Nina is a sole trader. She makes children's clothing at home and sells them from a street market stall.

Mark scheme

Marking points from the official mark scheme (May/June 2016). The mark or mark type is shown in brackets.

1. [4] (a) Any two advantages explained × 2 marks each
2. Own boss/control (1) does not have to justify decisions to others (1)
3. Keeps all profits (1) no need to share profits (1)
4. Can work hours to suit herself (1) does not have to work set hours (1)
5. Easy to set up (1) can be set up immediately with few forms needed/not much capital needed (1)
6. Business is private (1) only has to send information to tax authorities (1)
7. Costs are reduced (1) as she is working from home (1)
8. Makes own decisions (1) work at your own timings (1)
9. Close customer contact (1) can give advice (1)
10. Accept any other relevant point
11. [2] (b) (i) Any two characteristics stated × 1 mark each
12. Stalls are hired
13. Dependent on weather
14. Traders usually sell one line of goods/seconds/unbranded goods
15. Traders often make what they sell
16. Traders often travel from town to town
17. Operate on different days of the week, allow an example
18. Bargaining often seen
19. Open air/open area
20. Low overheads
21. Accept any other relevant point
22. [4] (ii) Any one advantage explained × 2 marks plus any 1 disadvantage explained × 2
23. Advantages:
24. Low prices (1) often due to less expenses to seller/able to bargain/competition (1)
25. Wide choice of goods (1) due to variety of specialist sellers (1)
26. Personal contact with seller (1) who should be knowledgeable about goods/and able to advise (1)
27. Disadvantages:
28. Usually outside (1) so can be affected by weather (1)
29. No control over sellers (1) so poor quality/fraudulent goods can be sold (1)
30. Sellers move around (1) so returning faulty goods may be difficult (1)
31. Can be difficult to try on clothes (1) as often no changing rooms (1)
32. Fake/poor quality goods may be sold (1) give poor value/difficult to return (1)
33. Accept any other relevant point
34. [1] (c) (i) Any one relevant source stated x 1 mark
35. Personal/own savings
36. Retained profits
37. Sale of personal assets
38. Reducing stock
39. Accept any other relevant point
40. [3] (ii) Any one reason × 1 mark plus up to 2 marks for explanation
41. Has little personal savings (1) and may want to keep them for emergencies (1) allow an example (1)
42. Only a small business (1) so retained profit unlikely to be sufficient (1) to cover the large amount needed for the cost of a van (1)
43. Reducing stock may not be possible (1) without holding a 'fire sale' (1) and this might result in Nina not receiving enough money (1)
44. Personal assets are needed (1) allow an example (1) and therefore not available for sale (1)
45. Accept any other relevant point
46. [6] (d) Level 2 (4-6 marks) Has discussed both sources of finance and has given a reasoned recommendation.
47. (If a candidate has discussed only one option award 4 marks max)
48. Level 1 (1-3 marks) Has commented on one or both options with/without recommendation
49. Bank Loan
50. Would be repaid over a period of two to five years with monthly payments of principal sum and interest would probably have to be paid too.
51. Would be secured by the asset (van) and Nina would probably have to make a down-payment of around 20%.
52. Leasing
53. Agreed payment over set period, usually two to five years.
54. Van would not be owned by Nina.
55. At end of period van is given back to leasing company.
56. Down payment probably limited to monthly payment up front or none at all.
57. Comparison
58. Payments would probably be higher on bank loan.
59. At end of period Nina would own van but not with leasing.
60. Leasing does not usually require an initial down-payment whereas a bank loan usually does.
61. Accept recommendation of either as long as it is supported.
62. Accept any other relevant point