Fig. 5.1 shows a country's employment figures in 2023. Its total working population is 24 million. 35% 55% Unemployed Public sector Private sector [Figure 5.1] Use Fig. 5.1 to help you answer the following questions.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2024). The mark or mark type is shown in brackets.

1. [1] Owned/controlled by the state/government
2. [1] Government ministers have overall responsibility/public accountability
3. [1] Often run not-for-profit
4. [1] Financed by taxes/state funded
5. [1] Has separate legal identity/incorporated
6. [1] Created by law
7. [1] Provides essential/public services/public goods/support welfare.
8. [2] Answer = 2.4 million (2)
9. [2] Method = Percentage unemployed = 100 – (35 + 55) = 10% (1)
10. [2] Wholesalers will buy in large quantities/bulk from the producer (1) and sell in small quantities to retailers (1) making it easier for the retailer to buy/offer in smaller quantities to sell / only require small quantities (1) saves the retailer the expense of providing storage (1) as the producer does not want to distribute in small loads to many retailers (1) and the small retailer cannot afford to buy in bulk / buy from the manufacturer (1)
11. [2] Wholesalers will buy ahead of demand / own/warehouse the goods they buy from the producer / buy in bulk(1) this means that they have to find the money needed to purchase the goods (1) and also store the goods until sold (1) wholesalers will bear the loss for damaged goods (1) unsold goods (1) retailers defaulting on payment (1) may have to sell goods at a loss (1) if demand falls/changes/ changes in consumer tastes (1)
12. [2] Manufacturers' risk is reduced (1) as they have sold the goods to the wholesaler (1) so does not bear the risk of losses (1)
13. [3] An order is sent by the wholesaler to the retailer. -> FALSE
14. [3] An advice note tells the retailer that the goods have been despatched. -> TRUE
15. [3] A credit note is sent when goods have been undercharged by the wholesaler. -> FALSE
16. [8] Working capital is the difference between current assets and current liabilities. It is capital used for the day-to-day running of the business.
17. [8] Option 1 (improve collection of money owed by retailers): If the wholesaler asks its retailers to pay as soon as possible, this will increase its cash flow and so increase its current assets
18. [8] It will reduce bad debts and not having to pay any interest on borrowed money
19. [8] Could offer discounts/incentives for early payment
20. [8] Could take a personal approach with a follow-up call / find out why a payment is late
21. [8] Make it easier for the retailer to pay e.g. could set up a payment plan so that retailers can speed up payments
22. [8] Could offer some incentives to retailers to persuade them e.g. cash discount so that their cash receipts will not be as great
23. [8] Make sure invoices are sent out promptly so there are fewer delays in payment
24. [8] Could charge late fees/penalties for overdue invoices but this may annoy retailers who might decide to take their custom to another wholesaler
25. [8] Could recruit / get help from collection agents to help collect payment but this will add to costs
26. [8] Option 2 (ask for a bank overdraft): Overdrafts tend to be used in the short term for working capital requirements, such as buying more stock
27. [8] This is a very flexible method of borrowing money for the wholesaler.
28. [8] If the wholesaler requires more money, and if the bank agrees they can borrow the money, then an overdraft is useful in reducing their liabilities
29. [8] Would enable the wholesaler to spend more than they have, up to an agreed limit. Interest is charged on the amount overdrawn with the interest charged likely to be higher than for a loan
30. [8] Interest will be charged until she has repaid the overdraft in full which can make it expensive if it is used for a long time
31. [8] Does not require much paperwork to complete.
32. [8] The overdraft can be received quickly and repaid at irregular intervals
33. [8] However, the bank may not agree to the overdraft, or they can request the money back at any time creating cash flow problems
34. [8] The wholesaler should first ask the retailers to pay more quickly. They may, of course, refuse. Then the wholesaler might have to think about borrowing money or another option, such as not overstocking. They should certainly consider reviewing their relationship with debtors. It would be best if the wholesaler does not ask the bank for an overdraft as it will have to pay interest, increasing its liabilities. However, if the amount is not too much, an overdraft may be used as a form of flexible credit to reduce the number of creditors, and could then be gradually paid back from sales, so eventually improving the level of working capital.