Mrs Ali operates a convenience store. She provides informal credit to some customers and receives 30 days' credit from some suppliers.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2022). The mark or mark type is shown in brackets.

1. [1] Mobile shop
2. [1] Hawker
3. [1] Pedlar
4. [1] Tuck shop
5. [1] Kiosk
6. [1] Roadside trader/food stall
7. [1] Street market stall
8. [1] Vending machine
9. [3] Up to 3 marks for justified reasoning of yes and/or no responses
10. [3] Yes - As it is given to known customers, less likely to lose money (1) it can increase sales/attract customers (1) increased turnover (1) impulse buys (1) selling some goods that consumers cannot afford (1) and increase customer loyalty/more likely to shop there (1) can gain competitive advantage over other stores not offering informal credit (1) will trust dealing with Mrs Ali (1)
11. [3] No - Risk of bad debts (1) must trust the consumers before granting informal credit/are they able to pay back/must be creditworthy (1) does not help cash flow (1) to finance/buy more stock (1) has to wait for the money (1) no interest / only receives the original amount back (1) need to make records of purchases (1) if there are many customers, this will be time-consuming (1)
12. [4] 1 mark for advantage plus 1 mark for relevant explanation (Maximum 2 marks for advantage)
13. [4] 1 mark for disadvantage plus 1 mark for relevant explanation (Maximum 2 marks for disadvantage)
14. [4] Advantage: Improves cash flow (1) as payment is delayed/spread out for 30 days (1)
15. [4] Allows Mrs Ali to sell goods (1) and earn revenue to pay the supplier (1)
16. [4] Can be used to buy more stock (1) if there is increased demand (1)
17. [4] Interest-free (1) cheaper than other sources /cheaper than overdraft/ no extra costs (1)
18. [4] Disadvantage: There may be extra costs / penalties / interest (1) if money is not paid back within 30 days (1)
19. [4] Can damage future credit (1) if Mrs Ali does not pay (1)
20. [4] May be unable to take advantage of discount offers if a credit customer (1) unable to increase profit margins (1)
21. [4] Only limited funds offered (1) not useful for large purchases (1)
22. [4] Temptation to buy more stock (1) increasing debt (1)
23. [4] Need to keep check on cash flow (1) otherwise, more debt / less profit (1)
24. [4] May forget to pay before 30 days (1) if records not kept (1)
25. [6] Up to 2 marks for describing insurance brokers/buildings insurance
26. [6] Up to a further 2 marks for analysing the importance of an insurance broker to Mrs Ali
27. [6] Up to a final 2 marks for evaluating whether an insurance broker is important to Mrs Ali
28. [6] An insurance broker is a professional who offers advice (L1) negotiates (L1) researches policies (L1) and sells policies (L1) They act as intermediary (L1) between insurers and customers (L1) schedules meetings (L1) collects insurance premiums (L1) advises on claims (L1) and receives commission (L1)
29. [6] Buildings insurance covers the cost of repairing damage (L1) to the structure of a property (L1)
30. [6] An insurance broker should offer independent advice to Mrs Ali on which insurance company to use. If Mrs Ali has difficulty in obtaining insurance cover, an insurance broker would be able to recommend an insurance company willing to offer insurance. This could save her time and money.
31. [6] Brokers receive commission so unscrupulous ones may favour the insurance company they receive the highest commission from, which may not necessarily be the best deal for Mrs Ali.
32. [6] The insurance broker will organise the proposal form and other documentation and arrange for the premium to be paid. They will help Mrs Ali understand the policy details and help her work out the level of cover needed.
33. [6] The insurance broker would also assist Mrs Ali in making a claim if store is damaged.
34. [6] Evaluation: Insurance brokers do not sell insurance but are there to work for Mrs Ali in providing her with independent and expert advice, to help her take out the best insurance policy in a smooth and effective way. She has her convenience store to operate so a broker can save her time/money. However, she could also research comparison websites, which she can do at any time rather than meeting/talking to a broker in business hours, and choose her insurance company that way.
35. [2] $357 (2)
36. [2] Method: $170 000/10 000 x 21 or $170 000 x 21/$10 000 or 170 000/10 000 = 17 x 21