O-LevelCommerceCredit7100/22 · May/June 2025 · Q215 Marks

DS is a department store. It offers a variety of credit facilities to its customers, including store cards and hire purchase.

(a)Define credit.[1]
(b)State two features of a department store, apart from credit facilities.[2]
(c)Ahmad wants to buy a new computer. Do you think it is a good idea for Ahmad to use a store card to finance this purchase? Give reasons for your answer.[3]
(d)Fig. 2.1 shows an extract of financial information on 30 April 2025 for DS. [Figure 2.1] Using Fig. 2.1, calculate the working capital for DS. Show your working.[3]
(e)DS is considering leasing space in its store to a clothing brand. Discuss whether DS should lease space in its store to another business. Give reasons for your answer.[6]

This question uses a diagram from the original paper, which isn't shown here. Open the full paper from the past papers archive to see it.

Mark scheme

Marking points from the official mark scheme (May/June 2025). The mark or mark type is shown in brackets.

[1] Buy now and pay later/paying for goods later/a form of borrowing
[1] Large shop/multiple floors
[1] Divided into departments/sections
[1] Located in city centres/shopping centres/commercial areas
[1] Sell a large variety/wide range of goods
[1] High prices
[1] One-stop shopping/all goods under one roof
[1] Delivery
[1] After-sales service
[1] Lifts/escalators
[1] Long opening hours
[1] ATMs
[1] Security/CCTV
[1] Many facilities or e.g., restaurants/toilets
[1] EPOS.
[1] Yes - goods obtained/can use immediately on credit
[1] computer can be expensive can afford to buy as able to pay later/within a set period
[1] easier to budget
[1] and if paid within the period, no interest charge paid
[1] can build up a good credit rating
[1] can obtain loyalty points rewards free gifts discounts/offers/promotions so this makes it cheaper/saving money for the customer to obtain other products
[1] does not have to carry cash
[1] prevents any theft of cash
[1] No - Ahmad may be tempted to overspend/impulse buying
[1] high interest rates/interest to be paid still needs to be paid back leads to bad debts/debt if not repaid within the period
[1] may need to have a satisfactory credit limit to afford the computer/his credit limit may be insufficient to purchase the computer
[1] can only use the store card in DS department store
[1] may not obtain enough loyalty points to make the card of sufficient benefit to the customer.
[3] Answer = $35 000
[1] Method = Current assets ($370 000 + $20 000) = $390 000
[1] Current liabilities ($45 000 + $310 000) = $355 000
[1] Working capital = current assets ($390 000) – Current liabilities (355 000)
[1] Department stores can generate new revenues/provides cash by offering leased departments to a clothing brand so could use extra income to buy more stock
[1] Receives money but still owns the store/less need to borrow money
[1] Using Fig. 2.1, DS has current liabilities that need to be paid back
[1] By selecting the right type of brand to which it can lease space, a department store may also create interest in the overall department store and generate new customers from different demographics. Leasing space, therefore, has the potential to both bring in new customers.
[1] A department store needs to offer brands that generate interest in customers. Whether the department store sells electronics, clothing, shoes or books, increasing the customer base generates traffic and increases the revenue for the department store.
[1] Utility bills could be shared reducing costs
[1] A good brand will attract new customers into the store so can increases sales/profits could use this to expand
[1] However, DS might lose their own customers to the new clothing brand resulting in reduced clothing sales
[1] However, DS might need to use this space to display new products in future
[1] However, DS still needs to maintain this space area so adding to costs
[1] However, the store might be less inviting to walk around if space is large, so reducing customer satisfaction
[1] However, branding requires the department store to consider the specific brands offered by the leased department and make sure that these brands don't interfere with other businesses leasing departments or with brands sold directly by the department store host. The department store therefore needs to find a balance between the goods sold by the leased departments and the host department store.
[1] However, before offering a leased space to a specialised business, the department store should consider the new customer brand and make sure this new clothing brand will benefit the department store.
[1] However, there may be conflict with the clothing brand e.g. over displays.
Evaluation: Department stores require a constant stream of customers to remain profitable and survive on the high street. Although increased traffic doesn't always translate to a sale, the interest created by increased traffic creates new revenue possibilities for the department store. Leased department ventures, however, don't always work out for the department store or the business leasing the space. Department stores should, therefore, use trial and error and data from previous leased departments to find the right kind of companies to which they may lease the spaces in their store.