Cambridge O Level

COMMERCE 7100/22
Paper 2 Written October/November 2024
MARK SCHEME
Maximum Mark: 80

Published

This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the
examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the
details of the discussions that took place at an Examiners’ meeting before marking began, which would have
considered the acceptability of alternative answers.

Mark schemes should be read in conjunction with the question paper and the Principal Examiner Report for
Teachers.

Cambridge International will not enter into discussions about these mark schemes.

Cambridge International is publishing the mark schemes for the October/November 2024 series for most
Cambridge IGCSE, Cambridge International A and AS Level components, and some Cambridge O Level
components.

This document consists of 25 printed pages.

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7100/22 Cambridge O Level – Mark Scheme October/November 2024
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Generic Marking Principles

These general marking principles must be applied by all examiners when marking candidate answers. They should be applied alongside the
specific content of the mark scheme or generic level descriptions for a question. Each question paper and mark scheme will also comply with these
marking principles.

GENERIC MARKING PRINCIPLE 1:

Marks must be awarded in line with:

• the specific content of the mark scheme or the generic level descriptors for the question
• the specific skills defined in the mark scheme or in the generic level descriptors for the question
• the standard of response required by a candidate as exemplified by the standardisation scripts.

GENERIC MARKING PRINCIPLE 2:

Marks awarded are always whole marks (not half marks, or other fractions).

GENERIC MARKING PRINCIPLE 3:

Marks must be awarded positively:

• marks are awarded for correct/valid answers, as defined in the mark scheme. However, credit is given for valid answers which go beyond
the scope of the syllabus and mark scheme, referring to your Team Leader as appropriate
• marks are awarded when candidates clearly demonstrate what they know and can do
• marks are not deducted for errors
• marks are not deducted for omissions
• answers should only be judged on the quality of spelling, punctuation and grammar when these features are specifically assessed by the
question as indicated by the mark scheme. The meaning, however, should be unambiguous.

GENERIC MARKING PRINCIPLE 4:

Rules must be applied consistently, e.g. in situations where candidates have not followed instructions or in the application of generic level
descriptors.

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GENERIC MARKING PRINCIPLE 5:

Marks should be awarded using the full range of marks defined in the mark scheme for the question (however; the use of the full mark range may
be limited according to the quality of the candidate responses seen).

GENERIC MARKING PRINCIPLE 6:

Marks awarded are based solely on the requirements as defined in the mark scheme. Marks should not be awarded with grade thresholds or
grade descriptors in mind.

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Social Science-Specific Marking Principles
(for point-based marking)

1 Components using point-based marking:

• Point marking is often used to reward knowledge, understanding and application of skills. We give credit where the candidate’s answer
shows relevant knowledge, understanding and application of skills in answering the question. We do not give credit where the answer
shows confusion.

From this it follows that we:

a DO credit answers which are worded differently from the mark scheme if they clearly convey the same meaning (unless the mark
scheme requires a specific term)
b DO credit alternative answers/examples which are not written in the mark scheme if they are correct
c DO credit answers where candidates give more than one correct answer in one prompt/numbered/scaffolded space where extended
writing is required rather than list-type answers. For example, questions that require n reasons (e.g. State two reasons …).
d DO NOT credit answers simply for using a ‘key term’ unless that is all that is required. (Check for evidence it is understood and not used
wrongly.)
e DO NOT credit answers which are obviously self-contradicting or trying to cover all possibilities
f DO NOT give further credit for what is effectively repetition of a correct point already credited unless the language itself is being tested.
This applies equally to ‘mirror statements’ (i.e. polluted/not polluted).
g DO NOT require spellings to be correct, unless this is part of the test. However spellings of syllabus terms must allow for clear and
unambiguous separation from other syllabus terms with which they may be confused (e.g. Corrasion/Corrosion)

2 Presentation of mark scheme:

• Slashes (/) or the word ‘or’ separate alternative ways of making the same point.
• Semi colons (;) bullet points (•) or figures in brackets (1) separate different points.
• Content in the answer column in brackets is for examiner information/context to clarify the marking but is not required to earn the mark
(except Accounting syllabuses where they indicate negative numbers).

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3 Calculation questions:
• The mark scheme will show the steps in the most likely correct method(s), the mark for each step, the correct answer(s) and the mark
for each answer
• If working/explanation is considered essential for full credit, this will be indicated in the question paper and in the mark scheme. In all
other instances, the correct answer to a calculation should be given full credit, even if no supporting working is shown.
• Where the candidate uses a valid method which is not covered by the mark scheme, award equivalent marks for reaching equivalent
stages.
• Where an answer makes use of a candidate’s own incorrect figure from previous working, the ‘own figure rule’ applies: full marks will be
given if a correct and complete method is used. Further guidance will be included in the mark scheme where necessary and any
exceptions to this general principle will be noted.

4 Annotation:
• For point marking, ticks can be used to indicate correct answers and crosses can be used to indicate wrong answers. There is no direct
relationship between ticks and marks. Ticks have no defined meaning for levels of response marking.
• For levels of response marking, the level awarded should be annotated on the script.
• Other annotations will be used by examiners as agreed during standardisation, and the meaning will be understood by all examiners
who marked that paper.

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Annotations

Symbol Possible Use

Tick Tick

X Cross

BOD Benefit of doubt

Highlight Highlight

On Page Comment On Page Comment

Off Page Comment Off Page Comment

TV Too vague

REP Repeat

L1 Level 1

L2 Level 2

L3 Level 3

NAQ Not answered question

OFR Own figure rule

SEEN Noted but no credit

given

BP Blank Page

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Question Answer Marks Guidance

1(a)(i) Identify the one tertiary import activity of this country. 1

Banking

1(a)(ii) Calculate the percentage of timber exported by this country. 1

Answer = 27%

1(b) Explain two reasons why countries use shipping containers to import 4
food.

• Containers can be refrigerated / temperature / climate controlled / need for

cold storage (1) for perishable foods (1) preserve food / food does not go
bad / spoiled / deteriorate / rot (1)
• Food can be transported in large capacity / big space (1) bulky / large
amount of goods (1)
• Cheap / lower costs / cost effective (1) so prices can be decreased (1)
compared to air transport (1)
• Containers are secure / sealed / locked (1) food kept safe / not opened (1)
• Protected (1) from weather / theft / damage (1)
• Food can be transhipped (1) no need for constant packing (1) saves time
(1)
• Food does not need to be warehoused (1) container acts as the
warehouse / for storage of goods (1)
• Containers are loaded / unloaded quickly / easily (1) saves time (1)

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Question Answer Marks Guidance

1(c) An importer has not received their order from an exporter. 3

Do you think the importer should use email, rather than telephone, to
contact the exporter? Give reasons for your answer.

Yes – provides a permanent / written / record (1) proof (1) for future
reference / can refer back to (1) as it is stored (1) enables detailed information
to be sent (1) example of information, such as how long will the order take to
arrive (1) can be supplemented by visual / numerical information (1) can use
attachments (1) one email can be sent to different addresses at
once / forwarded to other people (1) direct method (1) less chance of
misunderstanding between importer and exporter / clearer explanation of the
problem (1) the phone line may be busy / do not want to hang on / avoids
automated options (1) telephone signal may be poor / difficult to
understand / distortion (1) telephone would be affected by time-zones (1)
telephone has no evidence (1) making communication email is
cheaper / quicker (1)

No – Telephone is better when the exporter wants to hold a

discussion / conversation / talk (1) when a quick / urgent decision / response is
needed (1) it is direct / one to one communication (1) message can be
conveyed immediately (1) can have an immediate answer / instant
feedback / reply (1) when there is no working email/computer / internet is
down / may not have internet (1) there may be delays in replying (1) if email
not seen / checked (1) emails can be deleted / lost by accident (1) may be
seen as junk mail (1) can be seen as impersonal (1) spam emails can clutter
up inbox (1)

1(d) Oil is a non-renewable resource. 2

Tourism is an example of invisible trade.

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Question Answer Marks Guidance

1(e) Evaluate the benefits of using an overseas agent when exporting goods. 6 Up to 2 marks for describing overseas
agents / exporting goods
Overseas agents are intermediaries / third partes / who act on behalf of other
businesses in bringing buyers and sellers together in international trade. Up to a further 2 marks for analysing the
Agents include brokers, factors and freight forwarders. benefits of using an overseas agent

Benefits: Up to a final 2 marks for evaluating the

• Overseas agents have knowledge and understanding of foreign markets benefits of using an overseas agent
so are well placed to identify and exploit opportunities
• Overseas agents will find buyers, leading to increased sales
• Some agents will sell the goods on behalf of their principals
• Some agents can help with delivery of goods so saving exporters’ times
• Some agents can help with language so improves communication / avoids
communication barriers / so no need for exporter to employ a translator
• Some agents can guarantee payment so avoiding bad debts for the
exporter
• Some agents will help with documentation / customs clearance so
reducing the need for the exporter to employ extra staff
• Some agents can help with finding insurance which helps the exporter to
have financial protection
• Some agents will help with advertising so reduces costs to
exporter / exporter does not need to worry about employing an advertising
agency
• Some agents will sell at the best price so the exporter will earn a profit
• Some agents will have possession of the goods / arrange warehousing so
keeping goods safe form theft
• Overseas agents will have the necessary expertise in what they are
selling and what the local consumers are likely to demand as they will
have a network of contacts, reducing risk of failure
• Overseas agents assume responsibility for transporting / customs
clearance which saves the exporter time gaining that knowledge and
expertise
• The overseas agent will save a business time / money as there is no need

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Question Answer Marks Guidance

1(e) to recruit / train new employees to travel long distances / provide

accommodation as agents will collect payment / making contracts for the
business / guaranteeing payment
• Solves the problem of not being sure whether they will receive payment
for goods / some overseas agents guarantee payment so avoiding bad
debts
• Some agents will help with currency exchange saving time / money for the
exporter
• Using an agent allows an exporter to maintain more control over other
matters such as final price and brand image compared with the other
intermediary option of using a distributor
• They provide local representation giving trust to local buyers to purchase
goods.

Evaluation:
Much will depend on whether the business has enough resources to have
their own export department or are experienced in exporting. Then, an
overseas agent might be less needed. However, if the business is first time
exporting, or exporting to a new market, it might be better to use an agent so
that they can concentrate on other aspects of their business, which may
otherwise be neglected.

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Question Answer Marks Guidance

2(a)(i) Identify two examples that make this an informative advertisement. 2

• States that FF Freight Forwarders is the ninth biggest in the UK

• Announces a new air cargo service
• From UK to Asia
• Gives the date of service when it begins (10th December 2024)
• Destinations / locations have been stated / starts from Glasgow
airport / name of airport
• Please look at the website for our competitive rates / please look at the
website.

2(a)(ii) Explain one way that this advertisement could be more persuasive. 2

• Fonts / colour / graphics / photos (1) so that they stand out / attract
customers (1)
• Embolden some parts of the advertisement (1) such as the heading (1)
• Add some persuasive wording or example (1) such as the word
wonderful / reliable / receive the best service (allow any suitable word
example) (1) to attract customers (1)
• Make a comparison with other companies (1) such as the words ‘no other
company can provide such a good service’ (1) attract customers (1)
• Give examples of competitive prices/rates (1) e.g. $300 for any sized
container (1) to attract customers (1)
• Use humour / colour / emotions / hero worship / slogan (1) to attract
customers (1)
• Use special offers / deals / discounts (1) to attract customers (1)
• Use positive reviews (1) to attract more customers. (1)

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Question Answer Marks Guidance

2(b) State three services offered by a freight forwarder, other than transport. 3

• Insurance
• Prepare storage / warehousing / inventory management
• Packing / packaging
• Arrange / manage customs clearance / calculating tariffs
• Prepare / handle documentation / paperwork
• Logistics advice / logistics management
• Secure payments / manage payments.

2(c) A business wants to use air transport to send medical supplies to 6 Up to 2 marks for describing air
another country. Security is a factor when transporting goods. transport/goods carried

Evaluate two other factors that this business needs to consider when Up to a further 2 marks for analysing the
using air transport. Which factor is more important? Give reasons for two transport factors when carrying
your answer. medical supplies to another country

Air transport is operated by airline companies who can deliver a wide range of Up to a final 2 marks for evaluating which
goods, including medical supplies which might be needed in a military factor is more important when carrying
situation or an emergency such as an explosion resulting in the need for medical supplies to another country
medical assistance.

Factors:
• Speed / Time – air transport can deliver goods much more quickly than
other transport methods. There are fewer delays with air freight, so the
medical supplies are more likely to reach its destination on time
• Cost – air transport is usually more expensive than other transport
methods so this would increase costs
• Urgency – if the medical supplies are required urgently or there is a
natural disaster in a country, air transport would be used so that patients
can access the medical treatments that they require quickly
• Quantity of goods to be carried / weight – if the medical supplies are
lightweight then aircraft can carry more supplies

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Question Answer Marks Guidance

2(c) • Distance – it might be too far to use road transport

• Nature of goods – if the medical supplies require special handling, then
air transport is preferred over other transport methods such as rail
• Convenience – air transport could be convenient to carry medical
supplies from an airport
• Geographical location – if the other country is in a remote or mountainous
area then air transport is more suitable for access than other transport
methods
• Reputation / reliability of carrier – the medical supplies, as they are being
sent on a regular basis, will need an efficient / reliable carrier to get the
medical supplies there on time.

Evaluation:
The business would normally want to choose the least costly method of
transport but if the medical supplies are urgently required then air transport
will be used. However, if the medical supplies are bulky, low cost and not
urgent the business might decide to use sea transport.

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Question Answer Marks Guidance

3(a) Calculate the weekly sales revenue. Show your working. 4

Answer = $7560 (4)

Method = 14  200 = 2800 (1) 45%  2800 = 1260 seats sold (1)  $6 (1)
OR = 45%  200 = 90 (1)  6 (1) = 540 (1)  14
OR = 45%  200 = 90 (1)  14 (1) = 1260 (1)  $6

3(b) Suggest two sales promotion methods that Wesley might use to 2
increase bookings.

• Free offers / offers or example such as free tickets on purchasing 4 tickets

• Free showings
• Discounts or an example such as money-off tickets for students on
Tuesday night, lower price on Saturday
• Loyalty cards / collect points or example collect points for a free drink
• Competition / lucky draw or example such as win six months free cinema
membership
• Special offers / BOGOF deals or example such as two for one ticket, 2
popcorns get one drink free
• Product-bundle/combos or example such as buy drink, chips and a snack
at a lower price
• Gift or an example such as watch a movie and get a free drink or get a
free poster
• Coupon or example such as money off popcorn on your next visit
• Seasonal promotion or example such as paying less on Halloween
• Point of sale
• Loss leaders
• Early bird offers.

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Question Answer Marks Guidance

3(c) Wesley accepts payment for tickets by a variety of methods, but no 3

longer accepts cash.
Do you think it is a good idea for Wesley to not accept payment by cash
for cinema tickets? Give reasons for your answer.

Yes – less cash handling (1) lowers administrative costs (1) reduces risk of
theft (1) hard to trace / track missing money (1) no need to transport cash to
the bank (1) staff would have to count / process cash (1) incorrect counting of
money (1) would cause more administration / paperwork (1) saves
time / money (1) no need to store cash / have cash on premises (1) better
security / lowers security costs (1) debit cards / credit cards allow immediate
transfer of money (1) quicker at checkout / ticket office (1) some other
payment methods can take longer / be more costly to process (1) e.g. taking a
cheque (1) could lead to bad debts (1) sometimes fake notes are presented
(1) some businesses do not accept cash / less common to accept cash (1)
having a cashless society is the trend. (1)

No – Tickets are quite cheap (1) some people prefer cash for a low
amount / small payment (1) Wesley does not want to wait for payment/it is
immediate (1) compared to offering credit (1) do not want to pay for credit
card charges (1) cash helps Wesley’s cash flow (1) cash is legal tender (1)
can be accepted everywhere / cannot be refused (1) may mean lost business
by refusing to accept cash / consumers cannot pay for a ticket (1) from people
without credit / debit cards / mobile wallet / online access to pay for tickets (1)
e.g. Children / teenagers (1) some people only carry cash / some
people / teenagers prefer to pay by cash (1) may not like the idea of paying by
card (1) could lead to decreased sales / lose customers. (1)

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Question Answer Marks Guidance

3(d) Evaluate the advantages and disadvantages to the customer of paying 6 Up to 2 marks for describing credit cards
for their tickets by credit card.
Up to a further 2 marks for analysing the
A credit card is a plastic card issued by a bank/credit card company bearing a advantages and disadvantages of paying
magnetic stripe containing machine-readable code providing instant credit. for tickets and other goods by credit card

Advantages: Up to a final 2 marks for evaluating

• Convenience / easy to pay / store – using a credit card lets a customer whether the advantages of paying by credit
buy now, pay later card outweigh the disadvantages
• Spread out the costs – If a customer needs to make a big purchase, a
credit card lets them pay over several monthly instalments. This can help
with budgeting and increase their standard of living
• Interest-free credit – if full amount paid on credit card statement
• Can use it to obtain money from ATM – in an emergency
• Can pay online at home – saves money/time going to ticket office
• Flexible – can be used in variety of stores anywhere
• Purchase protection – Sometimes there could be a problem with a
purchase such as it might get lost or damaged, for example, or the
company could even go bankrupt. With credit cards, a customer will
have buyer protection so they can claim their money back from the card
provider if there’s an issue with their goods or services
• Cashback and rewards – customer could be getting discounts / air
miles or similar shopper loyalty points each time they use their card, or
cashback on purchases
• Accepted worldwide in most outlets so customers can use it in most
places
• Safer to carry credit card than to carry money so reduces theft.

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Question Answer Marks Guidance

3(d) Disadvantages
• Getting into debt – If a customer can’t pay back what they borrow, their
debts can increase
• The rate of interest is high – than for other forms of credit such as bank
loans so it can be an expensive method of credit if not paid back within
due date
• Customer may be tempted to impulse buy and spend more than they
should, so being unable to pay off the credit card debt at the end of the
month
• Damaging their credit – missing a payment on their card can damage
their credit rating. This can make it harder to get credit in the future
• Extra fees – Credit card providers might charge a customer extra for
things that are free with a debit card, such as withdrawing cash from an
ATM or buying goods or services overseas
• Fraud – they can be hacked / stolen and used to pay for goods with credit
cardholder liable for losses
• Security measures – may have to input a code to make a payment
delaying your time

Evaluation:
A customer needs to maximise the advantages of a credit card and minimise
the disadvantages by making sure that they pay off the balance each month
and don’t miss, or make late, payments so that their credit score is protected
and there is no interest to be paid. Otherwise, this can lead to a higher debt
and be costly.

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Question Answer Marks Guidance

4(a)(i) Identify the form that Celine completes in Stage 2. 1

Proposal form / proposal

4(a)(ii) Identify the insured. 1

Celine / Celine’s apple farm

4(b) Explain two reasons why Celine should insure her business. 4

• Provide compensation / payment / receive money / financial aid (1)

minimise losses / or example such as against fire / theft / damage (1)
• Risk reduction / reduce risks (1) taking cover for the risk or example of
risk transferring risk to the insurer (1)
• Protection (1) from losses / to replace losses / so Celine does not lose
out / can continue in business (1)
• Confidence in the business (1) to take risks / to want to continue in
business / because losses can be recovered / returned to previous
position / gives her peace of mind / reduce stress (1)
• Laws / legal requirement (1) e.g. public liability insurance (1)
• Need to cover employees / employer’s liability (1) employees
injured / accidents at work (1)
• To cover risks of international trading (1) e.g. export credit guarantees (1)

4(c)(i) Explain how warehousing might assist Celine to stabilise the price of 2
her apples.

• By storing / keeping / harvesting large amounts of apples (1) and

releasing it gradually over the year (1) to prevent shortages (1) by having
constant / controlling supply (1) when price of apples increases (1) Celine
can reduce the wider price fluctuations (1) by meeting the demand by
supplying apples (1) to charge an equilibrium price. (1)

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Question Answer Marks Guidance

4(c)(ii) Explain how warehousing might assist Celine to satisfy the seasonal 2
demand for apples.

• Apples that can be produced at only certain times of year (1) can be
stored / kept (1) and released / supplied throughout the year (1) enabling
everyone to have / sold these goods off-season / out of season / when
season is over / all seasons (1) when there is no production (1) so there
are no shortages. (1)

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Question Answer Marks Guidance

4(d) Celine is considering two options to sell her apples: 8

Level Mark Description
Option 1: street market stall
Option 2: local supermarket 3 7–8 The candidate is able
Discuss each of these two options. Which would you recommend? Give to offer a thorough
reasons for your answer. evaluation, with a
recommendation, of
A street market is a collection of stalls in an open area small-scale whether Celine should
retailer / business. be selling her apples in
A supermarket is a large-scale retailer / business, self-service store selling a street market stall or
mainly food and household goods / variety of goods. to a local supermarket.
Street market stall: 2 5–6 Candidate offers a
Street markets bring together many customers in one place / busy area so satisfactory analysis of
there are many potential customers. the advantages and/or
The start-up costs / fixed costs are low e.g. low rent/hire of stall so cheaper disadvantages of
than having a physical store. whether Celine should
The apples will be sold directly to customers so Celine will have direct contact be selling her apples in
with them who can give her feedback about their needs and wants. a street market stall or
Celine can be paid right away in cash helping her cash flow. to a local supermarket,
Street markets mainly deal in cash so no risk of bad debt. with or without a
Celine will need a van to transport her apples to the market, adding to her recommendation.
costs.
Street markets require a lot of labour time away from the farm for Celine. 1 1–4 Candidate
There can be a lot of competition at the market from other apple stalls. demonstrates some
There is a lack of storage for the apples apart from in her vehicle. knowledge and
If Celine does not like talking directly with customers, she will find it more understanding, with
difficult to increase sales. application to Celine
Street markets are very dependent on the weather. On a rainy day, she could using a street market
find few customers. stall or local
If her stall is poorly located in the street market, this will impact on the amount supermarket to sell her
of trade she receives. apples.
Celine might provide informal credit so increasing customer loyalty.
0 0 No creditable
Supermarket: response.
Easier to deal with one large customer rather than a number of smaller

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Question Answer Marks Guidance

4(d) independent customers.

Increase in sales with access to a larger customer base.
Increase in brand awareness of her apples with possible nationwide
coverage.
It may be easier to access financial assistance as banks may be more willing
to lend to a business if they have a supplier contract with a well-known
supermarket.
Supermarkets have a lot of experience in selling different products and may
be able to offer Celine advice that will help increase her sales, e.g.
through packaging design.
The price Celine might receive for her apples will be much less than if you sell
direct to customers at a street market.
Celine could become vulnerable to a drop in demand, price decreases or a
squeeze on profit margins from the supermarket.
Supermarkets can only store small quantities, so more deliveries are required
increasing her costs.
Celine will face competition from other brands which might affect her sales.
Celine will be under pressure to keep up with demand if her apples sell well.
She may have to invest in new equipment or expand her premises to produce
more apples.
Her apples may only be given a trial period on the supermarket shelf.
Some supermarkets may insist on being the only exclusive seller of her
apples or may insist on Celine selling elsewhere at a higher price.
Some supermarkets may audit their supplier to ensure certain criteria are met
or insist on a business achieving certain food safety accreditations before
being considered as a supplier which will take time to sell the apples.

Evaluation:
Celine will have to weigh up the advantages of selling directly to customers at
a street market where she can increase her profit margin compared to an
impersonal service at a local supermarket where she can maximise her sales
but at a reduced profit margin. As has no experience selling apples, so it
might be a good idea to talk to the local supermarket about the possibility of
selling her apples there and then if that fails, rent a street market stall.

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Question Answer Marks Guidance

5(a)(i) What do the letters Ltd mean in a company name? 1

• Limited / limited company / private / public limited company / private/public

limited / limited liability

5(a)(ii) Explain one difference between cash discount and trade discount. 2

• Cash discount is a deduction from the invoice price (1) trade discount is a
reduction on the catalogue / list price (1)
• Cash discount is given to encourage people to pay within a period / for
early payment / quick payment / or example 5%, 30 days (1) trade
discount is given to encourage repeat orders / bulk buying / quantity
buying / encourage sales from retailers / other traders (1)
• Cash discount may assist the buyer’s cash flow / working capital (1) trade
discount enables the retailer to make a profit to traders (1)
• Cash discount is usually low, or e.g. 2 – 5% (1) trade discount is usually
higher or e.g. 20–40% (1)
• Cash discount as a separate accounting entry as an expense (1) trade
discount are calculated on the final invoice / not a separate entry. (1)

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Question Answer Marks Guidance

5(b) Do you think an online payment by debit card is the best way for TT 3
Wholesalers Ltd to make the payment? Give reasons for your answer.

Yes – Convenient / easy (1) can transfer funds immediately / instant

payment / fast / direct (1) no chance of debt (1) no interest to pay / interest-free
(1) can be used to pay large amounts (1) will save the TT Wholesalers
time / money (1) less cash handling (1) compared to posting cheques / visiting
Shoeee (1) payment is guaranteed / secure / safe / no theft (1) will have
proof / record / evidence of payment (1) if there are any disagreements (1) no
need for credit (1) no fees / charges than using a credit card (1) no need to
visit the bank (1) saves transport costs (1) no need to carry cash around (1)
cash can be stolen / risky to carry. (1)

No – Cannot be used if there is no money in the account (1) large amount of

money to be paid (1) may affect cash flow (1) increase overdraft fees (1) may
be subject to fraud (1) by hacking (1) lose money (1) may prefer to use credit
(1) pay back over a period of time / buy now, pay later (1) other competitors
may offer a wider range of payment methods, which would be more suitable
to buy boots (1) less protection of fraud (1) than credit cards. (1)

5(c) Which of these statements about banking services are TRUE and which 3
are FALSE?
TRUE FALSE
Mobile banking is accessed through 
an app.

ATM’s can be used at any time. 

Savings accounts allow customers to 

have an overdraft limit.

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Question Answer Marks Guidance

5(d) Shoeee Ltd is looking to expand production to meet the demand for a 8
Level Mark Description
new boot by buying more machinery. It is considering two options to
s
finance these machines.
3 7–8 The candidate is able
Option 1: hire purchase to offer a thorough
Option 2: retained earnings (retained profits) evaluation, with a
recommendation, of
Discuss each of these two options. Which would you recommend? Give whether Shoeee
reasons for your answer. should be using hire
purchase or retained
Hire purchase is an arrangement / agreement which involves a third party in earnings to buy
the purchase of goods. The third party can be banks or finance houses machines.
Retained profits is profit kept back for use in the company and not paid as
dividend to shareholders. 2 5–6 Candidate offers a
satisfactory analysis of
Hire purchase: the advantages
• Using hire purchase – Shoeee will pay a deposit / down-payment to and / or disadvantages
purchase the machines and then make regular monthly of using hire purchase
instalments / repayments, usually over a one to five-year period, until the and / or retained
total is paid. earnings to buy
• The cost of repayments is fixed. This will help with its cash machines, with or
flow / budgeting as it means that the cost of buying the machines is without a
spread. It also reduces the initial outlay recommendation.
• Shoeee can buy the machines which might otherwise been unaffordable
• Shoeee can use the machines, but the machinery will not belong to / be 1 1–4 Candidate
owned by Shoeee until the final / last instalment is paid demonstrates some
• The machines will be repossessed if they do not make the regular knowledge and
repayments understanding, with
• The machines cannot be sold until the payments have been completed application to using
but the buyer has right to end the contract if over 50% of payments have hire purchase and / or
been made retained earnings to
• Interest will be added to the selling price of the machines to cover the buy machines.
length of time Shoeee will take to pay the total amount. So, hire purchase
is more expensive than paying in cash. 0 0 No creditable
• By using the machines, it will allow Shoeee to cater for the increased response.

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Question Answer Marks Guidance

5(d) demand whilst making regular monthly payments.

Retained earnings (retained profit):

• Do not have to find a financial institution to provide finance so time / cost
is saved
• Using retained profit gives Shoeee Ltd immediate finance to buy the new
machines and can use the machines straightaway
• There are no repayments and there is no interest to be paid so cheap
form of finance
• The retained profit would allow Shoeee to increase its output immediately
• The retained profits may be insufficient to pay for the machines
• There is the opportunity cost that the retained earnings cannot be used
for something else
• If unexpected costs occur, such as the machines break down, it could
leave Shoeee without the finance to correct such problems
• If retained profit has been used to purchase new machines shareholders
may not get the dividends they expected and be unhappy with the
management / reluctant to invest more money.

Evaluation:
It depends whether Shoeee has enough retained profits to pay for the
machines outright immediately, if so Shoeee should buy it because it
becomes an asset of the business. If not, Shoeee will have to use hire
purchase or some form of leasing or borrowing. Shoeee may not like the fact
that it does not own the machines but at least it can increase output to meet
increased demand with potential of increased profits.

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