CEKENAS END OF TERM TWO EXAM-2025

FORM FOUR EXAM

Kenya Certificate of Secondary Education (K.C.S.E)
BUSINESS STUDIES PAPER 1
565/1
FORM FOUR
MARKING SCHEME
1. External factors that may positively affect the operation of the business
i) Political stability
ii) Favourable government policy
iii) Stable economic environment
iv) Use of advanced/appropriate/update technology
v) Stable political environment
vi) Healthy competition
vii) Favourable physical environment
viii) Favourable social cultural factors
(4 x 1 = 4 marks)
2. i) Entrepreneurship
ii) Labour
iii) Land
iv) Capital
3. i) Lorries
ii) Aeroplane
iii) Ships
iv) Trains
(4 x 1 = 4 marks)
4. i) Premiums
ii) Actuaries
iii) Surrender value
iv) Consequential loss policy / Profit interruption policy
(4 x 1 = 4 marks)
5. (b) More cars will be demanded and this would increase the demand of petrol at the same time.
(2 marks)

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6. Factors that affect circular flow of national income
(i) Savings
(ii) Taxes
(iii) Investment
(iv) Government spending
(v) Exports
(4 x 1 = 4 marks)
7. (i) Punctuality
(ii) Honesty
(iii) Courtesy
(iv) Diplomacy
(4 x 1 = 4 marks)
8. Services offered by the Central Bank to the government
(i) Financial advisor to the government
(ii) Keeping government accounts
(iii) Managing government borrowing
(iv) Issuing currency on behalf of the government
(v) Servicing foreign debts on behalf of the government
(4 x 1 = 4 marks)
9. Ways in which government regulate business activities
(i) Through Licensing
(ii) By ensuring standards
(iii) Legislation
(iv) Subsidizing / production
(v) Through taxation of good and services
(vi) Total bans
(vii) Setting quotas
(viii) Price control
(4 x 1 = 4 marks)
10. Advantages of using mobile phone over pager
(i) Mobile phone provides for a two-way communication while pager provides only one-way
communication.
(ii) Mobile phone covers a wide range while a pager is limited to a certain radius.
(iii) Mobile phone provides for immediate feedback but the pager does not.
(iv) Mobile phone provides for extra features e.g. various games.
(v) Mobile phone may be connected to the internet, which is not possible with a pager.
(4 x 1 = 4 marks)
11. Negative effects of general rise in price of goods & services
(i) Lower standard of living
(ii) Reduced savings
(iii) Loss to creditors
(iv) Reduced profits
(v) Conflict between employers and employees
(vi) Political unrest
(vii) Increase in interest rate
12.
(a) Free trade
(b) Custom union
(c) Common market
(d) Economic union
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 (4 x 1 = 4 marks)
13. Benefits of locating firms near other existing firms
(i) Enjoyment of services from existing support firms.
(ii) Access to raw materials
(iii) Access to security
(iv) Access to markets
v)Easy disposal of waste materials.
(4 x 1 = 4 marks)
14.
(a) Real
(b) Nominal
(c) Personal
(d) Nominal

15. Challenges faced by a country whose population falls on C.

(i) Strain on the available social amenities
(ii) Low standard of living
(iii) Increased crime rate
(iv) High dependence level on the working population
(v) Environmental degradation
(vi) Food shortage
(vii) Over-utilization of resources e.g. land
(viii) Encourage rural urban migration
(4 x 1 = 4 marks)
16. Ways of identifying a business opportunity
(i) Identifying unfulfilled customer needs
(ii) Identifying areas of poor service delivery
(iii) Identifying goods or services that are not available
(iv) Identifying ways in which a product may be modified to serve other purposes
(v) Identifying bottlenecks in the provision of goods and services
(4 x 1 = 4 marks)
17. Reasons why distributor of goods would prefer to locate a warehouse near its customers
(i) To minimize transportation cost
(ii) To minimize damages of goods.
(iii) To ensure continuous supply
(iv) To minimize losses due to damage.
(v) To increase sales as a result of nearness to the market .
(4 x 1 = 4 marks)
18. Structural changes that a country experience when developing
(i) Shift from agriculture sector to manufacturing sector.
(ii) Reduction in illiteracy levels
(iii) Improvement in health facilities
(iv) Improvement in technology
(v) Improved infrastructure
(vi) Improved balance of payment
(4 x 1 = 4 marks)

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19. Factors to consider before incurring public expenditure.
(i) Sanctions
(ii) Maximum social benefit
(iii) Flexibility
(iv) Flexibility
(v) Economy
(4 x 1 = 4 marks)

20. Networth = Assets - Liabilities

= (3,000,000 √+ 500,000√) - (700,000 √+ 1,500,000√)
= 3,500,000 √- 2,200,000√
= sh. 1,300,000√√
(8 x ½ = 4 marks)
21. Franchising - this is where one business grants another one right to manufacture, distribute/ produce its
branded product using in name.
take over - situation whereby the acquiring company takes over the target business by buying all assets of
the target business which cease to exist.
(2 x 2 = 4 marks)
22. Incoming invoice - credit purchases
Outgoing credit note-Sales returns.
Payment voucher –validation of payments made by a cashier.
Purchases invoice- credit purchases
(4 x 1 = 4 marks)
23. Costs incurred by intermediaries in the chain of distribution.
(i) Advertising costs
(ii) Insurance costs
(iii) Transportation costs
(iv) Storage costs
(v) Salary & wages
(vi) Actual cost of buying
(4 x 1 = 4 marks)

24. Closing stock

Mark-up = GP/COGS
0.25 = 100,000 / COGS√
COGS = 100,000√ / 0.25 √= 400,000√√

COGS = OS + P - CS
400,000 = 40,000 + 480,000 - CS√
CS = 520,000 - 400,000√
CS = Sh. 120,000√√
(4 x ½ = 2 marks)

25.
(a) increase
(b) decrease
(c) no effect
(d) increase
(4 x 1 = 4 marks)

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