Mrs Sabah has a small shop selling glassware and china. She wishes to buy new stock.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2011). The mark or mark type is shown in brackets.

1. [2] (a) (i) Any one commercial document x 1 mark and one reason for using it x 1 mark: enquiry - when she wants to purchase stock from a new supplier; order form - gives details of what she wants to order. Any other relevant document completed by Mrs Sabah (e.g. goods received note).
2. [2] (ii) Any two reasons x 1 mark each or one well-explained reason x 2 marks: to encourage repeat business; to enable her to make a profit; to encourage her to buy in large quantities; because she is a retailer who is buying from suppliers; so that the supplier can increase sales. Any other relevant point.
3. [4] (iii) Any four points x 1 mark each or two well-explained reasons x 2 marks: she is likely to be buying regularly and would want to pay at regular intervals; she wants the opportunity to sell the goods she buys before having to pay for them so that she can use some of the money from the sale to pay the bill; it provides interest-free credit for a period of time for Mrs Sabah; and may help with her cash flow; she may have insufficient money to be able to pay upfront; supplier offers credit. Any other relevant point.
4. [6] (b) Level 2 (4-6 marks) Candidate has discussed purchasing both from wholesalers and from manufacturers and has given a reasoned opinion as to where she should purchase. (If only one kind of supplier is considered, award 4 marks max.) Mrs Sabah should purchase from wholesalers because she has a small business and may wish to buy only in small quantities. She will receive various services from wholesalers, such as advice, delivery of goods and trade discount. She will be able to buy a variety of glassware and china without visiting a large number of manufacturers. However, Mrs Sabah may find it advantageous to deal directly with some manufacturers. She may want particular items and it is possible that glassware manufacturers may deal in relatively small quantities and individual pieces for individual retailers. By buying directly, Mrs Sabah reduces the risk of damage to the glassware and china and she is able to build up a good relationship with the supplier. She should continue to purchase from both as she will obtain a variety of products and may obtain good terms from both. Level 1 (1-3 marks) Candidate has commented on buying from wholesalers and/or manufacturers with/without giving an opinion. Mrs Sabah should buy from wholesalers. They break bulk and supply a variety of goods. They may give information on new goods. Buying directly from manufacturers may not be so good. Mrs Sabah may have to buy large quantities. She may not be able to sell them. I think Mrs Sabah should buy from wholesalers.
5. [6] (c) Any two very well-explained reasons x 3 marks each or any three reasons explained x 2 marks each: A sole trader has unlimited liability and so is responsible for all the debts of the business. Personal assets are at risk. Shareholders in a private limited company have limited liability and so are liable for losses only up to the value of their investment. A sole trader business is easy to set up with no documentation and so it can be ended very easily. A private limited company is registered and so is a more permanent form of business organisation. A private limited company is a legal entity. The business can be sued or sue in its own name. A sole trader could be sued e.g. for negligence and so the sole trader runs the risk of paying out large sums in compensation. The sole trader may find it more difficult to raise capital than a private limited company where finance may come from the shareholders. A sole-trading business has a lack of continuity but a private limited company continues even if a shareholder dies. Any other relevant point.