Lesson Notes By Weeks and Term - Junior Secondary School 2

CAREER IN THE CAPITAL MARKET

FIRST TERM

SUBJECT: BUSINESS STUDIES 

CLASS: JSS 2

REFERENCES:

  • Business Studies for JSS Bk 2 By O.A. Lawal et’al Publisher: Longman
  • WABP Business Studies for JSS Bk 2 By Egba T. Ehiametalor etal Publisher WABP
  • Business Studies Work Book for JSS Basic 8 By S. Okioyemi   
  • Macmillan JSS 2 Business Studies By Awoyokun A.A et’al.

 

WEEK SEVEN

TOPIC: CAREER IN THE CAPITAL MARKET

BUYING AND SELLING

Buying means the acquisition of goods by paying out some money. The process of determining the price at which goods and services will be accepted to both buyers and sellers is called the methods of buying goods. 

 

VARIOUS METHODS OF BUYING AND SELLING:

  1. Description Method
  2. Sample Method
  3. Auction Method
  4. Inspection Method
  5. Procedures for buying and selling

METHODS OF BUYING AND SELLING

There are various methods of buying commodities in the market. They can be bought through the following ways:

  1. by description 
  2. by Sample
  3. by Auction 
  4. by Inspection 

 

Buying By Description Or Grade: Some goods are sold by describing them to the buyers who can determine the quality of the goods bought from past-experience. However, it is better to sell or buy by grades where goods are given grades.  Goods that are given grades or measurement include cocoa, garri, nails e.t.c.

 

Buying By Sample: In this case, the buyers are shown a part of an exact copy of the goods he/she wishes to buy e.g. textile, coffee, and sugar. The buyer can see or feel the qualities of the sample before purchase.

 

Buying By Auction: This is where the buyer is allowed to make an offer for goods, without considering the quality. This method of buying is called auction. 

In Auction, usually the goods are sold to the person who offers the highest price (i.e. highest bidder). Examples of such goods include unclaimed goods at the port; banks at time auction the properties of its debtors.

 

Buying By Inspection: This is when the buyers see the actual goods he/she wishes to buy and may even test it e.g. Electronics, radio, television etc displayed in the show room.

Butchers also inspect animals or cows before purchase

 

EVALUATION

  1. List four methods of buying
  2. Explain two methods of buying

 

PROCEDURES FOR BUYING AND SELLING

Procedures for buying and selling are in two forms:

  1. Cash sales
  2. Credit sales

 

Cash sales: for cash sales, payment for goods sold is made immediately. A receipt is issued to the buyer as evidence of payment.

 

Advantages of cash sales

  1. Cash sales is always available to the seller.
  2. Money is not tied down with the buyer.
  3. No issue of bad debt.
  4. Circulation of money is not stimulated. 
  5. Buyers can enjoy cash discount.

 

Disadvantages of cash sales

  1. There is reduction in sales.
  2. There is no question of deferred payment.
  3. Buyers can only buy what they can afford.

 

CREDIT SALES

Credit sales are the procedure for buying in which payment for goods bought are made at a later date. It is called deferred payment. Payment may be made within days, weeks or months depending on the agreement between the buyer and the seller. The buyer collects the goods while payment is made later.

 

Advantages of Credit sales

  1. Increase in sales
  2. Mass production is encouraged because of increase in demand
  3. Increase in profit 
  4. Buyers are encouraged to save to pay for goods bought

 

Disadvantages of credit Sales

  1. It encourages people to live and spend above their limit.
  2. It gives room for covetousness. 
  3. It leads to mis-planning and mismanagement. 

 

EVALUATION

  1. What is a cash sale?
  2. List and explain the disadvantages of cash sales.

 

READING ASSIGNMENT

Macmillan JSS2 Business Studies pg 21-22.

 

Calculation of turnover and net profit

 

Note:

CALCULATION OF COST OF SALES

                    N

Opening stock                      *

+ Purchases                         *

+ Carriage inward                *

                                        ___

                                         **

 

-Returns outward                *

                                       ___

                                        **

-Closing stock                    *

Cost of sales    =              **

Or simply:

                                       N

Opening stock                   *

+ Purchases                     *   

                                      **

-closing stock                   *

Cost of sales                    **

OR 

Cost of sales= sales – Gross profit

                   

Mark-Up

When profit is expressed as a % of cost price is called mark up.

It is also the relationship between profit and cost of goods. The formula:

Profit    _           

Cost of sales        *    100/1

 

Mark up is an extra amount added to the direct or variable cost of producing goods to arrive at the selling price of those goods. For example, a 50 percent mark-up on a good with a direct cost of $1.00 would mean that the company would sell the good for $1.50. The mark-up covers indirect and overhead costs as well as profit.

 

EVALUATION

  1. Define mark up
  2. What are the steps in calculating cost of sales

 

TURNOVER

Turnover = cost of sales + Gross profit

It is also known as SALES.

 

PROFIT

This is the excess of sales over the cost of sale.

Profit = sales – cost of sales

Profit, in business, the monetary difference between the cost of producing and marketing goods or services and the price subsequently received for those goods or services. Profit is an essential competitive feature of buying and selling in the economic system. The opposite of profit is loss, whereby the cost of producing certain goods or services is higher than the price a buyer is willing to pay for them. 

 

EVALUATION

  1. What is profit?
  2. Define turnover in terms of commerce and finance.

 

WEEKEND ASSIGNMENT

  1. Turnover is ____________ (a) profit + revenue (b) cost of sales + gross profit (c) cost of purchase + revenue (d) cost of profit + cost of sales.
  2. A market where raw materials and finished goods are bought and sold is ------ market. (a)commodity (b).foreign exchange (c) money (d) capital.
  3.  Sales – Gross profit  is equal to ______(a) cost of goods (b) cost of sales (c) revenue (d) cost of profit.
  4. The market where long term loans are traded is ----- market (a) money (b) capital (c) commodity (d) foreign exchange.
  5. The market where the value of one’s country is negotiated against another country’s currency is ------ market (a) foreign trade (b) commodity (c) money (d) foreign exchange

 

THEORY

  1. Mention four types of market and describe each
  2. Mention and explain three methods of market.

 

GENERAL EVALUATION

        1. Define a market.
  1. Mention three types of market
  2. Explain four methods of buying and selling
  3. What is mark-up?
  4. Define profit.

 



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