Advanced Learner’s Dictionary.
Candidates should use several illustrations to highlight instances of corruption in the society.
Ideas should be logically presented for the award of good marks.

(b) This is an argumentative essay. Candidate’s should take a stand from the onset and should
not argue from both sides.
Candidates should highlight the advantages and disadvantage associated with establishing
private educational institutions in Nigeria. Ideas should be logically presented.

QUESTION 3
POLIMA COMPUTER SOFTWARES LTD.
 P 37, Lucky Avenue, Sabo, P. O.Box 20, Ebute-Metta.
Tel: 01-23551172, e-mail:[email protected]
C S
15th March, 2003

Mr. David Adesanya,

15, Pedro Crescent,
Palmgrove,
Lagos

Dear Mr. Adesanya,

Offer of Employment

This is to inform you that you have been offered employment as a graduate-trainee in the
information Communication technology Dept following your performance in the interview.

Your employment takes immediate effect from this month.

As a graduate-trainee you have been placed on grade level 08 with a salary of N720,000 per annum
and a housing allowance of N120,000 per annum.

Your appointment will be confirmed after completing a six-month probationary period.

By this appointment you are therefore required to indicate your acceptance in writing.

Thanks for your co-operation.

Yours faithfully,

F.O. Peters (Mrs)

Personnel Manager

QUESTION 4
Eight factors affect the choice of a medium. These are spread/urgency, accuracy, impression,
circumstances, safety confidentiality copy and cost/expense.
From the urgency of this policy, the manager will have to consider spread to get to his staff in calling
a meeting. For this read he may ask the secretary to quickly send out a text messages to all sundry
involved – follow up with telephone calls and let them known the important of the meeting.
- When they have convened, he should give them each the photocopies of the policy and
them discuss how management wants it implemented.
- In all these, he has used the factors of urgency, accuracy of correct document.
- The circumstance was urgent, an urgent impression was created, copies were given out and
above all money was spent to get things on the right track.
Therefore, 2 or more factors must be put into place for a manager to choice a medium. One factor
cannot do it alone.

QUESTION 5
This is a speech to be delivered by the Administrative manager.
The examiner expects the following:
- Title of speech
- Introduction of pleasantries of the high table
- Body of the speaker made up o f
- Who is a secretary
- Who is an administration
- What role both play in the officer
- How they are corner piece of the office
i.e. without their efficient and effective contribution the office will collapse. Therefore they must be
up and doing.
Closure of thank you for listening
Layout 4
Content 8
Style 8
20

QUESTION 6
(a) The rest of the society is conservative, backward looking and intend on preserving statuquo,
while the scientist is radial forward looking. (3 Marks)
(b) It is because one advance follows the other and each leap forward opens up new field of
reasons. (3 Marks)
(c) It is because the discovery is not his alone. He has worked in contented efforts with others.
(3 Marks)
(d) i. Arsenic poison could be used to poison rats (1½ Mark)
ii. Atomic power to blow up the world (1½ Mark)
(e) “It rests squarely on the shoulders of the society” (3 Marks)