FINANCE AND FINANCIAL INSTITUTIONS– TRADE AND DISTRIBUTION – COMMERCE JAMB & WAEC GUIDE KEYPOINTS

April 4, 2026 Be first to comment Daniel DTW Tutor

CHAPTER 9: FINANCE AND FINANCIAL INSTITUTIONS

9.1 (a) MONEY – MEANING, FORMS, QUALITIES AND FUNCTIONS

  • Meaning: Anything generally acceptable as a medium of exchange.
  • Forms: Metallic (coins), Paper (notes), Bank Deposits (chequeable accounts).
  • Qualities: Acceptability, Portability, Durability, Divisibility, Scarcity, Uniformity.
  • Functions: Medium of Exchange, Measure of Value (Unit of Account), Store of Value, and Standard of Deferred Payment.

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9.2 (b) BANKS – TYPES, FEATURES, FUNCTIONS AND ACCOUNTS

  • Types: Central Bank (Apex Bank, Issuer of Currency, Banker to Gov’t); Commercial Banks (Accepts deposits, grants loans); Specialised Banks (Mortgage, Development, Microfinance).
  • Functions of Commercial Banks: Accepting deposits, granting loans/advances, electronic funds transfer (EFT), providing agency services (paying bills).
  • Types of Accounts:
    • Current Account: Allows cheques, for transactions, no/low interest.
    • Savings Account: Encourages thrift, restricted withdrawals, earns interest.
    • Fixed Deposit Account: Money locked up for a specific period, earns the highest interest rate.

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9.3 (c) INSURANCE – MEANING AND BASIC PRINCIPLES OF INSURANCE

  • Meaning: A contract of indemnity that provides compensation for specified losses in exchange for a Premium.
  • Basic Principles:
    • Utmost Good Faith (Uberrimae Fidei): Complete honesty and full disclosure of material facts by both parties.
    • Insurable Interest: The insured must suffer a financial loss if the event occurs.
    • Indemnity: The insured must be restored to their pre-loss financial position; no profit is allowed.
    • Contribution: If an asset is insured with multiple companies, the loss is shared proportionately.
    • Proximate Cause: The direct, active, and efficient cause of the loss must be one covered by the policy.

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9.4 (d) TYPES OF INSURANCE, IMPORTANCE, AND PROCEDURE

  • Types: Fire (covers fire damage), Personal Accident (covers injury/death), Marine (covers ship-related risks), Life and Endowment (pays a sum on death or maturity date—not an indemnity), Burglary (covers theft with forced entry).
  • Insurable Risks: Can be measured, are uncertain, and are not catastrophic (e.g., fire, theft). Uninsurable Risks: Cannot be measured or are certain to occur (e.g., wear and tear, war, change in fashion).
  • Importance: Provides peace of mind, offers financial security, facilitates trade (e.g., marine insurance is mandatory for imports).
  • Procedure for Taking a Policy: Proposal Form → Assessment of Risk → Payment of Premium → Issue of Policy Document.

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9.5 (e) STOCK EXCHANGE – MEANING, FUNCTIONS, PROCEDURE AND SPECULATIONS

  • Meaning: An organized secondary market for the buying and selling of existing long-term securities (shares, stocks, bonds) of Plcs and the government.
  • Functions: Provides marketability for securities (allowing quick sale), encourages capital formation, facilitates government borrowing.
  • Procedure of Transactions: Investor → Stockbroker (licensed agent) → Trading Floor → Transaction.
  • Speculations:
    • Bulls: Speculators who buy in anticipation of a rise in prices.
    • Bears: Speculators who sell (or sell short) in anticipation of a fall in prices.
    • Stags: Speculators who apply for new issues and sell immediately upon issue for a quick profit.

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9.6 (f) CREDIT – MEANING, TYPES AND FUNCTIONS

  • Meaning: The ability to obtain goods, services, or money in the present in exchange for a promise to pay in the future.
  • Types: Trade Credit (between businesses), Bank Credit (loans, overdrafts), Consumer Credit (hire purchase).
  • Functions: Increases production, promotes trade, allows consumers to enjoy durable goods immediately, enables large-scale investment.

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9.7 (g) CREDIT UNIONS AND THRIFT SOCIETIES – MEANING, AIMS, FUNCTIONS AND SERVICES

  • Meaning and Aims: Non-profit, member-owned financial cooperatives established to encourage thrift and provide credit to members. Aims: Encourage saving and provide low-interest loans.
  • Services: Savings accounts, small loans, insurance coverage, financial counselling.

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