trtrffi*$#&$.

ffiffi9
.:
xtxffi**$xffiX$$ffiffiffiffx$
.:x.::xtr*;ffi ffi xxxxgff xgx*
. 6*w**srm$$tr&s$$#ffi$ffi$
B€
ff.trff.:#H*ffi$*ffiex#x#$
:##e
..*&
*r+
: ;i;'. i.. 5I {.[]\ \{}'l {,.5 i
Production 2
The practice of trade 10
Wholesale trade t6
Retail trade 20
Enterprise 30
Documents used in home trade JJ
Intemational trade 37
Consumer protection 48
Business organisations................. 55
Finance and banking 66
Finance of the business units 77
Insurance and assurance 83
Business communication 90
Marketing and advertising .............. 96
r08
tt4
. i i{,.!.. ii: }'ii-'!.!t ! }.-\ \\ll\ S'l l{}\ l}Jt 1{ iii: t ti': i

i : ::,'r i : i'1i-l ;{ ? i.\ 11{l\.1, It}\ ,}}t \{ I t{. t

l

l any
;sion ! il;o. !3: r,\".\1 !.":r."5
a .?'t'

Production.... 146
they The practice of trade t47
\\holesale trade
148
Retail trade. 149
Fnterprise
151
Documents used in home trade l5l
153
155
158
159
Finance of the business units 160
161
Business communication ............
164
\larketing and advertising... .......... .....:............. ,166
167
169
Paper I Examination Practice Answers 170
Paper 2 Examination Practice Answers
t7t
 lntroduction . The questions will be set from all the topics in the
syllabus.
T:rs rer. isronbook completely covers all aspects of
Lerel Commerce Syllabus. Tbday Revision . Candidates need to, therefore, sfudy all topics
,. is s'ritren in simple and straightforward prescribed in the syllabus.
_.
-_.-:- :: :::.n \ tru tO understand and remember the
. Studying topics selectively will definitely result in
:,.: : :.:t'. ,.-:::ls rerisron book is to assist Vou to scoring low marks in the multiple choice paper.
_:-: -:-
. -: t :. ;lJtisses :he challen_ses that Commerce bl Poper 2: Structured euestions
: - -.: - :'' : . .:. ::ipinn_s for their examination. It gives
.
. Paper 2 usually has nine questions from which
::! : : ..:. ihat q'i1l assist students to do well in their candidates must answer four questions only.
---:,::.:J3 examinations. It provides the necessary .
-::,:,:n-iatirrn and practice that will help students recall Most questions begin with instructive words such
anci analr se facts, and present answers that score high as: list, state, deflne, describe, explain, outline,
marks. distinguish or calculate.

TodqvRevision Commerce is divided into:

Here are a few hints on how to tackle these questions:
Section A: Study Notes and Exercises;
./ List or state requires simple recall and you should
Section B: Paper 1 Examination practice;
use one word, phrases or one-sentence answers.
. Section C: Paper 2 Examination practice, and The number of points that need to be listed or
. Section D: Ansu'ers - Answers for structured,/essay stated should tally r,,'ith the marks aliocated for the
questions are given in brief or point form. you are question.
advised to expand and explain these points in a way ,/ Define requires you to give the meaning of a word/
that best suits the demands of the question. These are term or concept.
suggested answers, therefore you are encouraged to ./ Describe or outline requires candidates tell or write
come up with more suggestions.
about, trace the outline, give a picture in words or
state the characteristics.
G ./ Explain requires you to make known in detail, to
Hints ond Tips
{,,-' give the meaning, stating the reasons or giving an
account of.
The 'O' Level Commerce Examination has paper I
(Multiple Choice) and Paper 2 (Structured euestions). '/ Distinguish or dffirentiate or give the dffirence
It is essential to have a clear idea of the full scope of requires that you show how two words, ideas or
each paper, the demands of each question and the skills concepts are opposed to each other. The use of
in answering the questions. tables for answering such questions is encouraged.
Ensure that opposing points or ideas are presented
ol Poper l: Multiple Choice euestions side by side.
. Paper 1 usually has forty multiple choice questions
./ Colculate requires giving the formula and the
which must all be answered. actual working/calculation and then the answer.

Overview ilvi
\---J_,
,s&
@
 . The use of examples is encouraged (if not a must) Write clearly and legibly. Examiners have no tirne
wherever applicable. Every definition, description/ to struggle with poor handwriting.
outline, explanation or distinction/differentiation
Be concise and straight to the point in your answers.
should be supported by relevant and appropriate
Flowery long and winding language does not eam
real-life examples.
you marks.
When you answer a question, you should be guided
In the examination: by the marks allocated to it. For example, a recall
question that is allocated six marks requires you to
the ,/ Take time to read through the whole question give six points. Each point or fact scores a mark.
paper, choosing questions you want to answer.
Your work must be well planned and facts must
:ics '/ Read through those sections you studied and do not follow each other logically.
waste time on sections you did not study.
Use correct grammar and comect spellings.
Iin

rrch

.ich

j
Overview i
 SECTION A

STUDY NOTES

1
I Study notes
&
l.O Obiectives goods. Examples are tractors, sewing machines
and lorries. Consumer goods are the goods used by
ilre end of this chapter learners will be able to: final consumers to satisfy their needs and wants.
; .: : jrlilrences betw'een needs and wants; Examples of consumer goods are bread, mealie-
meal and clothes.
.,. : : .:.: :l=in ..f production;
Producers are those people or firms that provide
-: l :-:::r ilLr\\ ing production and its
goods and seruices while consumers are the users
i r ::.
ofgoods and services.
- t. j-:' .: :.: I:r,\eenJtre.-tandindirectproduction:
- ,'..:-'.:- ::e three stages of production;
1.2 The stoges of production
I3
- ;.sii:.gursh benveen consumer and producer goods;
g r erplain ri'hy it is important for indigenous people The three stages of production are primary, secondary
to o\\'n the means of production; and tertiary.
h) identifftheimportanceoflandreform;
i) describeindigenisationofoureconomy;
t.2.1 Primoryproduction
j) explain the different factors ofproduction and their - It is the flrst stage of production.
reu'ards; and - Includes extractive industries.
k) list the advantages and disadvantages ofdivision of - Examples are agriculture, mining, forestry.
labour and specialisation. quarrying and fishing.
- Raw materials are obtained from the earth
I.l Defining production including rivers and lakes.
- Examples of companies in primary production
This is the provision ofgoods and services to satisfu are Mbada Diamonds, Zimplats, Border
human needs and wants. Needs are basic things Timbers and Lunar Chickens. l
R
that a person cannot do without, for example, food,
water, shelter, clothing and healthcare. Wants are 1.2.2 Secondory producfion
luxury things which a person can survive without.
For example, a bed, radio or television. Needs are
- Second stage of production which includes
manufacturing and processing.
consumed to sustain life. On the other hand, wants
are consumed to improve life. - Raw materials are converted to usable =
goods (semi-finished and finished goods) for
Production is divided into primary, secondary and
example, timber to furniture, wheat to flour.
tertiary production. .I
flour to bread, maize to mealie-meal, cotton ti
It also includes the making of goods (cars, beds, cloth or cloth to clothes.
furniture) and provision of services (teaching,
medical care and transport services). Goods are
- Itincludes manufacturing, assembling, ar;
construction (building) industries.
tangible, that is they can be touched and seen.
Services are intangible; they cannot be seen or - Examples of companies in seconda:-"
touched. production are Willowvale Mazda Motc,:
Industries, National Foods, Delta Beverage..
The goods can either be producer or consumers
Dairiboard Zimbabwe Limited. Costa.-
goods. Producer goods are used to produce other
Construction.

*i-
Production x*
x3
 1.2.3 Tertiory production 1.3.2 Lobour
- Third stage of production which involves - This involves the human manual. mental and
commerce and direct services. creative work.
- It includes all kinds of service industries - It is the human effort and input in the process
such as transport, communication, banking; of production.
insurance, warehousing and advertising (aids - Its rew-ard is a wage/salary.
to trade- those services that help trade to
take place). Aids to trade are also known as 1.3.3 Copitol
lnes commercial services.
lbv - This comprises capital goods, human and
- It also includes provision of direct services financial capital.
,nts.
such as teaching, entertainment and nursing.
rlie-
Direct services are also known as personal
- Capital goods are producer goods, that is.
goods that are used to produce other goods, for
set ices.
ide example equipment, tractors, grinding mills,
,
- Involved in distributing goods and services to buses and machinery.
SETS
the final user.
- Human capital consists of the knowledge,
skills and expertise acquired by labour through
1.3 Foctors of produdion education and training.

These are resources that are required for production

- Financial capital comprises of money that is
ary invested in a business.
to take place.
These are 1and, labour, entrepreneurship and
- Its reward is interest.
capital.

Lry,

rrth

ron
'der
Organisation/
Capital
Entrepreneurship

des

ble
fbr t"ig l.l: I:uctttr.t rt/ 1tt'ttltti.'liint
)ur,
lto 1.3.1 Lond 1.3.4 Entrepreneurship
- Refers to all the natural resources on the earth. - This involves the ability of an entrepreneur
rnd - (owner of business) to organise the available
It is the sites where production is done.
resources to produce goods and sen ices.
- It is an immobile (fixed) factor of production.
ary
- - The entrepreneur takes risk by investing
Examples are land for farming, mineral ores
rtor money or time; must possess business skills or
underground, oil and forests.
leq, hire people with the skills.
ain
- Its remuneration or reward is rent.
- Its reu'ard is profit.

F
e&
Productian
 ---\ r t,

Y
Extractive ( Manufacturing Wholesaling Consumers
Construction
\ \---..-
/ .,.,/\\
---' ----t
--r\

:"-

:._
Primary Primary Primary
Production Production Production

L ii";i;r

1.4 Ownership of the meons of - Infrastructure development.

production - Restructuring the society and redistribution of
wealth.
- Employment creation. '1,6
1.4.I Meons of production os our heritoge
- Owned by a few elite people in the country.
Disadvantages of indigenisation
- Prime land used to be owned by the privileged
up until it was re-distributed through - Driving away potential investors.
resettlement. - Lack of transparency pertaining to valuation
- The stakeholders are the govemment, methodology.
municipal and individuals. - Lack of adequate skills and knowledge.

1.4.2 lmporlonce of lond reform

- Lack of effective system to monitor and
evaluate the efficiency ofprojects carried out.
- Land empowers people.
- Eradication of poverty. 1.4.4 The role of the government in
- Improved diet since variefy of goods can be indigenising the economy
produced. - Import equipment on behalf of farmers.
- Improved food security and self-sufficiency. - The farmers will pay for the equipment at
- Land can be used as collateral security. a subsidised price at low interest rate for a Lrn
certain period of time.
1.4.3 lmportonce of indigenisoiion - Creation of special trading zones such as home
- Allows the locals to possess means of industries.
production.
Advantages transparency
- Full ownership and control of means of 15 Choin of production
production to locals. inlurl
These are stages lhat a product passes through from
- Improved service provision in the communities.
primary production to the flnal consumer.

"e

Production '4 j
dt
s;
 l5.l Production ond its brqnches
PRODUCflON

Primory Secdndory
:rtraction of raw Manufacturing/ Constructior/
Vaterials e.g. Processing Assembling
rshing, mining,
-rming, forestry

Direct'Services
E.g. - Teaching,
Trade Aids to trade - Entertainment
- Nursing

i."i: f);'<;;!t*.'litrlr $nd ily ltr**tltt'.,

on of
'1,6 - There is surplus to sell.
Direct ond indirect production
- There is interdependence and trade.
- Production is mechanised and standardised
1.6.1 Direct production goods are produced.
- This is the provision of goods for one,s - The tasks are simplified.
personal use.
ation There is specialisation as entities concentrate
- For example, a person growing crops for his producing one line ofproducts.
family's consumption (subsistence farmer).

and
- The producer attempts to make all the goods Advantages
I OUt.
they need for sustenance on their own and they - Mass production.
consume all their produce. - Reduced costs ofproduction.
tin - There is nothing for sale. - High quality goods.
- Needs are provided for without the aid of - There is variety.
others.
- High standards of living.

-L'- :
- :r antages Disadvantages
People produce that which they really need or - Creates dependency.
u.ant. - Craftsmanship is lost.
\lakes use of simple and inexpensive tools. - High operational costs.
There are no labour costs. If any, they are low. - Unemployment and j ob losses due to mechanisation.
- Mass produced goods are not customer sensitive.
.advantages
Production levels are low.
Low or poor quality ofgoods.
1.7 Division of lobour
There is no variety. - lt is the breaking down of a production process into
a number of simpler tasks.
Lorvers standards of living.
- Each one of these tasks is undertaken by an
individual worker who specialises in it.
i2 lndirect produdion
- It can also be defined as the separation of a work
This is whereby one producer concentrates on what process into a number of tasks, with each task
:hey can do best and relies on other producers for being perfbrmed by a separate person or a group of
:he needs they cannot produce on their own. persons.

Production
 - For example, in a shirt manufacturing company - Workers cannot easily change jobs.
lrt.r
one or a group of workers can specialise in the - Goods are standardised.
making of collars, sleeves or button holes.
r
- A single product passes through different stations
where it is improved before being passed on to the 1.8 Volue oddition ond beneficiotion
next.
I
1.8.1 Beneficiotion
Advantages
- Process whereby ore is extracted from
- Each station has equipment that is relevant for the nature with the mineral ore being suitable
r-9
task to be done and it is managed by personnel for furlher processing.
especially trained to perform the task.
- Can also be referred to as economic
- Allocating work to employees according to their development and corporate society
individual skills and competence leads to work responsibilities.
efficiency. - It describes the proportion of value
- It allows the use of machines rvhich results in mass derived from an asset exploitation that
production. stays in the country to benefit the society.
- Production of goods becomes fast.
1.8.2 volue oddition
- The workers can become expefts by repeating the
same task every day since practice makes perfect.
- Manufacturing process that increase
commodities value such as cooling and
- Less training of workers is required since a worker
drying.
has to do only one part of the whole task.
- The new product will be different from
- It improves the standard of living since goods that the original raw material.
are produced in large quantities can be sold cheaply
to consumers.
- Value addition increases the economic
value of the commodity through a
- It saves time since a worker does not have to move particular process.
from one place to the other to do another task. E.g instead of selling groundnuts to the grain
- There is also the economic use of tools since a marketing board, the farmer can roast,
worker is just provided with the tools that he/she salt and process the groundnuts into
needs to catry out a task. peanut butter and sell it.
- A worker can develop new ideas by repeating the
same task and thus become innovative. Advantages of value addition
- Products look attractive.
Disadvantages - Products will fetch more money when sold.
- Repeating the same task everyday becomes - Increase economic value.
monotonous.
- The worker can have less technical skills for Disadvantages of value addition
making the whole product (loss of craftsmanship).
- Lack of knowledge on how to add value to a
- May result in work stoppage, delays or lower product.
productivity in the event of a strike in one
department since the workers depend upon each
- Lack oftechnology.
-

I
other (interdependency). Its costly.

- It may also result in loss of responsibility since no

one is directly accountable for bad production. Merits of exploitation of resources
- The use of machines may lead to unemployment. - Wealth to the country.
- It may also lead to lor.ver productivify due to lower - Infrastructure development.
-{m
job satisfaction. - Brings in foreign curency.

Production
tr
 - ,. nerits of exploitation of resources - Business growth.
Land degradation. - Prestige that comes with running a
Under declaration of extracted minerals value. successful business.
Deforestation. - Independence to make decisions.
0n
Destruction of wetlands.
Soil erosion. b) External factors
(i) Customers
tiom .l.9 -
Business environment Reliable suppliers.
itable
- Timely deliveries.
- Area where the business is carried out.
- Safery ofgoods.
Lomic
- Situation in which the business is (ii) Suppliers
'ciety operating in.
- Interested in doing business with a
value 1.9.1 Elements of the business company that is able to pay debts within
that the agreed period of time.
iiety.
- Land.
(iii) Competitors
- Capital.
- Ensure that the business deals honestly
- Labour. and does not use monopoly powers.
rease - Organisation. (iv) Community
: and - Technology. - Employment creation.

1.9.2 Business stokeholders - Safe products.

Iiom ond their
interests - Production that does not harm the
environment.
cmic a) Internal factors
(v) Banks
:ha li
(i) Owners
i
- Expect the business to pay interest and
Business growth. repay loans.
rrain l Constant dividends. (vi) Investors
u-l&St.

into
i
Maximised proflts. - Expect the business to have sufficient
I (ii) Workers cash flou, thereby avoiding iiquidity
{ Job security. problerns.
Training and carrier development - Expects a return from their investments.
I
E
prospects. (vii) Government
I
I Constant payments of salaries and wages. - Want businesses to abide by the laws of
Fringe benefits. the country.
I
I (iii) Managers - Businesses to pay taxes.
Itr High salaries. - Businesses to remain in business for a
Job security.
long time.
to 3.

G Common errors
Candidates often confuse production and commerce when answering questions requiring

rft
them to
deflne concepts' While processes of production bring goods into existence and put ihem in
usable
form, commerce ensures that those goods are distributed to consumers through different channels.

-l int:
{
fr
Elements of the business are the same as factors of production
l Branding and packaging add value to a product
i

poduction
 C. inflation.
l GI
TEST YOURSELF
D. land reform. I

CI
I

8. Who owns the means of production in Zi mbabwe? |

Multiple choice questions A. Foreigners I

C,r
B. Locals
1.
I

Which of the following is a consumer good? I

Il
A. Fertilizer C. Zimbabwe I

D. Christians
I

f,r
B. Plough
C. Seed 9' Which of the following is not an advantage of ui
D. Vegetables indigenisation? m
is part of primary production. A. Full ownership of means of production
A. Canning beef B. Employment creation Gr
B. Constructing bridges C. Infrastructure development
H
C. Grorving trees D. Inadequate skills and knowledge
D. Milking cou,s 10. Value addition can be best deflned as
H
3. Of the following, identify an example of direct A. manufacturing process that increase products
production. value. L
A. Canning factory B. a way of making production easy. Ar
B. Clothing manuf-acturer
C. asset.
C. Subsistence farmer
proportion of value derived from an ;a
D. Commercial farmer
D. increase in economic value.
h
4. Which one of the following not an advantage of k
indirect production? Structured questions
A. Loss of craftsmanship 1. (a) Explain the term production tlol *
B. Division of iabour (b) How is a miller assisted by communication?

C. Goods are mass produced [10]

D. Surplus in production 2. (a) Distinguish between primary and secondary
industry.
5. Which of the following factors of production has l6l
to do with equipment, machines and productive (b) ofdivision oflabour. [8]
State the advantages
capacity? (c) Differentiate between direct and indirect
A- Land production. t6l
B. Labour 3. (a) Distinguish between needs and wants. t4l
C. Capital (b) Explain the four factors of production. [16]
D. Entrepreneurship 4. (a) Explain what is meant by value addition and
beneficiation giving examples. !41
6. Of the follorving which one is not a way of adding
value to a product 5. (a) Identifiz the advantages and disadvantages oi
A. indigenisation. u0l
branding.
B. packaging.
(b) Discuss the impact of exploitation of resources
to the country. n0l
C. drying.
6. (a) Explain the importance of land reform p 0l
D. buying.
(b) What role is played by the government in
7. Exploitation of resources results in
indigenising our economy? t6l
A. Iand degrading.
(c) Why is it important for a business to add value
B. control of budgets. to its products? L4':

Production
 Glessxry *$ ?*rrcx
Chainof production - stages of production through which a product passes from primary industry to the final
ibwe? consumer.

Commerce - the distribution and exchange of goods to satisff human needs and wants.

Consumer - the final use of goods and services.

Consumer goods - goods used by consumers to satis$ their needs and wants.

ige of Direct Production - provision of goods for one's personal use without the aid of others.
Division of labour - the breaking down of a production process into a number of simpler tasks that are done by
different people.
Goods - tangible products like bread, car and television.
Indigenisation - the transferring of ownership of business and the means of production to locals

Indirect Production - this is production of goods and services through specialisation by entities. Needs are satisfied
through trade.
:ducts
\leans of production - resources required in order for production to take place
\eeds - basic things that a person cannot do without.
Producer goods - goods that are used to produce other goods.
Production - provision of goods and services to satisSz human needs and wants.
ien'ices - intangible products such as teaching, nursing and entertainment.

t10l
\\'ants - luxuries of life which a person can survive without.
ion?
I0l
lary
t6l
:r. [8]
rdrrect
t6l
l4l
t16l
i and
[14]
ses ofi
tl0l I

ources I

t l0l
[10]
tn
t6l
I value
t4l

,91
**l-' Production
w
 LrJ
C HL\*r1{i

- It facilitates the movement of goods from one

2.O Obiectives class of producers to another and finally to
the consumer. For example, the manufacturer
By the end of this chapter learners will be able
to:
buys raw materials from a primary producer
a) deflne the term trade; and processes them into flnished and usable
b) explain the importance of trade to a country; good, which are then distributed through
c) distinguish between home and foreign trade; wholesalers and retailers until they reach
of various commercial the final consumers' Such a process can be
d) explain the functions
activities and how theY aid trade;
illustrated as shown infi'g2'2 below: L3 l
Primory Producer e'g Former
e) deflne barter trade; and I
state various channels ofdistribution ofgoods'
J -e
0 SecondorY Producer e'g Miller
i
Wholesoler
,i{

2.1 Commerce ond trode I

J -.l
Retoiler
2.1.1
-
Commerce
Commerce deals with the distribution of
goods i
Consumer
and senices from producers to consumers' u
I:i,g ).) \!ttt't:rttt'ttt t;t' Yrtrtit
- It does not involve the making of goods but
provides services that assist in the exchange Farmer Sells - Miller Buys - Miller Sells -
Wholesaler
Retailer Sells-
process. Buys - Wholesaler Sells - Retailer Buys -
- It is trade and aids to trade' Consumer BuYs

Commerce
!.
Aids to trode
Trode
- advertising
- insurance
- banking
Domestic/ - warehousing
Home
- communication t 4
- transPort

Wholesole
J-----1,
Retoil lmport Export Entreport (re-ePon)

t:ig- 2. I (,'ottrrrttrct und its It rutttlt ar

2.1.2 Trode
- Trade involves the buYing and selling NB: Trade can either be home trade or international
(exchange) of goods and services to satisfy trade.
human needs and wants'

The pracrtce of trade

fi r:,: 2.1.3 The importonce of trode to o - Usually involves the use of foreign currency
!: ':r

country (forex).

F ,',,'' Enables the exchange ofgoods and services. - It can be import, expofi or re-export.
r
Gets rid of surplus products.
2.4.1 lmport trode
Prevents shortages.
Enables goods to be produced - This is the buying of goods and sen,ices from
large
other countries.
quantities.
one Satisfies human needs and wants.
- For example, buying machinery from China or
electricity from Mozambique.
!to - The country can obtain what it cannot produce.
urer - Goods or services bought from other countries
- The collntry gets foreign currency.
are imports.
rcer
able
- A wide variety of goods is available.
ugh - Improved standards of living. 2.4.2 Export trode
rach - Raises revenue for the government. - This involves the selling of goods and services
rbe to other countries.
2,3 Home trode - For example, selling diamonds to Britain.
- Goods sold to other countries are exports.
This is buying and selling of goods and senrices
between citizens/businesses/companies of the 2.4.3 Re-export
same country.
- It is also called domestic, internal or local trade - It is also called entre-pot trade.
because goods are produced, exchanged and - This occurs when goods are imported fbr
consumed rvithin the country in which they are the purpose of re-exporting them to other
produced. countries.
- It consists of r.vholesale and retail trade.
25 Aids to trode
2.3.1 Wholesole trode
- These are the services that help trade to take place.
aler - Goods are boughtin bulk (large quantities) - They are also known as commercial services.
:lls- from the manufacturers and also sold to
retailers in bulk.
- These include banking, insurance, warehousing,
transport, advertising, and communication.
- Can be cash and carry wholesalers who sell to
both retailers and flnal consumers.
25..1 Bonking
2.3.2 Retoil trode - Provides the safe custody of rnoney and other
valuables such as jewellery.
- Retailers buy goods in bulk tiom rvholesalers
and even from manufacturers (large scale - Provides loans and overdrafts to business
retailers) and sell them in smaller quantities persons.
(breaking the bulk) to consumers. - Accepts deposits into various accounts such as
current account, savings and term deposits.

2.4 lnternotionol trode - Accept and discount bills of exchange.

- Offer foreign cunency and issue travellers,
- Goods are produced in one country but cheques.
consumed in a diffbrent country. - Offer night safe facilities.
- Trade between citizens of different countries, - Act as trustees and executors of estates.
e.g. maize produced in Zirnbabw,e is consumed
- Do stockbroking.
by citizens of Malawi as maize or as maize
products. - They also provide automated teller machiries
(ATMs) so that money can be withdrawn at
,nOl - This is also called foreign or external trade.
any time of the day.

i 't'l The practicq of trode

 They facilitate the use of cheques in business. Carries equipment. machinery and spare parts
Provide telebanking facilities. to the plant/factory.
Can be by road, rail, sea. air or pipeline.
25,,2 lnsurqnce Moves goods to where there are shortages.
- It covers against risks that may be encountered Carries workers, managers and executives to
in business. For example fire, theft, and from work.
consequential loss, etc. Motor vehicles can be used for advertising or
- Covers a firm's assets such as machinery as a status symbol.
inputs, outputs and stock.
- Covers workers injured at work (employer's 25.5 Advertising
liability) and injuries to members of the public
(public liability). - It provides information to customers about
goods and sen'ices on offer, prices and where
- Covers embezzlement of funds (fidelity to buy.
guarantee).
- It increases the trader's sales and profits.
- Insurance companies compensate the insured
in the event that the risk covered occurs.
- Improves the image of the trader.

- Firms are able to remain in business.

- Used to launch new products and fight
competition and negative publicity.
- Businesses can operate confldently.
- It tells of forlhcoming events.
25.3 Worehousing - It can be informative or persuasive.
- This is the provision of safe storage facilities - To maintain sales.
for raw materials. semi-finished or flnished ir--
goods, machinery, spare parts, seasonal goods, 25.6 Communicotion I
I

perishables and goods in transit before use or Ir-

I

sale.
- lnformation can be sent or received. I

- Enables goods to be produced ahead of

- Payments can also be made or received.
demand. - Enables orders to be placed or received. l-
- Business documents can be sent or received. t--
- Can be bonded warehouses to store imported
goods befbre duty has been paid. - Provides contact between employers and i-
I

- Goods can also be left in a warehouse to employees.

:

mature. for example, bananas, tomatoes, and - Enquiries can be made.

j
wine. - Contracts can be arranged.
- Allows branding, Iabelling, blending and pre- - Complaints can be lodged and queries settled. \l
packaging to be done. - This enables the suppliers/sellers and their
- \l'arehousing reduces risks of damage to customers to contact each other.
goods.
- This can be done by the use offax, telephone,
- Reduces the risk of theft. letter or internet.
- Reduces deterioration of goods due to bad
weather.
- Goods that are off season can be stored in a
2.6 Borter trode I

warehouse, for example Christmas cards and - This is the buying and selling of goods and services
jerseys. without the use of money.
- Evens out supply - makes goods readily - It is whereby people exchange goods fbr goods,
available. services for goods or services for services.
- For example, one may exchange five goats for a
25.4 Tronsport cow.
- Carries raw materials, semi-finished and - It is the oldest form of commerce; it was common
finished goods from one place to another. in traditional primitive societies.

The practice of trade iltl

r-JJ
*
arts 2.7 Chonnels of distribution (i) Perishable goods: have a short shelf life and
- llost goods are moved from producers to have to be used before they go bad.
consumers as illustrated in table 2.1 below. (ii) Low tumover goods: sales volumes are small.
. However there are various channels through
sto u hich consumers can get goods or services from (iii) Goods made to order: the customer specifles
producers. the goods they want and are made to their
specifications.
gor Some goods are also provided from producers
directly to consumers, e.g. newspapers and farm (iv) Technical goods: require the manufacturer,s
produce. installation and after-sales services.
\\-hen goods do not pass through wholesalers or
:etailers, this is called direct dealing and it is used
(v) Fragile goods: at high risk of breaking.
lout
:or:
here

A B c D E F

Primary Primary Primary Primary Primary Primary

?:oducer Producer Producer Producer Producer Producer
fight

S:"'ondary
+
I I
Secondary
?:oducer Producer

:rrlesaler Wholesaler Wholesaler

d^- -
-l
J.etaier

l'lsumer
Retaler

*
Consumer
I
Consumer
Retaler

*
Consumer Consumer Consumer

- ,'. {. ltstt:tt:l' uf tlistrihutiutt

Lrla* -:::nnel fbllowed depends on: Size of the market.
\ature of goods. a
Quantity of goods involved in a specific
Pnce ofgoods. transaction.
Government policy. . Size of the firm manufacturing and distributing
Erpertise needed in using the goods. the goods.

Cornmon errors
G
t
The question: 'Distinguish between trade and barter,'is impossible because barter itself is a form of
trade. The concept of comparison should be between 'monetary trade'and 'barter trade.,
;

t1OJi.
a Direct production is not the same as direct services.
- -"t:
- to explain the importance of aids to trade,
', en asked to mention specific examples of raw
- ,r:rials or finished goods. Specificity is called for, e.g:
n:-:11 ,', :at is the irnportance of warehousing to a farmer?
To keep inputs like fertilizers, seed and chemicals; and produce like grain and cotton.

f lil
T The practice of trade
 t;v ,,,:;,l;fZ:A:r,1
4. is a branch of home trade. g
ffi A. Wholesaling l
B. Exporting
Multiple choice questions C. Importing fr
1. Which statement does not describe barler trade? D. Entre-Port trade Fr
A. Exchange of goods for services' 5. Which statement best describes the tetm producer? L
B. Exchange ofgoods for goods. A. Maker of goods
?rr
C. Exchange of services for moneY. B. Seller of goods
D. Exchange of services for services. C. Provider of goods and services In
2. Which statement indicates entre-port trade? D. Distributor of goods and services.
A. Zimbabrve buying maize from South Africa.
B. Storing maize from South Africa destined for Structured questions
Zambia. l. Explain giving examples, the circumstances why
C. Zimbabwe selling maize to South Africa. some goods are distributed directly from the
D. Insuring exported goods. producer to the consumer. [20)
3. Choose the statement that best describes trade.
2. Explain the role of the following in trade:
A. Buying of goods and services.
(a) transport (b) adverlising
B. Selling of goods and services.
C. Buying and selling of goods and services. (c) communication (d) warehousing t20l
D. Distribution of goods and services.

Across
1. The flrst stage of Production'
2. What a good or service is worth, is it's on
the market.
3. Grown as a source of energY' -
4. Remuneration for land.
5. Those things that consumers can live without.
6. An example of a want.
7. Japan's curency.
8. materials are obtained by primary industries.
g. Mode of transport used to carry bulky goods in
-foreign trade.
10. A factor of production.

Down
1. One who provides goods or services.
2. lntangible good.
3. Type of production in which one produces for own
consumption.
4. A branch of produciion that deals with
manufacturing, construction and assembling.
5. Land refers to all resources.
6. one who uses goods and services to satisf,z his/her
needs and wants.
7 . -
A mode of transport used to carry light and valuable
goods.
a
o' Financial assistance obtained from a bank.
LAb**r. l*.i:ll-ll:;:t::r, .*{j:{1. .i:,idu, i{f-':;j: '..:-:i;:}:' -': " z'i
ft hilti;-;r'*, . t'\;iirr,.. :;1..11-1.;e211;.),;;. .,.i::.,. ...:1-.,..: {".'; :i' 9' Buying and selling of goods and services'
5f,f,.,,-, '.- r'.- ': : ' ..

The practice of trade

 .3ic*sory
Barter trade exchange ofgoods for goods, or goods for services, or services for services.
I

Entreport re-exportation of previously imported goods.

I
Foreign trade buying and selling of goods and services between or amongst different countries.
Home trade buying and selling of goods and services within the same country.
Producer providers ofgoods and services.
Trade buying and selling of goods and services using money.

i15 The practice of trade

.{
tr
3.O Obiectives - Even out the flow ofgoods to ensure that there
is neither shortage nor oversupply.
By the end of this chapter leaners will be able to: - Provide a variety of goods bought from
a) deflne a wholesaier; different manufacturers.
b) explain the functions of wholesalers; - Bring goods nearer to retailers (situated near
c) describe the features of' different types of retailers).
wholesalersl - Transport goods to retailers.
d) explain trends in wholesaling; - Receive complaints fiom retailers.
e) discuss the reasons for the elimination of - Sell goods on credit to retailers (financing the
r,vholesaling; retailer).
0 state the role of agents in trade;
g) explain different types ofagents; and 3.2.2 To monufocturers
h) explain the role of marketing boards in the - Buy goods in large quantities from
distribution of goods. manufactures or producers.
- Clearing lines of production.
3.1 Whqt ore wholesqlers? - Financing the production process by paying
cash for goods bought so that producers can
- Wholesalers link the manufacturers to retailers or have money to produce nrore goods.
consumers. - Can grade, blend, package, bleach, dye
- Buy goods from manufacturers or producers and or brand goods before selling them hence
sell to retailers or consumers. completing the production process.
- They buy goods in large quantities. - Transport goods from manufacturers.
- Operates from a warehouse. - Advice on market feedback so that the
- Manufacturer/Producer---Wholesaler-+Retailer---+ manufacturers know r,vhat the market requires.
Consumer - Advertisemanufacturers'brands.
- Manufacturer/Producer--*Wholesaler->Retailer - Relieves the producers ofthe burden ofstorage
- Nlanufacturer/Producer---Wholesaler---'Consumer and marketing.
- Examplesofwholesalers:N.Richards,Mohammed
Mussa, OK Mart 3.3 Types of wholesolers
Wholesalers are classified according to the goods
3.2 FunEtions of wholesolers they sell and the service they off-er.

3.2.1 To retoilers 3.3.1 Generol (trqditionoll wholesolers

- Sell goods in smaller quantities to retailers - Sell a variety of goods, mostly groceries.
(breaks bulk). - They deliver goods to retailers.
- Store goods in readiness ofretailers. - Offer credit to retailers.
- Receive orders. - Steady prices.
- Stabilise prices. - Store goods.
- Ensure that goods are always available. - Offer information and advice to retailers.

lVholesule trade @
&
 - Bear risks. Provide a wide variety of goods.
- Even out the supply ofgoods. Surplus is shared among members.
- Operate from a warehouse.

3.3.2 Speciolist wholesolers 3.4 Eliminotion of wholesqlers

- Sell one line of goods or an assortment of The following are reasons why the wholesalers are often
related products, e.g. electrical goods, or hard excluded (by-passed) from the channel of distribution:
wares or building materials. - Large scale retailers have enough capital to buy in
rt there
- Offer expert advice to retailers or consumers bulk directly from manufacturers at low prices.

Irom
on the use ofgoods. - Large scale retailers have their own transport and
l
- May deliver goods. warehousing.
- May offer credir. - Manufacturers employ their own agents who
d near
- May operate from the warehouse. establish drrect links with the market, e.g.
Dairiboard (ice cream vendors).
3.3.3 Cosh ond corry wholesolers - Manufacturers establish their or.vn chain stores
- Sell goods for cash, no credit (cash and carry). (manufacturer's retail shops) through which they
rg the sell their products e.g. Bata Shoe Company.
- Do not offer delir ery.
- Operate like a supermarket.
- Manufacturers sell directly to consumers (direct
dealing).
- Sell groceries/household goods.
- The nature ofthe goods:
from ,i
- Sell to both retailers and consumers.
(i) Perishables, tbr example vegetables;
i
- Goods are packed in different sizes for the (ii) Fragile goods, for example glass;
convenience of consumers or retailers.
- Less advice is given to customers.
(iii) Sophisticated goods that need the producer,s
l) lng
advice, for example computers:
S CAN - Offer a variety of goods.
(iv) Low turnover goods, for example vehicles and
- Cut on overheads (transport and labour). jeil,ellery;
dy" - Goods are usually cheaper.
!ence
(v) Goods sold in sets and breaking-bulk cannot
- Use of self-service method. be done.
. Goods made to order or customer specifications,
3.3.4 Co-operotive wholesole societies for example birthday cakes.
the
Lires.
- They are formed either by producers (such as The growth of pre-packaging and branding.
farmers) or retail co-operatives.
- Each member contributes capital by buying
35 Morketing boords
rage shares.
- They are non-profit making. - These are wholesalers specialising in the buying
- They are controlled by a selected management and marketing of primary goods (agricultural
committee. products).
- They are mn on democratic principles and - Established by govemment (parastatals):
rods
decide policies through voting in an annual - Specialise in marketing of particular products, e.g.
general meeting. grains, minerals. milk or meat.
5 - Membership is open and voluntary. - Buy from farmers, miners and other prirnary
. Buy goods in bulk from producers at lower producers.
prices and sell them to co-operative members - Store the produce.
at lower prices, - Sell produce to local and foreign markets.
Goods are also sold to non-members at market - Can import produce in times of shortage (to sripply
price. the local market).
Dividends are paid to members in proportion - Can export produce when there is a surplus.
to the purchases made from the society. - Provide a ready market to primary producers.

@ &X*.
rti*:
lYholesale trade
 Enable primary producers to concentrate on 3.6 Commodity morkets
production.
Set prices ofproduce/ flx producer price.
- These are organised/specialised wholesale and
produce markets where raw materials such as
Determine production by setting prices (prices can H
agricultural produce and minerals are bought and
make producers to produce more or less). so1d.
1
J"

Grades the commodities. - Examples include Mbare Musika, Makokoba

May process the commodities they deal in' Market, Boka Tobacco Auction Floors and the
Finance producers. London Baltic Exchange.
Conduct research on production of commodities. - They observe set rules and regulations.
May give advice to producers. - The prices of commodities depend on demand and
supply.
3.5.1 Exomples of morketing boords - The commodities are graded to have standard

a) Grain Marketing Board (GMB) quality.

- Deals with all grain (maize, wheat, rice, - Trading on the markets may be done by agents
soya beans, etc.) such as brokers or by auction or direct sales.

b) Minerals Marketing Corporation of - Commoditiesboughtrnaybedeliveredimmediately

Zimbabwe (MMCZ) (spot dealing) or delivered at a later/future date
(forward dealing).
- Deals with the marketing of minerals.
c) Tobacco lndustry and Marketing Board
- Dealers may do hedging whereby commodity
prices are determined today to protect both buyers
(rrMB)
and sellers from future price fluctuations.
- Deals with tobacco.
d) Cotton Marketing Board
3.7 Agents
- Deals with cotton.
- It is now a registered company called - Sell or buy goods or seruices on behalf of a

Cottco. principal.
e) Cold Storage Commission They do not take title to the goods they distribute. (
- Deals in meat, especially beef. Link those who want to buy goods or selices to
selice.
those who are selling the goods or
{
- It is now a registered company called
Cold Storage Company. Agents deal with consumers, retailers and I
0 Dairy Marketing board
manufacturers. (
- They establish the best terms.
Deals r.vithmilk and milk products. I
- It is now a registered company called They look for the best price for both the buyer and
the seller.
I
Dairiboard Zimbabwe Limited.
They establish the best quality ofgoods and service.
They advise both the buyer and the seller.
NB: The Cotton Marketing Board, Cold Storage
Commission and dairy Marketing Board were Eam a commission for seruices provided.
once marketing boards but they have since been They can be brokers, factors and del credere agents.
privatised and are now operating as private (See Chapter on International Trade for detail)
companies

F cornrno-", err*rs
?ef, Commercialisation and Privatisation are terms often confused. Commercialised marketing boards still
iSit. belong to the govemment, but they are now required to work at a profit so that they are not funded by
[,ar grants. On the other hand, when a marketing board is privatised, the govemment would have sold the
|'--' .o-pany to individual or corporate investors and it ceases to be a statutory body.

Wholesale trade
r18i
i;
ffi
 5. Which of these not a offered by a
wholesaler?
and
:h as A. Grading goods to be sold by a retailer.
t and
Multiple choice questions B. Producing goods for sale by a retailer.
1. Which goods are best distributed straight from the C. Packing goods before they are sold to a retailer.
,koba producer to consumer? D. Blending goods before they are delivered to a
I the A. Chairs B. Newspapers retailer.
C. Suits D. Soap
An agent Structured questions
J and A. advises only the buyer. 1. State the services offered by wholesalers to the:
B. earns a salary for services provided. (a) retailers tsl
rdard C. can be a broker, del credere or factor. (b) manufacturers tsl
D. always wants the best price for him/herself. 2. Describe the features of a cash and carry wholesale.
gents Which ofthe following is not a commodity market? t8l
A. Stock exchange 3. (a) Explain the seruices offered by the Grain
ately B. Baltic exchange Marketing Board. [10]
date C. Grain marketing board (b) State the reasons why the government has
commercialised marketing boards. t5]
D. Cold storage commission
odity is a feature of a cash and carry 4. Explain the circumstances under which wholesalers
lyers wholesaler? are by-passed by retailers and consumers. [10]
A. Offering credit to customers. 5. (a) What are commodity markets? 12)

B. Carrying goods for customers. (b) Explain the functions of commodity markets.
C. Offering specialist advise to customer. t5l
D. Offering a variety of goods to customers.
ofa

)Lrte.
Glossory
es to
Agent one who sells goods or services on behalf of a principal'

and Broker a specialist agent. a broker specialises on a particular trade e.g. insurance broker.

Commodity market specialised market where raw materials or minerals are bought and sold'

Hedging the fixing of commodity prices today to guard against future price fluctuations.
r and
Marketing board a market for buying and selling agricultural produce or minerals.

r.ice.

rents.
)

@{!&
Wholesale trade
 4.4

4.O Obiectives - Store goods: goods are always available.

- Allow consumers to buy on credit.
By the end of this chapter learners will be able to:
- May deliver goods to the homes of consumers.
a) deflne the term retailer; - Provide personal service such as advice and
b) list the factors considered when establishing a information to consumers.
retail outletl - Provide after sales service i.e. follow up on
c) state the functions and services of retailers; goods sold to provide back-up service like
d) describe the different types of retailers; demonstrations, installations and repairs.
e) state the advantages and disadvantages of each - They can open for long hours so that customers
type ofretailerl have more shopping time.

0 explain modern trends in retailing; - Store a variety of goods offering the consumer
g) state reasons why retailers sometimes bypass a wide choice and one-stop shopping
wholesalers; convenience.

h) state reasons for the survival of small scale retailers;

4.2.2 To wholesolers
and
i) distinguish between hire purchase and deferred
- Inform wholesalers on goods required by
payments. customers.
- Store goods.
\.I
4.I Whot ore retqilers? - Provide finance by buying for cash.
- Bear risks. ,EI
- Retailers are organisations/intermediariesthat buy - Advertise the wholesaler's goods. S|,rq
goods from wholesalers and producers and sell to
consumers.
- Brand, package and grade goods.

- They sell in smaller quantities or single units of a

- Relieve the wholesaler of the burden of
marketing and distribution.
product.
- They are located closer to the consumers.
- Examples of retailers are OK, Pick n' Pay, Spar, 4.3 Foctors to consider when
Ramji's estoblishing o retoil outlet
- Adequacy of capital.
4.2 Functions of retoilers - Demand for the products.
- Government laws and by-laws.
4.2.1 To consumers - Labour requirements. 3!'g

- They break bulk - They buy goods in large - Closeness to suppliers wholesalers or "rNddl

quantities from r,r,holesalers or producers and manufacturers.

sell in small quantities to consumers. - Knowledge and experience in retailing.
- Retailers are conveniently located close to - Proximity to customers.
consumers.
- Competition from other retail outlets.
- Can be situated in the central business district
- Accessibility - transport and communication links.
(CBD) making it easier for consumers to visit
several shops in one trip. - Location of the business premises.

Retail trade L2_0_;

ta
 Size of the market or target group. - They have their own transporl systems.
Future development potential. - They have storage facilities and stock large
quantities.
4.4 Generol clossificotion of retoilers - They brand goods and advertise their brand
e.g.
- Retailers can be classified into rw,o main categories, Super Saver for TM Supermarkets.
small and large scale (depending on size, capital
outlay and operation).
- They employ specialists in areas like buying,
marketing and business expansion.
4.4.1 Smoll scole - Provide self-sen,ice and self-selection.

- Less start-up capitai required.

- Sell large volumes of goods at low prices
ers.
(SPQR-small proflt quick rerurn).
and - They are usually sole proprietorships with
very few legal requirements for opening.
on - Most of them are located in the residential 45 Types of retoilers
areas.
like - Retailers range in size from a small market stall to
- Low volume of goods. very large business organisations.
ters - Private sector. - When looking at retailers, it is convenient to
classify thern using the following headings:
4.4.2 Lorge scole
mer (i) Commoditiesigoods sold
ring - High volume of goods.
(ii) Size of shop and location
- Large start-up and operational capital.
(iii) Advantages
- They can borrow money from banks to finance
their operations. (iv) Disadvantages
by - They buy in bulk from producers and get (v) Main features
discounts.

rype of retoiler Size/ locotion Goods sold Moin fuofures Advontoges Disodvonfoges

ndependent - Small i fbund N,lainly Usually a family ou,ned Convenientll' located in 'Cannol buy in bulk
Shops in residentral grocery shop. residential areas because ot:
areas in both
Stock a Financed by ouners. Usualll run br locals and * lack ofcapital
rural and \,ariet) of Sell mostly grocery. owner can get uscd to * storage space
urban areas,
of goods
Small shop.
customers
* transport
may aiso be C an ofler credit to
special ist.
stock fen'goods Goods are expensive
u,ell-knou'n cus{omers
Ofl-er personal sen,ice goods move slou ly
Of ter personal attention
Cut bulk (lou tumor er)
Employ Iess u'orkers at veru
Ofl'er int'ormal credit to Goods are usually not
Lou,ri'ages
known customers liesh because they take
Small shop-lo* rentals lon-q on the shelve
Goods are usually expcnsile
Longer opening hours Poor management
Open fbr long hours
Provide l ariety
Break bulk.

3hoin or - Many - Seil one line Has many' branches - Buy in bulk and enjoy large Large capital required
-ultiple shops branchesi ol goods throughout the country. discounts Branch
e.g. tsata for menagers
fbund in
tbotu ear,
All branches use the same - Prices ofgoods are Iou cannot adapt to local
populous
name situations as policy is
areas e.g. Edears and -Goods and staff can be
grou,th points Power Sales All branches have similar transl'erred lrom one branch to determined at Head
or shopping lor clothing. shop lronts (brand name) another Office
centresr'malls. Decorated the same - Can allbrd to keep one branch Have to maintain a
Branches have similar layout running at temporary loss largc warehouse., i.e.
inexpensive to run.
nks. All stock same goods and -One advert wiil benefit all
branches thus sharing on costs Large organisations are
charge the same prices
difiicult to control
There is centralised buying -Easy to recosnise bl loyai
and control custome rs

@ &.
.Is
Retail trade

E
 Type of refoiler Size./ locotion Goods sold Moin feotures Advontoges Disodvontoges

- Each branch has a branch Customers with accounts If customers are

rnanager uto
monitors the day in one branch can get dissatisfied with services at
to day running ofbusiness goods in other braches one branch, they may shun
- Stock and staff can be Travelling customers can all other branches
transfemed to other branches easily identity the shop in
other cities
Customers can buy toods
in one branch and return
them to another branch

Deportmentol Large and - Sell a variety Very large usually in multi- OtTer a variety of goods - Rentals in the CBD are
stores located in city of goods storey buildings customer can get all his/ high
centre (Central in dillerent her needs under one roof Parking space is limited
Shop is dir ided into difttrent
Business departments Customers shop in luxury
District)
departments High overhead costs
Each department is controlled Shop attendants can assist like rentals, wages and
by a manager uho does its buyers on technical goods electricit.v
buying High quality goods are Prices are high
Has spacrous layout oflbred CBD is congested
Lu-turious appcarance : One advert caters for all Large capital outlays
x dcep carpets depafiments required to staft and run
+ ele\ ators Customers see v'hat Risk of bad debt due to
;
* air conditioners
is displayed in other credit ollbrs
depanments i.e.
* restaurants Goods are usually very
departments advertise fbr
expensil e
n
Sell high qualit.v goods each other

Has trained assistants Losses in one Department

Presti-qious impression ;
lbrces people to buy on
are covered by profits in
Uses selt--selection method ol the other departments
impulse
selling
Hire purchase and credit
Prices are usually high
facility enable customers
Otler credit and Hire Purchase to buy consumer durables
Ofler alter saies sen,ice e.g.
delivery
Cash tills are *'ithin the shop
Eramples are lVIeikles.H.M.
Barbour's and Greatermans

Voriety Choin large shops - Sell a variety - Like departmental store: Sell a variety of goods Large capital outlays
Slores situated in city ofgoods like * are multi-storcv (customer can do all required.
centre,/ has hardu'are, shopping under one rool). All decisions are made
r have many departrnents under
many branches clothing and fiom the Headquarters and
one roof Have luxurious outlook
throughout the grocery in branch managers cannot
country e.g. OK dif]'erent * sella vanety ofgoods Assistants can help the h
adapt to local conditions.
departments * thev are rituated rn the cir) customers on technical
under one roof goods. Large organisations are
centre dilllcult to control.
* har'e trained assistants Goods are ofhigh quality
Central ised buying
- Like chain store they have:
results in bulk buying
+ manv branches throughout lrhich in turn result in
the country large discounts.
* have identical shop fronts
Prices olgoods are lou'.
* have similar lay,out
One advert can benefit all
* stock same goods in all branches.
branches Goods bought lrom one
* uniform prices branch can be exchanged
* centralised buying at another branch.

x centralised control

Supermorkel Large shop - Sell grocery Large shop Bulk buying results in Large capital outlays
situated in (food and Sell mostly grocery and large discounts. required.
populous household household goods. Prices are lou' Goods can be lost through 5t
area" e.g. goods)
Sell'-service shops. Lou' overheads as pilf'erage and theflt. k
Grouth Points,
Sell on a cash and carry basis: leu er rvorkers needed Self'-service and display *
shopping
* no credit since customers serve results in
impulsebuying
themselves. which is bad for customers.

Retsil *ade @
 Type of retoiler Size/ locotion Goods sold Moin feotures Advontoges Disodvontoges
centres and * no delivery Goods are clearly displayed.
to\\'ns. Goods are attractivelv displaved Goods are branded and
Eramples are OK on shelves. individually priced making
Bazaars, SPAR.
Have rvide aisles bet$ een it easl for customers to
Food Chain, shop around.
she h.'es.
Food \Vorld. TN{,
Customers move along aisles Otler a variety of uoods
etc.
picking goods the\' $ant. (ditferent brands of same
product can be found).
Can be prorided riith baskets
or trollevs in uhich to put the No bad debts as they
thel pick. operate on cash basis.
-uoods
iD are
Suitable 1br goods that are pre-
packed, branded and indiridual
tred prices.
COSTS Goods are usually bar coded.
i and
Hare parcel counter.
Coods are paid for at till points.
Has securitl f-eatures in the
shop like CCT\'.
'urlays
:Lln

iue to
\OTE: A superette has same features as a supeffnarket. They differ in size. The difference is that a superette is
smaller than a superrnarket.
\ery
Type of reloiler Sizel locotion Goods sold Moin feofures Advontoges Disodvonloges
ession Hypermorket - Vert large shops. Sell a r arietv .Verl large retail outlet. Parking space is arailable -Large capital outlays
.t\ on usualh.found on ol goods and .Operates like a supermarket. 1br motorists. required.
the outskirts ol provide many Situated outside CBD where -Large business therefbre
large cities riere auriliary" sen ices
One storev building uith manl-
depannlents. rentals are lou. becomes difficult to
land is plentiful like banking and
Bulk buying results in large manage.
and cheap. children plaving .Has large parkine space for
t-acilities under motorists. discounts. -Goods can be lost through
- Should be linked
one rooL Prices are usually lo\\'. pilfering.
by good road -Prices are usually lou.
netu ork. Otler high quality goods. -Self-service and dispiay
Offer a varietv ofgoods.
results in impulse
Have lururious shopping Offer varietv of goods
buying u'hich is bad lbr
en\ ironment u ith banks. customers can br), customers.
playing,erounds. restaurants eventhing in one shop.
-Does not off'er credir.
and other lacilities.
Goods are aluays available.
ltlays
Good road net\\ ork fbr eas\' Relaxed shopping
acccss.
environment \\'ith one stop
n]ade
shopping convenience.
s and
lnnot
Moil order firm - Large retail - Sell a rarietv of Operate from a uarehouse. Large capital outlays
tns. Customers can bu1, in the
outlet -usuall.v goods but sonre Use coiourlul catalogues to required lbr stocking
are luxury of their homes.
operates from a might specialise adr ertise. variety and distribution.
rr arehousc. in onc line of Credit is ofTered to regular
Customers choose goods the1, or approVed customers. It might be expcnsire to
- Opcrates .'soods.
uant fiom catalogues. reprint catalogues.
through the - The goods are
Large cor eraee as they
Send orders uhich are then can be reached by distant High delir.ery and
mailine s.vstem usuall"v the
processed. advertising costs.
i.e. adrerts light rieight but customers through post.
are marled erpensive t.ype The goods are deiivered to Lou orerheads. Goods are very
to potcntial like perfumes customers through the postal
Customers can retum goods
expensive.
customers u ho and jen ellerv. s\ stem or are delivered by' door
that are not satisfactory No personal touch
in turn mail back to door sales people. between the trader and
r,"'ithout having to pay for
their orders and Pa-vment can be through post or them (goods are sent on the customers.
payment. The bank, approval).
traders mail the
Customers can return goods if
goods to the
they do not want goods ordered.
customer.
Goods might be sent cash on
rI I avs delii er-i.' (COD).

Large retail - Sell a variety of Large retail outlet. Enjoy large discounts due -Large organisations are
:.ugh Reioil
organisation goods. to bulk buying. difficult to manarre.
Cooperotive r-on-profi t making concem.
lbrmed by
Society - N{ight specralise Formed bl Sell at lorv prices. -Disagreements among the
:p1a\ cr.rstomers to customers
!i ins
in goods that (members) fbr bulk buying. Offer a variety of goods. members might affect rhe
:1e rs.
business-

Retail truile

i
l
 Type of retoiler Size/ locofion Goods sold Moin feofures Advonioges Disodvontoges

enable buik are needed by Sell to general public and -Members enioy a rebate
bu1 ing. merlbers e.g. memhers. at the end of trading

- Conveniently
Farnrers Retail \lay sell ar arietl ot goods.
period.

situated tbr its CooperatiVe. - Members might enjoy

Buy bulk at lower prices.
rnembers. credit buying.
Sell at lou,er prtces to customers.
-Members might get
I Profits (surplus) are shared bY
management training
I
members according to members' tiom society.
patronage.
Members earn a rebate (dividend)
based on their purchases from the
co-operative.
Controlled b"v elected members
(democraticall""" i.e. one vote per
member).
' \le1 bu) frorn co-operati\ e
{
u'holesale society.
.Members mal buy on credit.
. N'lembership is voluntary.
'They are loluntary and non-Profit
making.
- Vemhers jorn through bur rng
shares and subscriptions.
-Buys a variety of goods and sells
to members and non-members
(members buy at lower prices).

tuhla .l.l: T1'pet of ratailers

- These enable customers to visit a number of
4.6 Trends in retoiling shops in one trip.

These are innovations and developments in retailing

- Have luxurious surroundings.
due to technology and other factors. These innovations - Might have recreational facilities such as bars,

and developments: eating houses and benches for resting.

- Make selling and buying easier' 4.6.3 Automotic vending mochines

- Improve seruice to consumers.
- Machines situated outside shops.
- Make goods and services affordable.
- May be hired or rented.
- Attract consutners to certain retailers.
- Located in busy shopping areas or rvhere an
- Make buying convenient. event is taking place e.g. at a stadium during a
soccer match.
4.6.1 Fleo morkeh
- Customer slots in coin or token.
- Large shop or open space that is divided into
- Select button for seruice required.
several stalls (units).
- Goods are provided by machine.
- Each stall is run by separate individuals -
independent units.
- Can be used to buy soft drinks, bus or train
tickets or play games.
- Each stall sells different goods.
- Operate day and night(2411) - increases sales.
- Customer gets different types of goods under
one roof.
4.6.4 E-commerce
- Customer can negotiate the prices of goods.
- Also called e-business.
4.6.2 Shopping centreYPreci ncts - Enables customers to buy goods through the
internet.
- Group of shops fbund at one location.
- Customers visit websites of several traders
- Examples rnclude: Nkulumane Shopping throughout the world.
Centre, Joina Cit.v, Entumbane Shopping
Centre. Sam Levi Village, Westgate and
- Offers a wide range of goods.
Eastgate - Goods are ordered through the internet.

iril
L-:'-J
Retail trade **
1}*
 r
- All infbrmation including pictures of goods,
4.65 Fronchising
prices and total amount of purchase is shown
on a computer screen. - Allows a business (franchisee) to use the
- Customers make all payments through the name, trademark or brand name of a reputable
bank. business (franchiser) e.g. KFC. SpAR, pick ,n,
- Delivery instructions can also be given through
Pay.

email. - Must maintain standards prescribed by the

- Customers enjoy shopping in the comfort of
franch i ser.
their homes. - Franchisee can get business training from the
- If the goods do not satisfy the customer, they franchiser.
may be retumed and are either replaced or a - A business that gives the other business this
refund is given. right is called a franchisor.
- A business that buys the right to use the trade
rdvantages of e-commerce name, products and techniques is known as a
. A business person can reach customers in any franchisee, e.g. Spar, Chicken Inn, Wimpy etc.
part of the world through the use of e_commerce - The franchisee pays a fee or a royalty to the
websites. franchisor for the license or authority to use the
trade name or mark, techniques and products
An organisation is able to get new customers
etc.
locally and abroad.
Customers can use a search index to quickly locate
a product. Advantages to the franchisor
Customers can compare prices of goods and - Franchising serves as a source for capitalised
.1 r- - services using e-commerce facility.
expansion since the franchisee invest their own
E-commerce w,ebsites can make additional funds to expand the franchisor,s business.
information available to customers. - Franchisors receive continuing royalties based
Convenient to customers as e-commerce websites upon a percentage of franchisee gross sales which
are open to customers at all times and customers is paid on monthly basis.
can do their shopping any time.
- Multi-unit expansion leads to brand development.
Faster way of buying and selling.
- Leads to economies of scale e.g. bulk buying at
Low operational costs. lower prices.
Easy to start and manage a business. - All products sold by fianchisee must be bought
Customers can easily select products from different from the franchisor.
suppliers in the comfort of their homes and offices. - Franchisors benefit from managerial skills
possessed by the franchisee.
. radvantages of e-commerce
There is no guarantee ofproduct quality.
Advantages to the franchisee
Lacks personal contact or touch between sellers
and customers. - Built-in customer base.
Customers can not inspect, touch or try
- Uses an established brand and is therefore able
to
goods
before buying. increase sales and proflts.

There is also the danger of getting computer viruses - Franchisee enjoys group advertising as advertising
via the internet. is done by the franchiser.
Goods might take a long time before they are
- No need to build own reputation.
delivered, ifbought from abroad. - Benefits from established business svstems and
It is open to so many competitors due to many
procedures that have been tested and proven
on the
online stores selling similar products and services. market.
Customers may doubt or fear the reliability and
- Also benefits from continued training of staff.
credibility of online stores. - Gets cheap supplies from the supplier.
E-commerce sites are prone to attack by hackers. - All supplies are from a central source.

;il

'tll

&
i Raail trade
I
- Can also get technical and managerial assistance - Encourage customers to buy from particular
from the franchisor. shop as to earn credits/ Points.
- Franchisee is also helped by fianchisor in raising - Encourages loyalty to certain shops'
capital, keeping of financial records/statements,
location of business and advertising of products/ 4.6.8 Pre-pockoging
services. - Packing of goods into standard containers like
- Banks are willing to lend to franchisees due to plastic bottles and wrappers before selling.
relatively low risks. - Usually done by manufacturer or wholesaler.
- Retailers can also do their own packaging e'g.
Disadvantages to franchisor
supetmarkets or butcheries.
- Franchising is a regulated activity that requires
compliance with federal and state franchise laws. Advantages
- Establishment of a franchise system is expensive
- Enables price tags to be stuck on individual goods.
due to legal fees and cost of establishing a
franchising infrastructure. - Enables bar cording of each item.

- Poor management of franchised outlets leads to - Enables easy handling ofgoods.

bad reputation for the whole business. - Goods are easily displayed on shelves.
- Facilitatesself-service.
Disadvantages to the franchisee - Reduces soiling and ensures hygiene.
- Royalties paid monthly will impact on profit - Prevents goods from deteriorating.
margin since these are based on gross sales and not - Essential information, for example instructions, is
profits. often put on the packaging material.
- The franchise or the licence maybe withdrawn if - Allows advertising to take place.
cefiain standards are not met. - Coods look attractive.
- Some bad franchisors may not provide the training, - Goods are easy to store.
on-going support and brand recognition.
- Goods are easy to identiff.
- Access to specific suppliers has been established
and interactions with others might be restricted. 4.6.9 Bronding
- Less control over the business since many decisions
- Giving goods a distinctive name or label or
are made by the franchisor.
mark, for example Geisha, Colgate, Surf and
- Growth of business is restricted by whole franchise. Coca-cola.

4.6.6 Credit cords

Advantages
- Issued by banks or large retail outlets.
- Similar goods will look different e.g. Stock
- Allows card holder to buy goods in selected Margarine and Buttercup are all spreads but they
shops to a stated limit. look different because ofbranding.
- PIN protects the card from abuse. - Makes choosing of goods easy.
- Allows customers to buy goods on credit. - Goods are easy to advertise.
- Can be used internationally.
- Goods are easy to identi$2.
- No need for customers to carry large sums of - Encourages brand loyalty.
money.
- Enablesself-service.
- Examples are Visa and Master Card.
4.6.10 Bor coding
4.6.7 Troding stompVloyolty poinh
- Label stuck on goods.
- Points given to customers as they purchase.
- It has parallel vertical lines showing
- Points allow customers to enjoy certain information of goods such as name, price and
privileges/ rewards when they accumulate quantity.
points and reach a given level, e.g. discounts
and free goods.
- OMR (read by computer).

Retail*ade
rcular Goods are individually priced. well displayed and
within reach of customers.
Customers shop at own pace.
Remind customers of goods they might have
forgotten on shopping list.
:s like Check out points for paying fbr goods as customer
lo leaves the shop.
,u-r.r. Makes shopping fast.
otro
.-- v.b.
The code can be read by a sensor on a - Customers can remember those goods left out on
computer. A barcode is an optical machine- the shopping 1ist.
readable representation of data relating to the
object to which it is attached. 4.6.13 Self-selection
- Makes buying and selling faster.
- Method of selling goods.
loods.
- Stock taking becomes easy.
- Usually used by departmental stores.
- Self-service becomes easy.
- Customers select goods with the help of the
shop assistant.
4.6.1I DIY (Do it Your Self) Products
- Pay points are within the shop.
- Components of a product that are easy to assemble.
- Customers can pay for goods and proceed
- Allows customer to assemble components on their with shopping.
own.
- Allows customers to inspect goods before
,nS, iS - Mainly sold in supermarkets and hardware stores. buying.
- Examples are furniture items like tables that can
be dismantled and flt together again using screws,
tents. solar kits and bicvcles. 4.7 Reosons for the survivol of smoll-
scole retoilers
\dvantages
- Have instructions on assembling components.
- Small scale retailers are situated near customers.

- Customers require little skill to assemble the

- They offer personal services to customers, that is
cater for individual needs.
components.
rel or
- They are cheaper than already assembled products.
- They break bulk, for example they can sell a quarter
:f and bar of soap.
- Customers get satisfaction in making their own
goods.
- Offer credit to known customers.
- Easily adapt to changes in the market.
4.6.12 Self-service - Low overheads e.g. wages, rentals etc.
Stock - Low capital needed to run the shop.
Method of selling goods.
t they
- Makes use of trolleys and baskets - They open for long hours even until late in the
evening.
Usually done in supermarkets.
- Joining voluntary chain or formrng retail
\dvantages cooperative societies to buy in bulk at low prices
and sell at competitive prices.
- Allows customers to lrove around picking goods - Being franchised.
they want.
- Customers can examine goods before buying
(can read instructions, check prices/ quality and 4.8 Credit tronsqction
quantity) or compare prices of goods and calculate
total purchase.
- When buying on credit from retailers, customers
can either buy on Hire Purchase (HP) or Deferred
)wlng - Suitable for pre-packed, branded and bar coded Payments.
'e and
goods.

t27; Retail trade

rfa
r
Feqture Hire purchose Deferred poyments/Credit soles

Goods Sold Durable goods, e.g. car, furniture, Non-durable goods (goods without
TV second hand value) e.g. clothing and
groceries.

Durotion Instalments are spread over 12 to Instalments spread over a short period
36 months (long period) e.g. 6months.
Can be monthly for grocery- customer
must pay for goods at end of agreed
trading period.

Ownership of - Goods belong to trader during the Ownership passes to customer when
Goods hire purchase period. Ownership agreement is reached.
passes to customers after PaYment Goods cannot be repossessed.
of last instalment. Trader can sue customer in case of
- Goods can be repossessed. default of payment.

Finoncing Financed by finance company. Financed by trader.

Deposit Stipulated by act. No deposit is required.

requiremenis Buyer must pay a deposit, the Depends on agreement between seller
balance and interest are spread over and buyer.
a period.

Formolities Agreement must be in writing. A written agreement is optional.

Agreement is controlled by Hire Based on trust.
Purchase Act.
"{'it*ir j.;: f l;{!i,, r':t,.'t't l:1'1r",'4,,,.3; ltii'r purL'hurt, uttrl tla,te rrti pu-l'!,r{ttt\

l'C i*o=o,u*;;
.-.-*-'-*
-,
:--:::: "
-':: -- ;/rTj
. _- 3. 'Aretail outlet has many branches and sells a variety
:IEST YFU$5rlr_ffij of goods under one roof. Has many departments
under one roof.'The above describes a
Multiple choice questions A. hypermarket. B. department store.
1. A retailer who operates from a r,varehouse and C. chain store. D. r'ariety chain store.
advertises through catalogues and delivers goods The term branding means
:

4.
to a customer is known as a
A. retail co-operative society.
B. mail order firm.
C. specialistretailer. D. putting flavour into the goods. i

D. independentretailer. Which of the follorving is not a featurd of a retaili

2. Which service is offered by a supermarket? cooperative society? ]

A. delivery B. credit A. goods.

Offers a variety of i

i C. personal serv ice D. variety B. Sells to members only.

Retail trade
 C. Profits are shared according to patronage' (c) franchising [8
D. They are democratically controlled. 3. Distinguish between a Chain Store and a
Department Store. lt2l
Struciured questions 4. (a) Describe the features of a hypermarket. t10]
(b) What is e-commerce? t5l
- State the services offered by retailers
(c) What are the advantages of e-commerce? [5]
(a) Consumers l6l
(b) Manufactures
5. (a) Explain how small scale retailers continue to
t6l sun ive in the face of stiff competition from
Explain the following terms: large scale retailers. t5l
(a) pre-packaging t6l (b) What factors are to be considered when
(b) branding t6l establishing a retail outlet? t6l

Gi*sscry
Brand Name a name that distinguishes one product from another; the trade name of a product.

Bar Coding is an optical machine-readable representation of data relating to the object to which it is
attached. It represents data by varying the widths and spacing of parallel lines.

DIY Do It Yourself.
Franchising is the practice of using another firm's successful business name as one's trading name.

Lo-valfy points points/credits awarded to customer when they purchase goods or service points are redeemable.
Pre-packaging putting goods in containers or wrappers before sale.

anet)
nents

retail

,izel Retail trade

Z-
 Risk of failure if there is poor planning'
5.O Obiectives Unlimited liability
By the end of this chapter learners will be able to:

a) identify the qualities ofan entrepreneur; 5.2 Monqgement functions

b) explain the advantages and disadvantages ofbeing
a) Planning
an entrepreneur;
- Involves setting of objectives for the business'
c) show the importance of enterprise skills;
- Identifying and meeting training needs of
d) explain various management functions,
workers'
e) identify ethical considerations in business; will also find out the resources
- Managers
0 explarn the contents of a business plan; needed.
s) explain different types of intellectual property; and b) Organising
h) describe the functions of the Zimbabwe patent - Delegating tasks to subordinates in order to
ottce. achieve organisational objectives'
c) Commanding
5.1 Chorocteristics of on entrepreneur - Managers have the authority to make decisions
and give instructions to workers to carry out
- Risk taker. tasks and see to it that tasks are caried out'
- Creative. d) Controlling
- Optimistic. - Involves measuring and evaluating the work
- Self- confident. of the emPloyees so as to fulfil the objectives
- Innovative. of the comPanY'
- Independent. e) Coordinating
- Effective communicator. - Bringing together resources and workers to
- Hard rvorking. achieve organisational objectives working as
a team.

Advantages of being an entrepreneur

5.3 Business ethics
- Being his/her own boss.
- Ou'ner enjoYs all Proflts' - Do not cheat.

- Use personal skills and interests' - Do not steal.

- Able to put up own ideas into practice' - Do not bribe.

- If entrepreneur is successful the entrepreneur will

5.3.1 Business ethicol considerotions
become [amous.
- ObeY the law.

Disadvantages of being an entrepreneur

- Be loYal to the comPanY'

- Not all entrepreneurs will be successful'

- Treat others honestly and fairly'
the
- Lack of knowledge and experience in operating 5.3.2 lmportonce of business ethics
business.
of finance due to lack of - Gives credibility to the business'
- Restricted sources
collateral securitY.
- Quality products will be produced'

Enterprise
 Enables the business to be a good corporate Infringements
citizen. a) Piracy
- To sell or make a product which belongs
5.4 Business plon to someone else without permission or
payment.
5.4.1 Contents of o business plon c) Plagiarism
- Financial plan. - To take ideas or work of someone else
- Management. and use as one's own without admitting
- Products. one has done so.

- Strategy and implementation.

- Market analysis.
Importance of protecting intellectual property
- Organisational background. - To stimulate the creativity in artists.
- Executive summary. - Artists will be rncentivised and be rewarded for
]SS.
their work.
of 5.4.2 lmportonce of o business plon - Artists will be inspired to create more work and
- Helps to obtain banks loans and bank spread it for the good of the public.
CCS
overdrafts. - Artists can account for their sales.
- A guideline for what the company intends to
achieve. Solutions to intellectual property infringements
tL-)
- Enforcement of laws such as copyright law.
55 lntellectuol property - Musicians can in-script their recordings.
lns 55.1 Types of intellectuql property
out
a) Trade marks
5.6 Functions of Zimbobwe potents
- Design, special name and sign marked
office
on a product to shou, that it is made by a Admrnistration of Intellectual Property Act.
rrk
particular producer. Protection of patents or trademarks so registered.
ies
b) Patents Registration of intellectual properti es.
- The right given by a government office lssuing certiflcates after registration of intellectual
to allow a person to make or sell a new property.
invention for certain vears.
ES

C. Controlling
tr-HgTTffi D. Investrng
choice questions 3. Of the following, which one is a business ethic?
"'tultiple A. Do not be late
1. is an advantage of being an
entrepreneur. B. Do not steal
A. Use of personal skills and interests C. Do bribe
B. Sowing offto others D. Do cheat
C. Lack of knowledge 4. All of the following are intellectual properties
D. Unlimited liability except
Which one is not a management function? A. trademarks.
.{. Organising B. patents.
B. Planning C. industrial designs.

m ,{
**
Enterprise
 (b) \
D. business plan. Explain management functions in a business
organisation [10]
5. One of the importance of business ethics is to
A. be self-reliant. 2. (a) List the functions of the Zimbabwe Patents
Office t4l
B. achieve in controlling the community
(b) What are the contents of a business plan [10]
C. give credibility to the business.
(c) Explain any two elements of a business [6]
D. ignore what the consumers want.
3. Discuss the stakeholders of a business and their
objectives [20] TJ
I Structured questions
3,"

being an entrepreneur [10]

Sto*sory
Business plan document which contains the business objectives, operations details, finance and owners of
the business
6.:
Corporate legal persona (legal entity)

Entrepreneur person who has a business idea and is willing to take a risk

Ethics set of moral principles that guide behaviour

Infringe take over the right ofanother

In-script system done on computers to prevent illegal copying of information

Intellectual property - a product produced by someone using his/her mind

Unlimited liability the property of the owners of the business can be taken to cover the debts of the business

} Enterprise
IESS

[10]
i*6Hffi*
r!
ILS
\_/
t4l
[10]
t6l
their
[r0] 5.0 Obiestives 6.1.3 Quototion
:he end of this chapter learners rvill be able to: - A reply to a letter of enquiry.
identify the documents used in home trade; - Sent by seller to prospective buyer.
describe the t'eatures and contents of each of the - This document draws from the customer's
documents; and enquiry and gives the prices of those goods
explain the uses/importance of the documents. that have specifically been enquired for.
sof - Gives a description of the goods.
5,1 Different documents - The seller lists the goods available out of
those requested and gives unit and total prices
6.I.1 Letter of enquiry so that the customer sees the total bill before
making a decision.
- It is sent by a potential buyer to several
suppliers. - Shows the date of issue.

- Sent rvhen potential buyer wants to get details - Shows names of both seller and potential
about the availability of goods, terms of buyer.
payment, terms of delivery, prices and sizes of
goods. 6.1.4 Cotologue
- It gives the buyer the chance to compare terms - The catalogue shows pictures of all the goods
offered by different suppliers.
that are offered by the seller with unit prices
- Upon receiving the letter of enquiry, the seller under or above each photograph.
responds by sending a price list, quotation,
- It also shorvs products codes.
a catalogue or a pro-forma invoice to the
potential buyer. - It serves as a means of advertising.
- Shows names and addresses of supplier and
buyer. 6.15 Pro-formo invoice
- Shows date of issue. - It is an invoice that is sent by the seller
to the buyer in any one of the following
6.1.2 Price list circumstances:

- It can be sent to a potential customer in (i) When goods are sent on approval;
response to an inquiry. (ii) When payment is needed before delivery;
- This is a list of all the products offered by the and
supplier with prices of each item. (iii) As a quotation when the buyer wants to
- It also gives information on business terms make a decision.
like credit. discounts and deliveries. - The word pro-forrna means "as a matter of
- The potential buyer actually sees all the form"..This means that it shows the customer
products on offer and notjust what they have how the actual invoice will look like when it is
enquired for. which might entice them to buy raised so that a decision is made.
more.

t!1_l Documents used in home trade

 6.1.6 Order form 6.1.9 Delivery note
- It is sent by the buyer to the seller and serves - It is issued by the supplier to the buyer and it
as an authoritative instruction for the seller to accompanies the goods being delivered'
provide and charge the goods indicated on it' - It is used when the supplier uses own transport'
- It shows the quantities, sizes, types, unit prices - Enables the driver to ensure that correct goods
and the total price ofthe goods required' are loaded and delivered.
- Upon receiving an order, the supplier will - It is issued in duplicate and the buyer signs
charge the customer tbr the goods and make a
the copies as confitmation that the goods have
delivery. been received.

6.1.7 lnvoice - It contains:

(i) Details of goods delivered by the
- This is the supplier's bill to charge the
supPlier's own transPort.
customer when goods are supplied on credit'
(ii) Quantities of goods sent.
- It is the summary of a single transaction giving
the following details:
6.l.10 Consignmeni note
(i) DescriPtion of goods;
(ii) - It is used when goods are being delivered
QuantitY of goods;
using hired transPotl like Swift.
(iii) Unit and total price of goods (amount
owed);
- lt is completed it triplicate by the transporting
company, a copy being given to the supplier
(iv) Terms of PaYment e.g. discount and
and the buyer and the third one is retained by
interest:
the transPorter.
(v) V.A.T;
The copies are signed by the receiver of the
-
(vi) Name and address of both buyer and
goods.
seller: and
- It is a contract of carriage between the
(vii) E, & OE clause (Errors and Omissions transpofter and the suPPlier.
Excepted) which gives the seller the right
to adjust the invoice for any errors and - It contains the following information:
omissions that might have been made (i) Names and addresses of supplier
when it was issued. (consigner) and customer (consignee);
(ii) Address/Place of delivery.
6.1.8 Advice note (iii) Quantity of goods
- It is sent bY a suPPlier to a buYer.
(iv) Description of goods.
- It notifies the buyer that goods have been
(v) Condition of goods.
dispatched and are in transit.
- It is sent ahead ofthe goods.
(vi) Freight charges.
- Helps the customer to make preparations to (vii)Name of hired transporter.
receive them e.g. creating space for storage
and ensuring that there will be personnel to 6.l.ll Debit note
receive them. - It is sent by the seller to the buyer to correct an
- It contains the following details: undercharge (under invoiced goods).
(i) Date of disPatch; - It is a suPPlementary invoice.
(ii) Method of disPatch; - It is a request for the buyer to top up payment
(iii) Tems of dispatch; lbr goods alreadY delivered.
(iv) A descriPtion of the goods; and - It increases the amount owing on the original
(v) The name and address of both the sender invoice or receiPt. i
I
and the receiver'

,i

i-_3_4 ,

I Documents used in home trade

,rl
 6.1.12 Credii note - The seller gives the customer an original and
remains rvith a carbon copy.
ind it - It is sent by the seller to the buyer to comect an
overcharge arising from any of the following:
iport. (i) Arithmeticalerrors; 6.2 Trode ond cosh discounts
roods 1ii; Overstated invoice:
(iii) Return of ernpty crates: 6.2.1 Trode discouni
slgns (iv) Return of damaged goods; - Discount given by one trader to another trader.
have (v) Return ofsub-standard goods; - An automatic deduction.
(vi) Return of goods that rvere wrongly sent to - Deducted fiorn the gross invoice price cash
the buyer; or discount.
(vii)Adjusting a shorl supply of goods. - Given to encourage customer to keep buying
- It reduces the amount owing on the original tiom the sarne supplier.
invoice or receipt. - Represents the profit margin of the buying
- It is usually printed in red. trader.
- Trade discount is high - ranging between 10 %
6.1.13 Stotement of Account and 40oto- Discount given to any customer.
ir ered
- It is a summary of allthe transactions made
between the buyer and the seller for a grven
6,2.2 Cosh discount
rorting
rpplier
period of time when goods are sold on credit. - Deducted after trade discount.
red by - It gives details which include the follorving: - Deducted only upon prompt payment (usually
(i) Purchases made; within thirty days)
of the (ii) Payments madel - Given to encourage prompt payment.
(iii) Balance at the end of the period: - Prompt payment:
'n the (i") Amount due; (i) Reduces clerical work for sending
reminders
(v) Due date for payment;
(vi) amount of interest on overdue accounts;
(ii) Reduces bad debts

(vii) credrt available to the buyer;

- Cash discount is low - ranging between 1% to
5%
(viii) Terms of payment; and
(ix) Credit and debit notes that adjusted the 6.2.3 Exomple Colculotion
amount during the period.
A customer bought goods valued at $ 10 000.00 less
- It is a request for payment made to the debtor 300/o trade discount. She paid promptly and received a
by the seller. 3% cash discount.
- The buyer can check the accuracy ofentries.
(i) Trade discount:30% ofgross price ($10 000.00)
- Ait is used for accounting purposes. : s 3 000.00

6.1.14 Receipt
(ii) Amount payable after trade discount: $10 000.00
- s 3 000.00: s7 000.00
- It is an acknowledgement of payment issued (iii) Cash discount :3o/o of S 7 000.00: 5210.00
rect an
by the seller to the buyer who buys for cash or
(iv) Net amount payable (before VAT) :$ 7 000.00 - S
pays up in a credit transaction.
210.00: s 6 790.00
- It cerlifles that payment has been made and
(v) Net amount payable (after VAT) :56 790.00 + 15o/o
.l is kept for reference in case of future dispute :
($ 1 018.00) $7 808.00
l over payment.
nginal l Common errors
.
)

Students fail to distinguish between a consignee and a consigner; credit note and debit noie.

Hint
. For each document, remember its contents and purpose/use.

EJ Documents used in home trade

 __.-lfx.l 5. On July 1, 2013, a sewing machine worth $2 000
rEry_Ygt,IsELFsj was allowed a l0o/o cash discount if paid for within
30 days. if a customer paid for the machine on the
Multiple choice questions 2lst of July 2013, how much was paid?
1. The purpose of a letter of enquiry is to
A. sr 200 B. S1 800
A. enable the seller to identify the best buyers to c. sl 440 D. Sl 380
deal with.
B. enable the buyer to compare terms offered by Structured questions
different buyers before choosing one to deal L Describe the following documents that are used in
with. home trade:
C. identily ways olmarketing new brands. (i) statement of accoun t5l
D. make sure that goods are as cheap as possible.
(ii) invoice lsl
I

2. A document that has prices as well as pictures of

(iii) advice note
goods being offered is known as a tsl
A. photograph. B. quotation. (iv) letter of enquiry tsl
C. price list. D. catalogue. 2. (a) Distinguish befween cash and trade discount.
J. A pro-forma invoice is sent to a buyer when I0l
A. goods have beett or.'ersupplied. (b) what is the importance of the following
B. payment is required before goods are delivered. documents used in home trade?
I

C. acknou'ledging that payment has been (i) invoice

Pro-forma t5l
received. (ii) debit note. t5l
D. enquiring about tenns of payment and delivery. 3. (a) How does a quotation differ from a price
One of the follou,ing statements is true about a list? t4l
debit note and a credit note. (b) How does the use of catalogues benefit both
A. A debit note is used rvhen returning empty the buyer and the seller? t6l
crates; a credit note is used to top up payment (c) What are the differences between a delivery I
where there has been an undercharge for goods note and a consignment note? t5]
delivered.
4. (a) List any three contents and explain three uses
B. A credit note is used to correct an overcharge;
of each of the follou,ing documents:
a debit note is used to correct an undercharge.
C. A debit note is usually printed in red while a
(i) credit noe t6l
credit note is alu'ays printed in blue. (ii) statement of account t6l
D. A credit note is used fbr under invoiced goods (iii) invoice i6l
while a debit note is used for over invoiced ( b) What does the abbreviation 'E & OE'stand for
goods. on an invoice? l2l

*i*sscry
Consignee a customer who receives goods being delivered using hired transport

Consigner a person/company who supplies goods that are delivered using hired transport.
E&OE errors and omissions excepted.

Pro-forma an invoice that is sent by the seller to the buyer as a matter of form. It helps the buyer to see how the
invoice will finally look like should they choose to buy.
V.A.T Value Added Tax

Documents used in home trade

.E
.ri'*
000 ?l-r
thin :i.rL tlmil{n
r the
tr

:d in
7.0 Obiectives 7.1.2 Export trode
- . the end of this chapter learners will be able to:
- Where a country sells goods and services
tsl to other countries e.g. Zirnbabwe selling
- define international trade; diamonds to France.
t5l : distinguish between home trade and foreign trade; - This happens when a country produces more
t5l . outline the main purposes of international trade; of a product than it requires for domestic
t5l
- state the problems of the export trade; consumption.
runt.
: explain the middlemen of foreign trade; - Countries also export in order to get foreign
Ii 0] currencv hence goods can be expofied even
r ing
describe the functions of customs and excise
authorities; when they are locally in sliort supply.

i5l
- outline the purpose and contents of each document
7.1.3 Entrepot trode
used in international trade;
tsl explain the importance of bonded warehouses; and - This is when a society imports goods for re-
lrice export e.g. Zimbabwe could irnport rice from
list the advantages and disadvantages of
14) China and export it to Zambia.
international trade.
both - Goods are sometimes developed, further
t6l or re-branded before they are re-
processed
Very
7.1 Bronches of internotionol trode exported.
tsl . Foreign or international trade deals with exchange
USCS of goods and services between buyers and sellers 72 Benefits/ lmportonce of
of different countries. It consists of import trade,
export trade and entre-pot trade.
internotionol trode
t6l
Exchange ofgoods and services between countries Evens out supply ofgoods.
t6l
within the same geographical region, e.g. SADC Goods become cheaper.
t6l
region, is called regional trade. Creates employment.
J for
t2l lnternotionol trode Widens the market.

lll Businesses make profits.

,pJ* rode Export'trode EntrepJt rode To get what a country cannot manufacture
(interdependence).
:'.1 Brunthes of itrterttfiittrtul irudt To obtain what it does not possess, for example oil,
raw materials.
7.1.I lmport trode
To trade surplus goods.
- Buying of goodsand services from other
countries e.g. Zimbabwe buying airplanes
To access high qualitir goods thereby improving
i'the the standard of living of people.
from China.
To access a variety ofgoods.
- This happens when a country does not have
the capacity to make such products or provide To obtain quality goods at competitive prices.
such services. Foreign currency is obtained to pay for foieign
- Countries also buy from others when it is goods.
cheaper to import than to make the goods. Promotes intemational specialisation.

Interndtioncl trade
- Generates revenue fbr the government To supplement shorlages/seasonal goods.
- It ilrproves relations, infrastructural, social links - Enables transfer of technology/business skills.
and promotes peace between countries' - To beneflt from comparative advantage.

7.3 Distinction between home trode ond foreign trode

Home trode Foreign trode

Trade among citizens and entities within the same - Trade between/among countries.
countty.

Involves u'holesale and retail trade. Involves importing, exporting and entre-pot.

Larger volumes of goods traded in one transaction.

Smaller volume of goods traded in one transaction. 7l
Distances are relatively short. Distances are usually long.

Less state interference/less restrictions/less trade More state interference, restrictions and trade
barrier. barrier.

Less risks. - Higher risks.

Less costs on market research. - Higher costs on market research.

Local cumencies are used. - Foreign currencies are used.

Local languages are used. Foreign languages are used.

- Same laws. Different Laws.

Same units of measurement. Different units of measurement.

- Same banking and flscal/monetary Systems. Different banking and flscal /monetary systems.

Ferver documents. More documents.

Factors of production are mobile Factors of production are less mobile.

Fewer middlemen. More middlemen.

lnsurance costs are lou.. Insurance costs are high.

- Largely same culture and religion. Different cultures and religion.

- Low transpotl cost. - High transpofi cost.

'lh
hl L'', 1 l)i.fli' rc nl lis lr(ttrL't' tt lt o rtrr' turd .fitrt'i srr t rrtiit:
7t
7.4 Difficulties foced by exporters - Differences in currency and fluctuations in
- Differences in languages which calls for translation exchange rates'
of instructions and advertisements. - Complicateddocuments.
- Diff'erences in units of measurements. - Licenses are not easy to obtain (export license).
- DrfTerences in region and culture. - Long distances.
- Differences in level of technology. - Delays in receiving payment.
- Differences in Laws and regulations. - High transport costs.

r-..-\
International trade i38r
L::-
r;.
 High transit risks involved. movements of goods for example types of goods.
High insurance charges. origin and destination ofgoods.
Risks of non-payment/insolvency of the foreign - Supervise the movement of goods in and out of the
buyers. country.
High storage costs. - Ensuring that prohibited goods are not imported or

I--l
Trade restrictions. exported.

-{dditional government and administrative - Charge and collect duty on imports.

regulations. - Enforcing quotas and embargoes on -eoods from
Costly market research. trading partners.
L

I Need for special packaging. - To raise revenue for the govelxment.

Political instability. - Control bonded u,arehouses to enslrre no dutiable
goods are released befbre duty is paid.
.ln. i

r5 Troding blocs - Supervise public health by arranging quarantine

for animals.
For example COMESA (Common Market for
tul-
.,-.1 Eastern and Southern Africa), EU (European - Supervise entre-pot trade.
Union), SADC (Southern African Development
Community) and SACU (Southern African
Customs Union).
7.7 Bonded worehouse
A trading bloc is formed by two or more countries. - It is a govemment or privately ow'ned u,arehouse
They agree to preferential or free trade and which is controlled by customs authorities.
movement of people across member states. - Located at the country's points of entry such as
Countries involved become a common market with airports, seaports, rail stations and border posts.
or without reduced trade tariffs.
7.7.I lmportonce of bonded worehouses
75.1 Purposes of forming troding blocs
They store dutiable goods only and release
- To mobilise resources together and share ideas them when duty has been paid.
and technology.
1S. Provides govemment u,ith inlbrmation on the
- To have bargaining power as a group. types of goods being imported.
- To reduce reliance on countries outside the
Goods in bond can be packaged, branded.
b1oc.
blended. sampled, bottled, softed. assembled
- To encourage trade between member countries. or graded but cannot be manufactured.
- Accelerate regional economic development. Goods can be removed from bond in small
- Increase investment opportunities in the quantities thus saving on working capital.
region.
Goods can be sold whilst in bond.
- To make customs clearance quick and easy.
Store goods in re-exporl trade (entrepot).
- To promote peace within the region.
Store goods until they mature like tobacco,
- To reduce trade barriers.
wine and wedding cakes.
They are controlled by customs and excise
'.6 Functions of Customs ond Excise authorities (ZIMRA).
Authorities Goods can be moved from one bonded
Collect, compile and analyse statistics on imports warehouse to another under the supervision of
and exports in order to show pattern of trade and a bonded carrnen.

L99J Internotional trade

r,ii
 7.7.2 Ditterences belween bonded worehouses ond privote worehouses

Comporison criterion Bonded worehouse Privote worehouse

Ownership Government or privately owned. Privately owned.

Control Government Controlled by port and Controlled by private business owners.

customs authorities.

Goods stored Dutiable products. Raw materials, work in progress and

finished goods.

Movement of goods Released only aflerpayment of customs Goods move freely in and out of the
duty. warehouse.

Location At or close to airports, seaports, border Located anywhere convenient.

posts and major rail routes.

ktble 7.2: D|flerenc'es betv't:en honded unil Srrivtte h'ortlt(,tt\(\

7.8 Trode restrictions To discourage the consumption of harmful

products.
- This is a means by which governments seek to ' To prevent shortages through exporl quotas.
control the quantities and types of goods and
services that come into the country. 7.8.2 Methods of effecting trode controls
- The level of imports is kept in control so that a a) Quotas
favourable balance of payments can be maintained.
- Quotas limit the quantity of goods to be
There are also other reasons for the imposition of
imported per period e.g. per year.
trade restrictions and these are given below.
b) Customs duty/tariff

7.8.I Reosons for imposing trode - Customs duty makes imports more
expensive and less attractive.
restricfions
- People will logically opt for domestically
- To protect local industries.
produced goods.
- To protect infant industries.
c) Imposition of excise duties. An excise
- To protect established industries. dutY:
- To protect strategic industries. - ls also called a special tax.
- To protect declining industries. - Is an inland tax while customs duty is a

- To safe guard employment. border tax.

- To prevent durnping. - Is charged on the change ofownership of
locally registered second-hand vehicles at
- To reduce imports.
the rate of 5oh of the value of the vehicle.
- To preserve a nation's traditional way of life
e.g. by protecting farming.
- Is charged on the sale or production fbr
sale of targeted products and activities
- To avoid the importation of goods made within a country.
through exploitation e.g. of labour.
- Is charged only on specific products and
- To stop over specialisation by encouraging activities e.g. tobacco, petrol, alcohol and
the local production of goods that are being gambling
imported (import substitution policies).
- Is an indirect tax i.e. the producer or seller
- To raise government revenue. raises the price of the product to recover
- To correct a balance of payment deficit. the tax frorn the consumer.

h
g ',.' '
.,.::,,,', Inter*atioaal trade L19J
,*
,,t.
' .
&&
 d) Embargoes/import ban - Invisible trade refers to the import or export
of
Embargo bans trade with certain countries services.
for reasons like war, exploitation of child ' A favourable balance of trade occurs when the
labour and human rights abuses.
value of exports (visible + ini,isible) is greater
than
An embargo can be placed only on the value of imports (visible + invisible).
the trade of certain types of goodi e.g.
When the total value of imporls exceeds that
firearms, drugs and explosives. of
total value exports, an unlbvourable balance
of.
e) Subsidies trade occurs.
- These are govemment grants given to
exporters and local producers to make 7.9.1 Visible trode
locally manufacfured goods cheaper than - Trade in goods only (tangibles).
imports.
- For example clothes, maize, rnachinery.
- Subsidies reduce prices of domestic
products making foreign goods more
- Involves visible imports and visible expons.
expensive.
7.9.2 lnvisible trode
- Less is imported when local goods are
competitively priced. - Trade in seryices only (intangibles).
- Subsidies reduce imports and increase - For example transport, tourism, insurance.
exports. - Involves invisible imporls and invisible
nxf.^,
0 Import licenses exports.

tas.
- Limit number of importers by issuing 7.9.3 Bolonce of pqyments (B.O.pl
licenses to only a ferv.

rhols g) Devaluation of local currency - It is the difference in the total value of exported
and imported goods aud services.
- Makes imports more expensive.
.. : h) Exchange control
- Exported goods ancl seruices less imported
goods and seruices.
- Rations foreign currency allocations and
-
the amount that can leave the country at
It can be a surplus (favourable) if exports
exceed imports.
any given time.
i--! -: - Ir is a deficit (unfavourable) when imports
7.8.3 Arguments ogoinsl protectionism exceed expofts.
..:- - It is calculated for
L-!--
- Subsidised industries become inefficient. it
a given year.
becomes difficult to forecast which industries
e\a, ]:
are likely to survive in the future.
7.9.4 Couses of o bolonce of poyments
- deficit
The power to protect industries is limited bv
international trade organisation agreements.' - High inflation as compared to the inflation
- Attracts retaliation because other countries rates of trading partners.
wiil also impose trade restrictions. - Low interest rates than neighbouring countries.
-F--
- Consumer choice is limited to what is produced - Over-valuation of the country,s curency.
locally. - High government expenditure abroad.
- Leads to shortages. - Increased foreign investment by locals.
:a: :.-

I Bolonce of trqde 7,95 Methods of correcting on

unfovouroble bolonce of poyments
it is a summary of the country,s total exports and - Increase exports to increase inflow of foreign
1.- - '-, rmports with the rest of the world.
curTency.
It is a comparison of visible and invisible trade -
and Reduce imporls to reduce outflow of foreign
capital movement.
cuffency.
fhe import and export of goods is called visible - Devalue local currency to make impons dearer
:rade.
and exports cheaper.

@
& Internatinnal trade
 Reduce foreign culrency allocation to 7.ll lntermediorieVogents in
importers. lnternotionol Trode
Negotiate fbr debt cancellation with
Intemational Monetary Fund or World Bank. lntermediaries:
Sell own assets in foreign counties. Reduce distribution costs through their expertise.

Sell gold resera/es. Provide storage fac i I ities.

Control the issue of import licenses to reduce Prepare goods for sale through blending, bottling
the number of importers. and grading.

Substitute imports with (home-made) goods. Ensure wide distribution of products.

lntroduce increase excise duty on

or Stabilise prices by ensuring constant supply of
goods.
certain goods so as to discourage domestic
consumption and make more goods available Provide display space to showcase goods.
for export. Enable seasoning and ripening of goods such as

Increase customs duty to discourage wine, cheese and wood.

consumption of imports. Provide advice to both buyers and sellers.
Impose quotas to limit quantities of goods
irnporled. 7.ll.l Del credere
Impose trade embargoes - banning goods - Is an agent.
from cefiain countries. - Sells goods on behalf of his/her principal.
Subsidise expotls. - Possesses goods he/she sells.
Give tax concessions to exports to encourage - Has insurable interest in the goods.
exports e.g. expon processing zones. - Sells goods in his/her own name.
Establish export promotion to attract foreign - Guarantees payment to the principal.
buyers by parlicipating in trade fairs and
exhibitions.
- Stores the goods.
- May sell goods on credit.
- Delivers goods to customers.
7.lO Reosons why stotisticol records of - Can obtain loans from banks using the goods
imports ond exports ore kePt as collateral security.

To provide information on the levels of impofts and

- Is paid a higher commission because of the
guarantees they give and the greater risk they
exporls. The information rvill be used fbr balance
take.
of trade computations.
- Commission earned is called del credere
To compile the invisible balance.
commission.
To assist govemment in correcting an unfavourable
balance of payments. 7.11.2 Foctor
To control the outflow of foreign cuffency. - Is an agent.
To enable the government to be aware of its trading - Brings buyers and sellers together.
position with othel countries.
- Possesses the goods which they sell.
To help government determine the needs of its
people.
- Sells in his/her own name.

To inform decisions on the tetms of trade with

- Personally liable to contracts.

other countries. - Has insurable interest in the goods.

To evaluate the effectiveness of a country's foreign - Delivers the goods.

trade policies or tax collection system. - Stores the goods.

Internattonol trade @
 7.11.3 Forwording ogent 7.12 Documents used in lnternotionol
- Collects goods from manufacturers/ exporters. trode
- Transports the goods to own warehouses.
- Completes all shipping documents. 7.12.1 lndent
- Arranges shrpment, insurance, packaging and - An order informing an exporter of goods
1no
customs clearance of goods. required by the importer.
- Provides advice on import and export - Issued by the importer to the exporler or their
formalities. agent.
- Gives advice on transport f-acilities available. - Provides packaging and shipping instructions.
- Books shipping space for goods. - Can be open indent where supplier from which
- Sends instructions to representatives abroad the goods are to be obtained is not mentioned.
for final delir.ery of goods. - Can be closed indent rvhere types of goods
- Ensures that goods are delivered to their final are specifled and the supplier from whom the
destination. agent must buy the goods is specified.

7.11.4 Merchont
Contents
- Buys and sells goods on their own account.
- Types (description) ofgoods.
- Are traders who aim to make profit.
- Quantities required.
- Pays promptly for goods relieving the exporter
- Catalogue number of the goods.
of risks.
- Transporls goods on his/her own.
- Prices ofgoods.

- - Terms of delivery.
Stores the goods.
- - Cost of insurance.
Displays and advertise the goods.
- Handles customs clearance.
- Packing and shipping instructions.

- Advises manufacturers on market conditions.

- Place/address to which goods are to be
delivered.
- Can be wholesalers or retailers.
- Terms of payment.

7.115 Brokers - Indent number.

- Are appointed by a merchant.

- Names of parties involved.

- Do not take the goods in their possession. 7.12.2 Pocking note

- Are not responsible for the delivery of goods.
- Issued by the packers or forwarding agents.
- Connect the buyer and the seller without
- Issued to the exporter or their agent.
handling the goods.
- Cannot enter into a contract in their name.
- Indicates care instructions for the goods.

- Usually specialise in a few goods to give

- Gives customs particulars of goods
classifications for duty purposes.
expert adr ice to irnporters.
- Receive a commission called brokerage based
- Description of what is in the package.

on sales paid.
7.12.3 Consulor invoice
7.11.6 Auctioneers - Accompanies the goods being exported.

- Sell goods in a publc market in which buyers - lssued by the importing country's consul to
bid their offers for the goods. the importer.

- Goods are sold to the buyer with the highest - Assists customs officials to calculate customs
bid. duty.

'43: International trade

#
 - Certifies/confirms that the prices quoted are - Quantit-r of goods.
correct. - Port of loading'origin and off-loadir=
- Speeds up clearing and delivery ofgoods. destination.
- There is no need for customs officials to
inspect goods when calculating customs duty. 7.125 Certificqte of origin
- Prevents cheating when assessing duty. Issued by the department of commerce or the
national consulate of the exporting country.
- Assists customs officials to prohibit
importation of banned goods. Issued to the importer to pass it on to customs
authorities.
Enables customs authorities to charge customs
Contents
dufy and identifiu duty exempt goods.
- Description of goods.
- - May be used to enforce a trade embargo and
Quantities of goods. quotas on a country.
- Prices ofgoods.
- Prevents evasion of customs duty by countries
- lndent number. that are not on preferential tariff system.
- Consular invoice number. - Accompanies goods.
- Name and address of importer and exporter. - May be signed by exporter or consul.
- Declaration by consul of the importing
country.
Contents

7.12.4 Bill of loding - Shows names and addresses of importer,

exporter and manufacturer.
Used whenever goods are transported by sea.
- Shows the country in which goods were
Issued by the master of the ship in triplicate. manufactured.
Copies are issued to the exporter, importer and - Has details of goods being exported.
the ship master retains a copy.
- Customs duty valuation code.
A contract ofcarriage ofgoods by sea. ii

Is an acknowledgement of the receipt of goods 7.12.6 Certificote of insuronce

on board. i
- Issued by the insurance company to the $
- A document of title (proves ownership of expofier. il
U
i
goods).
- Required in documentary credits. $
- Acts as an advice note specifying the cargo
- Gives details of policy provided for goods tha: il
sent by a named vessel.
are being transported.
- Aids in negotiating documentary credit from
- Can be in the form of an open insurance
banks.
contract/floating policy to cover all exports
- Assists customs authorities in verifying the during a specific period.
origins and quantities of the goods.
- Or can be a specific policy to cover a speciflc
- A quasi-negotiable instrument (transferable by cargo.
endorsements to third party). l
- is proofthat goods being exported are insured.
- It specifies who pays for insurance and freight
- Must be produced when making a claim.
il,

charges.
- Can be used as collateral security in negotiating
credit with banks.
Contents
- Details of the vessel used, freight charges, Contents
markings on crates.
- Particulars of goods in transit. tr
- Names and addresses of importer/exporter.
- Nature of risk insured for e.g. marine iittt tit. #
- Condition of goods (dirty or clean bill). fire, jettison, theft and piracy. fr

- Description of goods (nature/quality). - Amount of premium payable. f

il
iil

1,

International trade
 - Particular of the type of policy e.g. time or 7.13 Methods of moking poyment in
voyage policy in the case of marine risks.
internotionol trode
7.12.7 Shipping note
7.13.1 Bill of exchonge
- Issued by the exporter to porl authorities.
- An unconditional order in writing.
- It is a request to port authorities for goods to
be loaded on a specified ship at the port in
- Drawn by a creditor.
question. - Sent to a debtor.
- Assists the shipping company in resening - Debtor must sign it as proof of acceptance.
space for the goods. - Determines payment at a future specific date
- Used to ascertain whether or not goods have usually three months from date of sight.
been shipped. - An evidence of debt when accepted by
importer.
ntnes
Contents - Ailows a period of credit.
- Name of sea vessel to ferry the goods. - Enables goods to be sold before the bill
- becomes due.
Details of goods as shown on indent.
- Name and address of the shipping company.
- Can be discounted for early payment.

- Port of destination.
- Enables trade to exist among companies of
various countries.
- Names of both the importer and the exporter.
orter. - Can be quasi - negotiable instrument when
- A duplicate copy rs issued and it becomes the endorsedby exporter in favour of someone
dock receipt which is proof of else.
\\'ere
receiving goods on dock.
- Required as part of a documentary credit.
- Sight bill: paid on presentation.
7.12.8 Ainroy bill - Tenor/term/usance bill: paid after the expiry of
- Used when goods are caried by air. a certain number of days.
- Issued by airway flrm in triplicate. - Discounted bill: one sold to a bank for an
) the - Copies are issued to the exporter, importer and amount less than its face value before its
the airliner retains a copy. maturit,v.

- Acknowledgement by the airliner that goods

have been received. Advantages to the importer
- It is an advice note to the consignee. - Provides credit.
rance - It is a contract ofcarriage. - Provides time to source the money.
ports - Giving terms and conditions of carriage. - Provide time to inspect goods.
- It is the airliner's bill of freight charges. - Boosts working capital.
ecific
- It is a receipt for goods. - Less expensive way of effecting payment.

ured.
Contents Advantages to the exporter
- It gives names and addresses of consignor and - Written record for debt owed.
consignee. - Immediate cash if it is a sight bill.
- It gives the flight number and name of airline. - Bad debts are minimized.
- lt shows a description of goods.
- It gives the origin and destination of goods. Disadvantages of bill of exchange
s like
- Name of dispatching airport. - Prone to fraud.
- Name of receiving airport. - Unsafe, prone to default.
- Statement reflecting payment of air charges. - Part of the value is lost if discounted.

Internalional trade
 7.13.2 Coble ironsfer
- The goods are shipped to the importer'
-TE
- The exporter presents the stated documents on
- Payments are made by use of cables, telephone
the letter of credit.
wires, telex or telegraPh.
- The exporter is paid by his/her bank, on Itu
- Money is transferred from one debtor's presentation of these documents.
account to another (creditor's account)'
1
l.

of - The exporter's bank forwards the shipping

- Used by banks in various exchange markets
documents to the imPorter's bank'
the world.
- The exporter's bank is paid by the imporler's
- A very fast form of remittance. bank.
- A safe means of making Payment' - The importer PaYs his/her bank.
- Usually expensive to use due to bank service - The importer's bank releases the documents to
fees.
enable the importer to claim the goods'

7.13.3 Letter of credit 7.13,4 DocumentorY credits

- Issued by the importer's bank, the issuing - It is a letter of credit accompanied by shipping
bank, to the exporter's bank, the advising/ documents e.g. a bill of lading, certiflcate
cor-responding bank.
of origin, certificate of insurance, bill of
- Purpose is to ensure Payment. exchange.
Importer's bank finances the importer.
Procedure of paying by letter of credit Importer obtains short term credit'
- Importer and exporter agree to use the letter of May be revocable - authority to make payment {
credit. may be cancelled by the importer any time'
- lmporler requests a letter of credit from his/ May be irrevocable - bank's authority cannot
her bank. be cancelled without the consent of the
- Letter is sent by importer's bank to the exporter.
exporter's bank. May be confirmed bank will agree to pay the
-
- Exporter's bank informs exporter of this letter exporter if there is any default by the importer'
of credit.

Common errors
C., Candidates often:
. Treat difficulties faced by exporters as characteristics ofinternational
trade' G

ffi, . confuse functions of port authorities with functions of customs authorities.

an entry port while customs administer revenue collection
Fail to distinguish
at the port

between quotas and customs duty. while both measures are taken to
of
Port authorities administer
entry'
control imports, customs
limiting the quantities that can be
L
3
T
duty is a tax and an indirect control whereas a quota is physical control
impofted. I
is used in making payments foreigr
. Confuse the bill of exchange and the bill of lading. The bill of exchange I
by sea'
trade while a bill of lading ir u proof of ownership of goods being transported

t
Hints:
. Visible trade: trade in goods.
. Invisible trade = trade in services.
. Total exports: goods exported * services exported.
. Total imports: goods imported * services imported'
. Visible trade balance : goods exported - goods imported'
. lnvisible trade balance = exported services - imported services.
Balance of payments : total exports - total imports'

International trade
F
I
 B. Certificate of origin
:ST Y#1"!RSELF
C. Bill of lading
D. Advice note
rr' itiple choice questions
.t' hich of the following is not a benefit of Structured questions
:.:ernational trade? 1. (a) Why does Zimbabwe trade with other
\. creates employment countries? t8]
B, greater variety (b) State the methods of restricting trade? t6l
C. increasedproduction (c) Outline the functions of forwarding agents. [6]
D. dependency on others
2. (a) List the problems faced by importers and
- l;-rtiable goods are stored in a exporters. t8l
\. rvarehouse. (b) Outline the functions of customs and excise
B. cold room. authorities. t6l
tl. bonded warehouse. (c) What is the importance of a bill of exchange?
D. storeroom.
t6l
-:.:de among many countries is known as
3. (a) Explain fourpurposes and fourcontents ofthe
\, regional trade. following documents:
B. import trade. (i) Billof Lading t8l
C. foreign trade. (ii) Airway bill t8l
D. home trade.
re following are problems of the export trade
(b) What is cable transfer? t4l
-
ercept 4. (a) Outline the importance of bonded
warehouses.
\. technology. t8l
B. distance. (b) Explain why excise duty is charged. t4l
C. laws and regulations. (c) What do the following terms used in
D. climaticconditions. international trade mean?
.\ hich of the following is not a document used in (i) f.o.b. [2] (ii) c.i.f. [2]
ireign trade. (iii) f.a.s [2] (iv) f.o.r [2]
\. Indent

3 iosscry
:rporters people or firms that buy goods/services from a foreign country.

: rporters people or firms that sell goods/services to other countries

"lsible trade trade in goods only.

,:risible trade trade in services only.

iinded warehouse government owned warehouse controlled by customs authorities and used to keep dutiable
goods before duty is paid.

]riffs duty to be paid on imports and exports.

fnturnational trade
il
8.O Obiectives The business person(s) can supply fake
commodities or duplicates of the original.
By the end of this chapter leamers will be able to:
The customer cannot easily differentiate
a) explain the importance of consumer protection in befween a genuine product and an
Zimbabwe; imitation.
b) identify the rights of consumersl d) Illiteracy and ignorance
c) describe the importance of the Consumer Council - Some customers can neither read nor
of Zimbabwe; write and might not know and understand
d) Explain how consumers can protect themselves; their rights.
summarise the Acts available for e) Environmental pol lution
0 consumer
protection in Zimbabwe; and - This entails living and working in a
g) list and explain the associations that help to protect healthy environment which does not
consumers. endanger the people's iives.
- For example, air pollution, noise, and
odour.
8.1 Consumer protection
fl Incorrect quantity or weight
- Consumer protection consists of laws and - The supplier may show false quantities or
regulations that have been enacted by government weight on packages ofgoods.
to enforce the rights of consumers as well as - For example, 4 kg of mealie-meal being
fair trading practices and fiee flow of truthful shown as 5kg on a package, thus short
information in the market. weighting of goods.
- In the past the consumers were supposed to protect g) Improper labelling
themselves against dishonest business persons.
- This occurs when packages of goods
- Therefore, the legal phrase that u'as applied was have a lot of information such as prices.
caveat emptor meaning, 'let the buyer beware'. instructions, quantity, etc. and some of
It meant that if the customer was deceived by the the information provided rnay be false.
supplier it was the customer's fault.
h) Credit Sale Agreement
- Goods bought on credit sale agreement
8.1.1 The importonce of consumer belong to the buyer as soon as the
proiection agreement is signed.
a) Malpractice by business persons - The goods can therefore not be repossessed
- This means that business persons may in the same way as those bought on hire-
supply substandard defective goods or purchase agreement.
unfair goods. - This results in improper repossession of
b) Deceptiveadvertising goods bought on credit.

- This happens when misleading or untrue

information about the quality or safety 8.2 Consumer rights
of a product is supplied by the business These give consumers the ground to protect themselves
person(s).
against inferior or faulty goods or against misleading
c) Spurious (fake/false/counterfeit) goods advertisements.

Consumer proteetion
 8.2.1 The right to sofety 8.2.7 The right to consumer educotion
- This protects consumers against injuries - They also need to be aware of basic consumer
caused by the consumption of a commodity. rights and their responsibilities.
- The customer is therefore protected against
the danger of using the commodity or service. 8.2.8 The right to heolthy environment
- For example, some goods may have been - This right ensures that consumers are protected
contaminated during the production process. against environmental dangers.

lke
- Such products may be poisonous if consumed. - For example air population, dumping of waste,
water pollution, noise pollution etc.
ta1
82.2 The righl to bosic needs - Consumersmustliveandworkin environments
an
- Consumers must have access to adequate that do not endanger their lives and those of
basic needs such as food, shelteq clothing, future generations.
education, etc.
8.3 Voluntory qssociotions
1L-ri
8.2.3 The right to be informed
inc These are organisations which offer services to
- This right empowers consumers to be
protect consumers without being forced to do so.
provided with appropriate information so as to
enable them to make informed and intelligent For example, the Standards Association of
l:
decisions when buying products. Zimbabwe (SAZ), Consumer Council ofZimbabwe
Or'i
- The information can be on prices, quantities,
(ccz).
ingredients. instructions etc. They are usually non-governmental and non- profit
tna making organisations.
- The information has to be true and complete.

8.2.4 The righi to choose 8.3.1 The Siondords Associotion of

Zimbobwe (SAZI

ffi
- The consumers should be provided u,ith a
variety of goods and services from different
suppliers so as to exercise choice.
- Protects customers against monopolistic

-
tendencies.
Consumers have the right to choose the goods
or services that they want and the supplier they
Ni7'
want. l:i,J ,1. L\ iZ tit.qo rrtrl r"r.lr','ilir ,iit lrrdi,. {

8.25 The right to be heord This is a national standards board for

- This right stresses the need for the consumer Zimbabli.e.
to voice complaints about a product or service. A non-govemmental and non-profit making
- Customers have the right to express their organisation.
views. It facilitates the development and use of
- For example, pollution of the environment, national standards in order to enhance
unfair pricing etc. Zimbabwe's competitiveness and safeguard
the welfare of communities.
8.2.6 The right to redress Governing body is a general council which
The consumer has to receive just claims that consists of representatives from govemment,
arise when complaints are made against a local authorities, professional institutions,
supplier. industry and commerce.
\ -!. For example, compensation for giving false SAZ operates under the Zimbabwe Companies
i-- information, inferior goods or unsatisfactory Act and has its Articles and Memorandum of
services. Association.

w
&
Consumer protection
I
n

The principol funciions of SAZ 8.3.2 The Consumer Council of

- Preparing and publishing Zimbabwe National
Zimbobwe (CCZI

Standards. The functions of the CCZ

- Offering standard-based training to promote - Settles disputes between consumers and
an understanding of standards requirement. suppliers.
- Providing technical sen ices for the testing of - Improves consumer awareness through
goods as well as calibration of equipment. educating consumers to know and understand
- Operating certification marking schemes to their rights.
encourage the use of Zimbabwe Standards, - Monitors standards of products (product
lbr example, goods may be licenced as being quality).
in accordance with the appropriate standard - Provides research senrices and information.
bearing the Association's certificate mark.
- Encourages membership throughout the
- Making available to producers and consumers country.
laboratory facilities for testing ofraw materials
and flnished products.
- Receives and investigates consumer
complaints.
- Operating registration scheme for companies
a
- Recommends appropriate action to be taken to
complying with international standards (ISO
solve given problems investigated.
9000) on quality system.
- Putting quality management mark.
- Lobbying and advocacy remain an integral
parl of the CCZ'. the CCZ lobbies policy
- Providing a laboratory and information service makers and stakeholders to enact consumers'
w'hich has copies of all international standards protective legislation. It also represents
(rso). consumer interests at all levels.
- To adopt and modify intemational standards - Promotes ethical advertising of goods and
of quality, performance and safety. seryices.
- Encourages the testing of products by the
Why ore stondords importonP SAZ,

a) Benefits to customers
- Conducts spot checks on issues like hygiene
and pricing.
- Boost u'orker morale.
- Recommends reputable shops to buy from.
- Inspire confidence in the customer by
guaranteeing quality.

b) Benefits to the nation

8.4 Volunteer orgqnisotions
- Standards promote national production in 8.4.1 Citizen Advice Bureou (CAB)
terms of qualify, quantity and reliability.
- Standards are a marketing tool in international
- Gives free confldential information to
consumers.
market.
Provides advice to help people with their
c) Benefits to industry
financial, legal, consumer and other problems.
- Standards are an assurance ofproduct quality.
Improves the policies and principles that affect
- Provide adequate performance functions and people's lives.
quality.
Has trained advisers who,represent clients at
- Boost workers'morale and inspire confidence tribunals and courts.
in guaranteed quality. lnfluences policy makers on issues that
- Simplifies purchasing. concern the consumers.
- lntemational standards. such as ISO 9000
improve efficiency of operations and help 8.4.2 Trode ossociqlions
protect our environment. - These are usually formed by business persons
- Standards eliminate barriers to trade. carrying out similar businesses.

Consumer protection
50r
*--t*
E w
 - They have codes of practice that guide their Motorist can get liis car keys made by the
members on how to do business to protect locksmith to open the vehicle and claim
consumers' interests. refund for expenses lxet to make the keys
from AAZ.
- For example, Advertising Media Association
(ADMA) that safeguards consumers against h) Driving school
misleading information that can be in - Runs an AAZ driving school situated in
r,_r -_ adveftisements. Bulawayo (Matabeleland Branch Office).
.:..-- i) Emergency hotel exPenses
8.4.3 Automobile Associotion of - In the case of a breakdown in Zimbabwe
It-.1--- Zimbobwe (AAZ! that requires one to stay overnight in a
- It is an association of motorists. hotel one can claim refund within certain
i r-:- - Provides most of its services to member limits.
motorists. - Refunds include touring and hotel costs.
i) Touring sen'ice
- AA7 services include:
.: -_-
- Provides its members with travel and
. ,AA 24hour help line touring inlormation on Inost cottntries.
IN': :, - Members get 24 hours emergency
roadside assistance.
85 Stotutory bodies
: Legal service
- Members may get free legal advice on The government also makes use of statutory
problems that concern motoring. bodies to ensure that the interests of consumers are
protected or safeguarded.
. Key Rerum Service
These bodies include local authorities and
:- - A member is given a key wallet which has
parastatals (public corporations).
a numbered disc which enables the owner
to quickly get his/ her car keys ifthey are
85.1 Locol government outhoriiies
lost and found and then surrendered to
Head Of]ice. - These include municipalities, rural and district
councils.
- Provision ol rnaps
- Provide touring maps which include - They ensure that standards of hygiene are met
't- I by organisations rvithin their area.
Zimbabwean road maps and tour
planning maps with resort areas for a fee - For example, they provide disposal of waste,
to members. storage and refiigeration facilities. and ensure
that processing areas are clean and free from
. Breakdown services
flies.
- Break down claim forms are completed
and submitted by a member to recover
- They also offer hawkers' licences to pennit
vendors to sell within certain municipal. rural
money spent on a breakdown.
and district areas.
- The claim form has to be submitted within
-; - three months of breakdown.
- These help to prevent the sale of fbod and other
products everywhere by unlicensed veudors.
l:chnical service
- One can have his or her car inspected by 85.2 Public corporotions
AAZ's Technical Department staff giving
a thorough check, road test it and write a
- Parastatals (publtc cotporations) have been set
up by government to provide essential goods
repofi on its condition.
3: :tri[ and services.
- This can be done before one starts a long
journey. - The provision of certain goods and services
cannqt be left under the control ofthe private
- -':locking service sector.
- This service is provided in the event that - For example, electricity (ZESA), water
a motorist locks his or her car keys inside (ZINWA) and transpotl (NRZ and ZUPCO).
the vehicle.

Consumer protection
 Consumers can be exploited by being charged
- Weight or measure shown to exclude the mass
exorbitant Prices.
of ttre packaging material (to reflect the net
mass and not the gross mass)'
Government protects the interests of
consumers by subsidising prices to make the
goods and services affordable to consumers'
8.65 Dongerous Drugs Act
- It is an offence to mislead consumers about the
curative Powers of the drug.
8.6 Legislotion
- The act requires suppliers of drugs to supply
The Zimbabwean government passed the following drugs that are fit for a certain purposes'
Acts of parliament to protect the consumers:-
- It also requires the supplier of dangerous drugs
8.6.1 The Food qnd Food Stondord Act to give full and clear instructions or direction
of use to avoid harm to consumers.
- The act ensures that:
(i) All food sold is safe for consumption.
8.6.6 Merchondise Morks Act
(ii) All labels and descriptions on packages
are correct.
- Prohibits a company to use the SAZ seal when
its products have not been tested.
(iii) Consumers are not misled by the quality
of food being sold' - The act ensures that the goods that are wrongly
described are not sold.
8.6.2 The Sole of Goods Act - lt also protects the importation of certain
- The goods must correspond with the description commodities.
for which they are sold, for example, jewellery
sold as genuine diamonds must be made of 8.6.7 Hire Purchose Act
diamond and nothing else.
- Guards against unfair and unlawful
- When selling goods by sample, the rest of the repossession ofgoods bought on credit'
goods must be of the same qualiry'
- The goods need to be of satisfactory quality, 8.6.8 Consumer SofetY Act
that is, goods must be fit for the said purpose,
for example. a rain coat must be water proof
- Ensure that products are safe for human
consumption.
and not othenn'ise.

8.6.3 The Price Control Act 8.6.9 Foir Troding Act

- Safeguards against overpricing ofgoods. - Guards against false price cutting, hoarding
and conditional selling of goods.
- Controls prices of basic commodities such as
sugar, bread, and mealie-meal.
8.6.10 Drugs Act
- Also ensures that prices of goods are clearly
labelled or displayed on shelves' - Prohibits the buying of some drugs without
prescription.
8.6.4 Trode Meosures Actl Weight ond
Meosurement Act 8.6.1I Heolth Act
- Guards against underweight and incorrect - Prohibits the use of dangerous drugs without
weights and measures of goods. waming.
- Weights, measures or volumes to be clearly
marked on packages, for example, two (2) 8.6.12 Consumer Protection Actl
litres, and this should be clearly shown on Consumer Controct Act
packages of 2 litre cooking oil.
- Protects consumers against disclaimer clauses.
- Ensures that the weight or measure of the
contents tallies with what is marked on the
package.

\ 52--)
Consumer protection
r
I
 81 How consumers moy protect 8.7.3 Buying clubs
themselves Consumers can form buying clubs so that they
contribute money and buy their groceries in
8.7.1 Being on lhe lookout/being olert bulk and obtain discounts.

- Consumers should check products for quality 8.7.4 Consumer educotion

and quantity. for example, quality seals such
as SAZ.
- Consumers need to acquire consumer
education about their rights and consumer
- Check expiry/best before dates.
protection so that they become informed and
- Listen carefully to advertisements in order to can make intelligent decisions.
get the information passed.
- Read instructions and care labels carefully. 8.75 Avoid impulse buying
- Check if back-up service or spare parts are - Consumers should have a shopping list or
readily available. draw a budget to enable them to buy what they
- Check for guarantees and warrantees. have planned for and can afTord.

8.7.2 Window shopping 8.7.6 Understonding ogreements

- Consumers should do window shopping to - Consumers need to read and understand
compare prices. agreements or conlracts belbre signing them.

eommon errors
. Consumer rights are often taken as the reasons for consumer protection.
' The CCZ is a consumer watchdog while the SAZ is for quality and standards control.

C. goods and senices that are produced under

secondary and tertiary stages.
D. wants.
.l ltiple choice questions 4. 'Caveat emptor'means
"
Which of the follori'ingActs protect the consumers A. customers should not take away empties.
!-:. against expired products? B. let the buyer beware
\. The Food and Food Standard Acts C. empties must be returned by customers.
B. The Price Control Act D. the customers have tricked suppliers.
C. The Trade Description Act 5. Associations or organisations which offer
D. The Trade Measures Act themselves to protect consumers are called
identify a service that is not provided by the A. parastatals.
\utomobile Association of Zimbabwe (AAZ) to B. pressure groups.
.ts members. C. local authorities.
L:,: \. Key retum service D. voluntaryassociations.
B. AAZ24 free help line
C. Sell of goods to motorists
Structured que$ions
D. Legal advice
1. (a) How does the Consumer Council ofZimbabwe
Essential goods and sen ices are protect consumers? t6l
A. goods that are extracted from the land. (b) Explain the importance of the following aits
of parliament in protecling consumers:
B. goods and services that are so crucial and
cannot be left under control ofprivate sector.

@ ,6.
1{{3
Consumer prutection
 (i) The Food and Food Standards Act 12) (b) Why do consumers need protection? [10]
(ii) The Sale of Goods Act t4l 3. (a) How are consumers protected by the following
organi sations or associations?
(iii) The Price Control Act l4l
(iv) The Trade Measures Act
(i) Local authorises t4l
t4l
(ii) Publiccorporation l4l
2. (a) List and explain the methods that can be used (iii)
The Citizens Advice Bureau t3l
by consumers to protect themselves against
unscrupuloustraders. (b) Explain 5 consumer rights. [10]
t10]
I
{-- * S * ,
I F
I
I

I
P 0 G AI
* , , CI ,
I R I
ig
?
r: t.1 s
I

U f,
L T 5 ii {-,} ,s n
i

I
I w i: Ii ft D
I

I
f ,
L t.! tl ti ;f v K
I

I
t" 5 & L F 5 a. & E

I I Y ? q i' ,?r
: rs. Y
i1 L! N
I N i :

ii i., r ; t T

N U lij "{ l: t3 * ?

C Fl l"r I G
3'
K

How many words can you find? I found thirty-two words,look closely for them.
Choose Standard Read Test Heard Goods
Inspect GVT SAZ Food CCZ Clubs
Consumer Caveat Right Car right
Consumer Emptor
Protection Caveat emptor Informed Key Redress Put
Act Seal Action Sum Rot lnspect
Protect Sales

Glosscry
Caveat emptor let the buyer beware.

Consumer Protection consistsoflawsandregulationsthathavebeenenactedby governmenttoenforcetherights

of consumers as well as fair trading practices and free flow oftruthful information in the
market place.

Consumer rights the rights that give consumers the ground to protect themselves against inferior or faulty
goods or against false information.

Legislation laws or acts of parliament passed by government to protect consumers.

Public Corporations state owned organisations that provide essential service to the public.

Spurious goods false commodities or duplicate of the original goods.

Voluntary Associations organisations that offers services to protect consumers without having been forced to do
so.

Consumer protection .!J :

k .*
flm
! t-,-
:-
..-:-

; 0 Obiectives
Public Enterprise
:e end of this chapter learners will be able to:
:dentify the different forms of business
-.r_eanisations;
'' rite down the features of each business unit;
:utline the advantages and disadvantages of each Local Authorities
:usiness enterprise;
::f'terentiate between organisations in private and
:.rblic sectors; and
; ,;,,1 1l.J ;,,';ii.'s 1.;i littiilii.' i,itrr'r1;rir*
st and explain the functions of the stock exchange.

! ' Orgonisqtion 9.2 The privote sector enferprises

Also called the private sector
-. lusiness organisation is a group or a unit of
-;ople working together with a common objective
It includes businesses owned by individuals or
groups of individuals and are run primarily to make
. :rofit maximisation.
: profit or surplus.
-.fit maximisation is not the only objective, they
- .r satisfy human needs and wants by providing 9.2.1 The sole proprietorship
-, -.ds and services.
s. therefore, an entity formed for the purpose of
- This is a business owned and operated by one
individual.
-
':n ing out commercial enterprise or activities.
- Also called a one person concern.
: -siness enterprises exist in any of the following
.:rs: Individual (sole) Proprietorships, - There is no legal distinction between the
: .::nerships, Limited Companies and Cooperatives. owner and the business.

Private Enterprise
rerigilu'
rn ineh

Limited Multinationals ratives

Private Limited Public Limited Retail

*, t': o.f' 1trir,$te (rtt(,t"lrri\i"\

I B us in e s s O rganis ations
=5
s-
I - The owner receives all profits and has Not suitable for large scale business - This is due
unlimited liability for all losses and debts. to limited financial resources, limited managerial
capacity of the proprietor and risk to private
Every asset of the business is orvned by the
property.
proprietor and all debts ofthe business are the
proprietor's Difficulty to maintain personal contact - Not
easy on the part ofthe proprietor to have personal
contact with customers and suppliers at the same
Advantages
time especially when business is undertaken in
- Control [{as unquestioned control of the
different areas.
operations as her'she can make all the important - Division of labour May be difficult due to
decisions on pricing. stafflng and expansions'
- the
small size of the business.
- Close supen'ision of business and employees'
Owing to the above disadvantages ofsole proprietorships,
- Quick decision making - reacting fast to market the business can be changed to a parlnership.
needs and changes.
- Simplicity - Easy to start as it can be started almost 9.2.2 PortnershiPs
immediately rvithout consr'rlting anyone.
Are relationships that exist between two to
- Lorv start-up costs - Start-up costs may be minimal
twenty persons who join to carry on a trade or
srnce its operation is small and one may not need
business (ten in banking and more than twenfv"
to hire a large staff or operate out of expensive
in case of accountants. solicitors and members
building.
ofthe Stock Exchange).
- Personal touch Has personal contact with
Each person contributes money, property.
customers, particularly where a business operates
labour or skill and expects to share in the profit
in a local area.
and loss ofbusiness.
- Direct motivatiott - The entire proflt goes to his
Can be formed by professionals such as
pocket.
lawyers and doctors.
- Secrecy - Business aflairs can be kept private as
Has few legal formalities.
every aspect ofthe business is looked after by the
proprietor and the business secrets are known to a) Formation of PartnershiPs
him/her only. - Persons wanting to form a partnership
- Free frorn govemlnent control - Least regulated usually make a written agreement
fonn of business since regulated laws are almost called Partnership Deed or Articles of
negligible in its tbrmation' day to day operation Partnership.
and dissolution.
b) Partnership Deed
- Easy dissolution - Like that of formation, the
dissolution of the sole proprietorship is also very
Contains: t
easy.
- Objects of the firm.
- Capital contributed by each partner.
Disadvantages - Profit or loss sharing ratio'
- Limited resollrces - The flnancial resources - Salaries and or bonuses given to active
(Capital) of any small proprietor as an individual partners.
are limited. - Rates of interest, if any, on partners'loans
- Unlimited liability - The private property of the to firm.
proprietor is at risk as when the business fails, the Rates of interest, if any, to be allowed on
private property of the orvner is utilised to pay off partners' capitals.
the business debts. - Rates of interest, if any, charged on
- Unceftainty of continuity - The business may partners' drawings.
come to an end due to incapacity or death of the
Where a verbal agreement has been fnade or
proprietor
where no agreement exists then the rights and
- Limited managerial capability - Proprietor may
duties of the partners are determined bv the
lack managerial talent (skills) to carry on a business 1890 Partnership Act.
efficiently.

B usiness Organisations
@
-s
k &&
 c) Partnership Act of 1890 Management
States that: - Partners may contribute a diversity of knowledge,
- Partners should contribute equal capital. experience and expertise in the management of the
business.
- Profit and losses must be shared equally.
- Partners are not entitled to:
- Losses In the event oflosses the burden is shared
-
among members than being borne by one person.
(i) interest on capital; and
(ii) salaries/bonuses. Disadvantages of partnerships
- Partners are not charged interest on - Disagreements - Most obvious disadvantage of
drawings. partnerships is that of disagreements befween/
- Partners are entitled to
5oA per annum among partners.
interest on loans made to the firm. - Less freedom - Less freedom with regards to
i) Types ofpartnerships management of business because they are jointly
run.
These are general and limited partnerships

Generol portnership Limited portnership

Partners manage the partnership Partner with unlimited liability

manages the business

All partners have unlimited liability At least one general partner must have
unlimited liability
Partners are actively involved in the day to day Partners only make suggestions about
running of the business the running of the business
All partners may lose their properties in the - Only the general partner with unlimited
event ofinsolvency ofthe firm liability may lose their personal
properties in the event of insolvency.

i,rit!i' t). I : ( tttttpru^itritt of.,4t'ttrral uttt! tintittil lturttt{'r\ltif \

Unlimited liability - Each of the partners shares

Hint the liability and financial risks of business and can
lose their personal possessions to meet business
I

G li#il, ffi'ffin,,-,iT
t;
-T!1,, l1', debts.
" ^'i or differentiate. i

Partners share profits of the firm.

require you to distinguish Profit sharing -
Never use negatives such as "do not" unless Lack of continuity - The partnership ceases to
a there is no other way you can write it. exist if one of the partners is insane, dies, resigns
or becomes bankrupt.
r ::sges of partnerships Lack of capital - May lack large sums of capital for
expansion unlike limited liabiliry companies.
, - More money can be raised as start-up
-:.:ai
-: due to more partners in the firm.
,:. The ordinary partnership may be converted to a limited
1:_- : :,-:,1it1' - Easier to form, manage and run than liability company to overcome the above challenges.
- -,::d Companies, since they are less regulated
.i -,-
- '.,r:rs of laws governing their formation. 9.2.3 Limited liobiliiy componies
: -.:::
responsibility/control - Partners can share These are business enterprises whose
l-* ' . ::snonsibility of the running of the business. liabilify is limited only to the amount of their
Partners share the decision investments.
-":- !.-rfl making -
--.-:.: and can help each other out when they The name of the company must end with, the
-::- ll. word Limited (Ltd).
: :1-
i *-r - . -'n of labour - This is possible since partners Owned by Shareholders (who get dividends as
: -=.' e different skills. share ofprofit).

Business Organisafions
 They are legal persons separate from their Location of the company's registered office.
members and can therefore sue or be sued in The objects (objective) of the company.
their own rights (separate legal entity). Amount of authorised share capital.
Members are shareholders. A statement that the liability of its members is
Managed and controlled by a board of limited.
directors.
Names offirst directors and company secretary.
Governed by Companies'Act IChapter 24:03]
- It is a company's charter.
Formation of limited companies b) Articles of Association
Formed by the registration of certain documents These are rules, regulations and by-laws for
with the Registrar of Cornpanies. the internal management of the affairs of a
These documents include Memorandum and company.
Articles ofAssociation and Statutory Declaration. Contains:
The documents are prepared by the company's Rights of shareholders.
promoters. These are the people w'ho come up with Variation of these rights.
the idea of starting a company and go through the
Payment of commission.
procedures of registration.
Share certificates.
The registrar issues the company with a Certificate
of Incorporatiou once he/she is satisfled with the Calls on shares.
Memorandum and Articles of Association. Transmission of shares.
- When the company is registered, a private limited Forfeiture ofshares.
company can start business and its shares can now Alteration of capital.
be traded by private placementt a public limited - General meetings and proceedings thereat.
company will get a Cerlificate of Trading after
raising adequate capital and sell shares on the stock
- Voting rights of shareholders.
exchange. - Appointment of directors, their remuneration.
qualification, powers and duties.
Annual General Nleeting (AGM)
- Dividends and reselves.
- Companies Act legally requires that this be held by - Winding up.
all limited companies once a year.
- Names and addresses of company.
- A11 Shareholders must attend.
- This is where a Board of Directors is elected and NB: The Memorandum andArticles ofAssociation
decisions concerning the cornpany are made. form the company's Constitution.
- Board of Directors also gives a report to
shareholders concerning the perfornance of the c) Certificate of lncorporation
company. - Also called a Certiflcate of Registration.

Formation documents
- Legal document indicating that the Registrar
of the companies recognises the business as a
a) Memorandum of Association Corporation.
- An undertaking by founder members to form a - It gives the business legal status (business can
registered company. now sue or be sued in courts).
- A document that regulates a company's - A licence given to a company by the Registrar
external activities. of companies.
- Submitted to the registrar of companies for - It is given when the Registrar has approved
approval. a company's Articles and Memorandum of
Contents: Association.
- Gives the company's name which must end - Private companies can start trading after
with the lr'ord "Limited." receiving this document.
- Narles of members (shareholders). - Shows the company's legal name and its date
- Types ofshares issued. of incorporation.
- Number of shares held bv the shareholders. - Usually issued when a company is formed.

k B usines s O rganisatio n s @-*

.*&i
hce. Certificate of Trading - Scope of expansion is higher because it is easier
- Needed before a public company can start to raise capital from financial institutions and the
trading or its operations. advantage of limited liability.
- Issued by Registrar of companies when the - Recognised formal structures.
company has raised the minimum capital - Secrecy - does not publish its accounts.
required for its operations by selling shares to
the public.
- Not subject to hostile take-over attempts by an
individual or entity that wants to buy fifty per cent
- Usually issued after certiflcate of incorporation (50%) of its shares.
- It contains: date and place of issue, name of - Do not need shareholders'approval for operational
company, address of company,s registered and growth strategy, decisions made by the
office, name and address as well as the company as long as that is stated in their corporate
signature of the Registrar of the companies. documents.
Prospectus
- An invitation to members of the public to buy Disadvantages
shares. - Not allowed to appeal to the general public to
- Issued by public companies only. subscribe to their shares.
- It is prepared by company promoters after - Have limited capital as only up to fifty (50) persons
registration of a public limited company. can contribute.
- Sent to the Registrar of companies before the - Their shares are not freely transferable.
public is asked to buy shares. - Cannot be listed and dealt in on the Stock Exchange.
- It shows: the background of the company, - Accounts are flled annually with the re_eistrar of
cument financial position, future plans of a companies and can be made available to anvone on
company. number of shares to be sold and the payment of a fee.
price ofeach share.
- Have limited growth due to limited capital.
- Carries an application form for those who
intend to buy the shares. Owing to the above disadvantages the private companies
can be converted to public companies.
9.2.4 Privote limited compqnies
- 9.25 Public limited componies
There must be a minimum number of one and
a maximum of fifty shareholders. - These are companies that can sell their shares
- Closely held businesses usually by family, to the general public.
friends and relatives. - Are listed on the Stock Exchange.
- Shares sold privately to family, friends, and - Start business operations after receiving a
relatives (not allowed to offer shares to the certificate of trading from the registrar of
public). companies.
a
.51-
qi :
- Shareholders may not be able to sell their shares - Name of company must contain ,.plc', or ltd.
without the agreement of other shareholders. - Have a minimum of one shareholder and there

) t;_
- Start trading after receiving a certificate of is no maximum.
incorporation. - Have limited liability.

<r-: -
- Not listed on the stock exchange. - Issue a prospectus.

:. dvantages Advantages
l\.3:
r i: Enjoy limited liabiliry (that is shareholders only - More capital can be raised since it is listed on the
lose what they u..ould have invested and not their Stock Exchange (sell shares to the public).
> ri=- private properlies). - Have limited liability.
Continuity of existence business not affected by - Have independent legal existence.
,J^.-
!l{.1 .:
status of owner. - Continuiry oI business.
More capital can be raised through the issuing of - Shares easily transferable.
I shares. - Enjoy economies of scale.

:59
*._:- .

B us in e s s Orgonis atio ns
!B&
ffi
- Banks and other financial institutions are more Own and control business operations outside
willing to loan out money to the organisations. the country in which they are based, for
example, Bata Shoe Company (Canada based).
Disadvantages Are holding companies with shares in many Ad
- Expenses in connection with formation are high. overseas subsidiaries.
- Companies have to publish flnancial reports Very large companies with limited liability.
which may contain information useful to their Headquarters are in one parent country
competitors. which centrally controls the activities of its
- Formalities of forming a public company are quite subsidiaries.
involving. Are involved in large scale production of
Can be very expensive to raise capital. goods and services.
May be difficult to manage due to its size. Usually give licences to their subsidiaries to
Owners exercise little control over them. manufacture abroad at a profit and produce
goods to its original design.
Inefficiency may result if an organisation becomes
too large. Also design and produce goods at a large scale
to suit the local market.
9.2,6 Differences between o limited Able to provide large scale production due to
liobility compqny ond q portnership the large amounts of capital that they have. Dir

Limited Compony Portnership

A legal person apart from its members. Has no legal personality.

It can enter into contracts and sue and be sued - Has no contractual capacity, the
in its own name. parties can contract, sue and be sued.

- Shareholders have limited liability. Partners have unlimited liability.

Shares easily transferable. Partners may sell shares only with the
approval of their co-partners.
9)
- Number of shareholders limited by the number May have not more than twenty
ofshares issued. partners.

Aminimum of one person can form a company. Aminimum of two persons can form a
firm.

Name of company must end with the word Not allowed to have the word limited
limited. in its name unless it is a limited
partnership.

Formed in accordance with the provisions of - Formed by mere oral or a written

the Companies' Act and must be registered agreement.
with the Registrar of Companies.
Ivfust have books of accounts audited and Accounts kept secret.
published.

- Managed and controlled by a board of directors Managed by active partners.

Owned by Shareholders. Owned jointly by partners.

- Shareholders receive dividends. Partners receive profits.

- Has continuous existence. Lack continuity.

,l:rj:jr r',;.' 1itil;1';.t,t.t1i.! jli,ii!,i,t,r'i tr itlrflil4,f',ihi!, flfitl ft Ii m itr d i-' i) rn !, $, r.t'

9.2.7 Multinotionol corporotions - A royalty is paid by the subsidiary compan\

for the use of the design.
- These are companies rvith branches in two or
more countries. - Royalty is determined by the volume of sales.

B us in es s Org anis atio ns

 outside - Profits are sent to the headquarters in the Preference shares can be cumulative, non-cumulative,
;ed, for parent country. redeemable and participating preference shares.
r based).
a) Cumulative preference shares
rn man) .{dvantages - Should there be insufficient profits in any one
- Create emplovment as they are very large year to pay the cumulative shareholder, arrears
rility. employers. of dividends will be paid from the following
countq - Improve the standard of living for people in the year's profits together with the curent year,s
:s of it host country. dividend before ordinary shareholder,are paid
- their dividends.
Goods are usually designed to suit the local market.
ction o:
- Avoid shortages since goods are produced in large
b) Non-cumulativepreferenceshares
quantities. - Dividends are only paid out from each year,s
- proflt.
Have large amounts of capital.
. Have limited liability.
- Profits missed in one year will not be paid
from profits from subsequent years.
Give licences to subsidiaries to manufacture abroad
to avoid tariffs and quota controls.
c) Participating preferences shares
- Shareholders share futher in the remaining
surplus profits should there be surplus after
-) isadvantages
payments are made to ordinary and preference
May be affected by the politics of the host country shareholders.
(may also have an influence in the politics of the
d) Redeemable preference shares
host country).
- Issued for a specified period and the company
Profits are usually sent to the mother country agrees to repay the capital at a future date.
r repatriation of profi ts).
e) Deferred shares
Have an impact on an economy when they close
lactories as they are very large employers.
- These are often held by directors and founders
of the company.
- Shareholders are paid their dividends after the
?3. Sources of finqnce for limited preference and ordinary shareholders have
componies (See also Finance of the been paid a certain rate of dividend.
Bus ines s Units chapter) - They are last to participate in the profits of the
company.

9.3.1 Shores ond types of shores 9.3.2 Debentures

In order to raise capital, companies sell or - Another source of raising capital for a limited
issue shares so that many people are able to
liability company is the issue of debentures.
own a small part of the business. These shares
can be ordinary shares (equities) or preference - Debenture holders are not shareholders but are
shares. creditors of the company.

Ordinory Shores Preference Shores

Last or receive dividends only after preference First to receive dividends
shareholders

- Rates of dividend varies depending on the - Have a fixed rate of dividend

proflts remaining
Have full voting rights Do not have full voting rights
Rank last in the distribution of company assets Have prior claims on the distribution
on liquidation of company assets on liquidation.
compa: Risky form of investment Safe form of investment

e ofsal=i ':f ot ililti;i.t

:61 ,

B usiness Organisations
fl
 They are loans to a company' - Unpaid amount of capital is called calls in
arears.
Can be raised upon security of the assets of
the company and can be called secured or - Amount received in excess of what has been
mortgaged debentures. called up is called calls in advance'

If there is no security then they become naked (see Finance of

9.3.4 The stock exchonge
debentures.
the Business l-Jnirs)
Receive a fixed rate of interest.
Can force company into liquidation if they fail - A stock exchange is a market for second-hand
shares.Second-hand shares are shares that are
to receive their interest.
not being traded for the flrst time i'e' they have
Interest is paid whether a proflt is made or not' already been issued by the firms and investors
Upon liquidation of the company, debenture are changing hands on ownershiP.
holders must be paid in full before the - Acts as a market that puts those willing to sel1
shareholders have any claim on the assets of shares in touch with those seeking to buy'
the company.
Do not have maturitY dates.

Shoreholders Debenture holders

Owners of a companY Creditors of a comPanY

Receive dividends Receive interest

Have voting rights - Do not have voting rights

Receive dividends after debenture holders have First to receive their fixed rates of
received their interest interest before shareholders

Receive their claim on the distribution of - Paid in full upon liquidation before
company assets after debenture holders shareholders

Trt hl c 9, J : C o ntp rt r i so tt r
|t'' s h a r t It 0 I d e rs u nti tl eb c n t u ra ho lders

9.3.3 Shqre coPitol 9.4 The public sector enterPrises

a) Authorised caPital
9.4.1 Public corPorotions
Also called registered or nominal capital.
Also called parastatals and established by ar
Shown in the memorandum of association.
Act of Parliament.
Represents the maximum amount of capital
Found under the public sector, example.
the company is allowed to raise from the include Agribank, POSB, ARDA, ZINARA'
public through issuing of shares.
NRZ, ZUPCO and G.M'B.
b) Issued capital Owned by government on behalf of the public
Part of the nominal capital that has actually Controlled by govemment through a minister
been offered for subscriPtion.
Usually run by a board of managemen'
c) Subscribed capital appointed by government.
Part of the issued capital that has been taken Has a general manager
up by the public. essential services to th-
Aim at providing
d) Called up capital public.
Amount of shares (issued and subscribed) that Raises capital by selling stocks and bonds.
have been called for PaYment. Also receive grants from government and re-
The part that has not been requested is known invest profits.
as uncalled capital. Is a separate legal entitY.
e) Paid up capital Usually subsidised by government.
Parl of the called capital that has been actually Government provides initial capital.
paid to the company.

B asin es s Organis atio ns

 ldvantages Government has a large measure of control
over such utility organisations.
. Separate legal entity.
Government provides a large proportion of
Provides essential services to the public.
their capital funds.
- Prices of goods and services are low due to
in nature since they
Maybe monopolistic
subsidies.
have no competitors. Work on a non-profit or
. Govemment provides initial capital. limited profit basis.
. Receives grants from govemment. Provision of some goods and seruices may
be undertaken by municipalities, e.g. water,
-tisadvantages sanitation, light, sewerage.
Continuous milking of government through
underperforming.
to consider when
Inefficiency due to monopoly.
Too much political control and interfere
t,
ffi f--:ft'--jT'THiT:;;"T:::::'rocotion
Blamed lor high comrption. t CapitalLvailable
iI 14 Space required
Loss of qualified staff. I .-i ..-'
I
High debts. I
* JlNDt',*A'rt'; .$pecial flacilities needed
eo e!I9'- Easy access to markets, customers, or clients
9.4.2 Public utility undertoking$
-\ Availability of qualifled staff
- Set up to meet consumer needs'and wants Quality of telecommunication and transport
of commodities and services of national links with local cities and internationally
importance. The cost of staff
- The goods and services are closely linked up Availability of office space
with the well-being of the whole population. Neamess to markets
- Require large capital investments. Competitions from other business
- State or local authorities have a direct or Availability of parking space
indirect influence in them e.g. electricity, water, Availability of police stations/posts, fire
transpofl etc. (ZESA Holdings, ZINWA).
stations and hospitals

Common errors
G . Public limited companies are often mistaken for public corporations.

T., . Shares and debentures are often confused.

n- C. at least one partner has limited
.EST
YOURSELF D. there is no limited liability.
3. A private limited company raises capital mainly
rrtultiple choice questions by
na:. What factors enabled the continued existence of A. borrowing from banks.
small scale retailers? B. issuing shares to members.
A. They have flexible time of business. C. obtaining govemment grants.
B. They operate on the small proflt, quick return D. selling debentures.
principle. 4. An individual buys existing public limited company
They know each other. shares from the
They have their own transport to collect A. directors. B. post office.
orders. C. stock exchange. D. registrar of companies.
In a limited partnership 5. Who sets up public corporations?
A. all partners enjoy limited liability. A. Directors B. Government
B. all partners have unlimited liability. C. Shareholders D. Underwriters

B usiness Organis ations

 iStructured questions (b) State the contents of a Memorandum ol GI
i 1. (a) What are the contents of an arlicle of Association. tsl Bu
i ursociation? t8l
J. Explain the differences between Partnerships and
i (b) Outline the characteristics of a private limited Public limited companies under the fbllowine
headings: Fr
i .ompany in respect of':
(i)
r (i) Raising capital t4l
Formation t4l
(il) Control (ii) Ownership l4l Lr
: I4l
(iii) Management and control lll
'',2. (iii) Distribution of profits t4l Li
(a) Explain the features of multinational (iv) Liabiliry i4l
I corporations. t8l
(v) Distribution of profits 14)
Fr

Business Orgonisotions - Crossword

?l
h

h
?r

5.
fr

iAcross J. Shares that do not entitle their holders to future

profits when missed in one year.
I t. Business organisation owned by at least two and
i maximum of twenty people.
4. One person business is called

,7. A debenture is usually a_to a company.

5. Company that issues prospectus

i q. The abbreviation for company.

6. Parastatals can also issue to rarse
capital.
i t t. O.gurisations which are semi-government are also
, called government organisations. 8. Limited Companies are separate
entities.
: 12. An of association governs the
internal relationship in companies.
10. An ordinary share is called an
15. Companies that do not need to publish their 12. An partner is one who
contributes capital and takes part in the running of
flnancial statements.
the partnership.
16. Companies can be sued or in their
own names.
13. A company's name must end with the abbreviation
17. Shares ofprofit given to shareholders.
I
14. Apart of a limited company's capital is called a

iDown *ivisi*{tdg,,fieti!r*, Pritel?*, i**:-;:;:;r-.rii+i'i:,"r+

i t. Organisation owned by govemment on behalf of
Fr"::ttn*r'**tip. ;:ri:b{i*, F}*rr;*i*t'*::. Fr.:l},". .,i,,.-i
i the public.
i***, {*. -*t.i:#.9, il*ul$"- .*;-iitil.:*, ,rr.i*i;i., i"t*
12. Debenture holders get a flxed of
55"r*ra"
\,
t

rnterest
il

9I:
k B usiness Organisations
{w
 ; oss*ry of terrms
l;usiness organisation - a unit or group of people working together with a common objective of profit
making.
: :anchising - a business strategy or practice of giving another business the right to use one's
I trade mark or brand name.

-agal entity - can sue or be sued under its own name.

-:mited liability - shareholders only lose what they would have invested and not their private
properties when a business fails to pay debts.
: rrtnerships - relationships or associations of two to twenfy people who join to carry on a
business or trade with a view to profit.
rrrtnership deed - partnership written agreement also called an article of partnership.
):.tvate enterprise - businesses owned by individuals or group of individuals and are run primarily to
make proflt.

\blic corporations - stated owned organisations also called parastatals.

Lr blic utility undertakings - organisations set up to meet consumer needs and wants of commodities of services
of national importance.
::r,.e proprietorship - business owned and operated by one individual.

" rlimited liability - private properties of the proprietor are at risk when a business fails since they can
be used to pay offbusiness debts.

-:-\

t-
!!- :

i.6s j B usine s s Organis atio ns

&
 lO.O Obiectives - Lack of store of value - some goods are
perishable feasily go bad] and can therefore
By the end of this chapter leamers will be able to: not be stored for a long time.
a) deline money; - Porlability - some goods are heavy or bulky to
b) list the characteristics of money; be carried or transpofted.

c) list and explain the functions of money;

l0.l.2 Chorocteristics of money
d) explain the different sources of income;
e) state methods of saving income;
- Portability - easy to carry.
- Divisibility - found in small denominations
0 identify methods for personal investment;
for change.
g) analyse reasons for investing;
-
h) state the speciflc functions of different types of
Durability - lasts long; not easily defaced.
banks;
- Scarcity not easy to find.
i) explain how banking and finance assists commerce
- Acceptability - it should not be refused as a
means of payment.
and trade: and
- Homogeneous/uniformity - money of similar
.i) explain the cheque system and give reasons why
denomination should all be alike.
cheques can be dishonoured.
- Stability in value its buying power should
not change too often.
IO.t Money - Identifiability/recognisability easy t0
Generally acceptable purchasing power. recognise.
A medium through which goods and services can
lO.I.3 Functions of money
change hands.
Legally acceptable in settlement of debts/legal - Means/medium of exchange can be
tender. exchanged for goods or services.
- Measure of value
enables goods to be easill
l0.l.l Origins of money priced or to be given value in monetary terms
and enables comparison of values of goods.
Mor-rey originated as a result of the shortfalls/
problems of barler trade which include: - Store of value/wealth enables savings to be
made.
- Lack ofdouble coincidence of wants -
people wanting to exchange goods must be - Standard/unit of deferred payments - goods
in possession of what they both want. For services can be bought or sold on credit to be
example, if one wants a goat and has a bag paid for in future and the price to be paid is
of maize he/she must look for someone with a expressed in monetary terms.
goat r,vho also u,ants abag of maize. - Unit of account - enables ltnancial reporting
- Indivisibility - some of the goods cannot be to be made i.e. transactions are accounted for
divided. For example, an exchange of ten bags in monetary terms.
of maize with half a live ox.
- Lack of a common measure of value - it is
l0.t.4 Purchosing power
dif{icult to measure the value of goods being - Describes the amount of goods or services that
exchanged since there is no use of money. can be bought from a given sum of money.

Finance and banking

r66 l

i€
rc w
ll Where money gains value, more goods/ Sources of financial advice
It
EI services can be bought from a given sum of -
ta Banks.
tl money- deflation.
EI
TI - Friends.
f,I Where money loses value, less goods/services
can be bought from a given sum of money -
- Accountingcompanies.
inflation. - Stockbrokingcompanies.

Consequences of financial mismanagement

102 Sources of personol income
- - Business will run short of working capital.
Employment.
- Suppliers will not continue to sell on credit.
Trading.
- - Banks will not give loans to such people.
Personal savings.
- Leasing.
- Rentals.
lO.3 Toxotion: Tox heods
. Pay As You Earn is a tax charged to ernployees'
\lethods of saving income salaries and wages.
. Value Added Tax (V.A.T) is levied on goods or
Banking of money.
sen'ices by registered VAT operators"
" Short term investments such as shares.
. Excise duty is levied on locally made luxurious
. Pension funds. goods.
- Forming money savings clubs. . Customs duty is levy charged on imports.
. Corporate tax is levied on contpany taxable income.
l,easons for investing
" Growth of investments. lO.4 lnflotion
To get interest.
- - Rate of change in price at a parlicular time against
To get capital invested at maturity.
previous period.

Budget
Causes of inflation
A plan that gives guideline as regards to the source
and application of funds at a given time.
- High tax rate resulting in high prices.
- More money in circulation than goods or serv'ices
produced.

tble l0.l E.rumple o.f'u perxtnul ltuilget - High demand for goods and services whilst they
are in scarcity.
,ncome - High production costs.
Salary I 000
Ither income 500 1500 Effects of inflation
- People with fixed income will lose purchasing
:xpenditure power.
lent 150 - Businesses might find it difficult to enter into long
School fees 400 term contracts.
,Sroceries 200 - May cause balance of payment problems.
Clothing 100
Travelling expenses 50 900 How to reduce inflation
,L--
l:-;
Surplus of income over expenditure 600 - Reduce imports.
The surplus cash can be invested in banks. - Reduce government expenditnre.

@
&*j
Finonce and banking
 - Negotiate debt cancellation with creditors. Offer interest on money kept in the account.
- Introduce or increase customs duty. Offer investment opporhrnities, for example
- Reduce printing money. through long term deposits.
- Reduce shortages by increasing production. Give expert financial advice.
- Impose trade restrictions on hire purchase. Accept and discount bills of exchange.
- Increase taxation. Act as underwriters.
- Devalue local currency. Offer bank assurance.
- Export more goods. Offer e-banking and tele-banking.
Act as trustees and executors.
lO5 BEnks
10.6 Types of bonks
- Legal financial institution.
- Collect excess money from the public.
10.6.l Building societies
- Keep the money safely.
- Give the money back to the owners when they
Examples include Central Africa Building
request for it.
Society (CABS), FBC and ZB Building
Society.
105.1 Generol functions of bonks Provide savings accounts.
- Allow withdrawals to be made from different Provide interest to account holders.
types ofaccounts. Operate paid up permanent shares (PUPS)
- Provide finance in the form of long and short which eam tax free interest.
term borrowings e.g. loans and overdrafts. Accept money on fixed deposit accounts
- Assist in making payments on behalf of
(subscription shares), which earn taxable
account holders. interest.

- Receive payments on behalf of account

Provide mortgage bonds (loans) to
r those
holders. wishing to build/buy houses.
- Provide interest on principal amount. Provide point of sale service (POS).

- Charge clients for sen'ices rendered Operate ATMs (cash dispensers).

- bank
charges. Issue cheques on request.

Keep money safe through savings accounts, - Facilitate automatic transmission of funds.
current accounts and deposit accounts.
Allow withdrawals to be made from diflerent 10.62 Sovings bonks
types ofaccounts. - An example is the People's Own Savings
Provide night safe facilities. Bank (POSB).
Process payment of money through cheques, - Accept deposits.
standing orders, stop orders, direct debit, - Operate fixed deposit and savings accounts.
bankers' drafts and bills of exchange. - Provide tax free interest.
Receive payments from customers, for - Receive payments/income on behalf of clients.
example credit transfers.
- Make payments through stop/standing orders
Provide foreign currency for the importation on customers'behalf.
of goods and serv'ices.
- Provide money transfer.
Facilitate international payments and
- Operate ATMs.
movement of funds through telegraphic
transfers and letters ofcredit.
- Lend money to large organisations and
individuals.
Provide automated teller machines (ATMs),
credit cards and point ofsale facilities. - Issue cheques on request.

I Finance and banking @

#
 - Finance the government and local authorities - Provide flnancial assistance in times of death,
by buying stocks they issue. illness and accidents.
- Cover corporate and personal property against
I0.6.3 Merchont bonks/occepting houses insurable risks.
- An example is the National Merchant Bank of - Finance policy holders by providing loans
Zimbabwe (NMBZ). secured on certain types ofpolicies.
- Issue securities to the public on behalf of - Guarantee sale of public sector stocks and
companies. shares issued by private companies - takes up
- Cover goods in transit against transit risks. unsold securities and pays the organisation for
the securities.
- Provide loans to expofiers.
- Accept and discount bills of exchange. 10.6.7 Development bonks
- Provide short term finance to importers.
- Buy and sell unsubscribed shares.
- Specific development banks are set up to
finance specific development activities.
- Keep foreign exchange/cunency reserves.
- An example is Agribank.
- Offer banking senrices.
10.6.8 Centro7Reserve bonk
10.6.4 Finonce houses
- Is a public sector enterprisc.
- An example is Standard Chartered Finance. - Manages the country's monetary policy.
- Provide hire purchase finance.
- Controls the amount of money in circulation.
- Pror ide leasing sen ices.
- Produces the couutry's coins and notes.
- Collect debts on behalf of clients: offer - Issues the coins and notes.
factoring serv'ices.
- - Manages the country's gold and foreign assets
Financecustomers/providesloans.
resen/es.
,>: - Accept short term deposits, which earn taxable
- Provides banking services to other banks.
interest for the depositor.
- - Banker to the government.
Finance the govemment by buying treasury
bills.
- Is the financial organisation that banks turn
- to when they cannot get finance elsewhere-
10.65 Discount houses lender of last resort.

- Examples include Bard Discount House and

- Provides loans and overdrafts to other banks.

National Discount House of Zimbabwe. - Provides clearing house services.

- Finance the govemment by buying and selling - Settles interbank indebtedness.

treasury bills. - Replaces worn out notes and coins.
- Lend money to government and private - Controls lending rates.
companies. - Advisor to the state on monetary issues.
- Finance traders by discounting bills of - Operates accounts for state departments.
exchange before maturiry. - Manages national debt.
- Provide banking services to commercial banks - An agent for state borrowing from the public.
by keeping resen/e assets.
- It is the bankers' bank - keeps minimum
- Advise organisations on mergers and take- deposits required of banks.
overs.

'10.6.6 lnsuronce componies 10.6.9 Commerciol bonks

- Examples include Barclays, Standard
- Governed by the Insurance Act through the Chartered Bank, Allied Bank, ZB Bank and
Insurance Council of Zimbabwe. CBZ Bank.
- Examples include Nicoz Diamond. Champions
and Zimnat Life.

Finance antlbanking
 - Assist in making payments through stop/ - Account holder notifies the bank of the
intended withdrawal from the account in
standing order, credit transfer and direct
advance.
debits.
- Operate savings, curent and deposit accounts - Account holder earns a fixed rate of
for clients. interest on the account.

- Provide finance in form ofloans and overdrafts' - Higher interest rate is earned than on a

savings account.
- Finance exporters by discounting bills of
exchange before maturitY. - Can be used to save money for a speciflc
purpose.
- Keep valuables like title deeds and jewellery
safelY.
- The account provides collateral securin
in securing bank loans.
- Issue bank drafts.
- Execute u'ills and act as trustees'
- On maturity, the customer can reinves:
the whole amount (including interest) ot
- Provide stock broking services by issuing part of it.
stocks of the public sector entetprises and
shares of cotnPan ies.
c) Curent account
- Mainly used by businesses thougL
- Providetravellers'cheques.
individuals can also use it.
- Advise clients on investment oppoffunities
- Withdrawals can be made at any time br
and foreign trade Procedures.
completing cheque forms andATM cards
- Provide night safe facilities'
- Deposits are made by completing deposr:
slips.
tO.7 Services of commerciol bonks - Keeps moneY safe.
- Operates on
the cheque system
l0.7.l Mointoining customer occounts customers are issued cheque books.

a) Savings account - Withdrawals can be made at any timt

without notice.
- Mostly used bY small savers like
individuals over a short period of time' - Enables payments to be made or receivec

- Holders have to maintain a minimum

through stop/standing order, credr:
transfer and direct debits.
balance in the account.
- May have a minimum and maximum - Cheques provide proof of payments.

withdrawal. - Account holder can secure overdrafts'

- The bank charges the account holder for - Bank provides banker's reference whe:'
operating the account. required.

- Account holder may earn interest on the - Account holder may receive interest or
account if the balance on the account the credit balance in the account.
exceeds a cefiain level. - Bank provides bank statement showing
- Account holders are given ATM transactions made and the balance on thE

cards which maY be used for making account.

withdrawals.
1O.7.2 Administering the cheque system
b) Deposit account
- A lixed sum of money is deposited into a) A cheque is:
the account for a fixed Period. - an order to the bank;
- Mostly used by large savers for huge - by a current account holder;
sums over a long Period of time' - to paY a stated sum of moneY;
- Withdrawals can onlY be made from to a named Persorlorganisation;
the account after the expiry of the fixed
period.
b) Features ofa cheque

Finance and bonking

i79.l
h .i$.
ffi
 d) Types ofcheques
i th.. :Z Bank Ltd (i) (i) Open cheque
ni r: 25-11-12 (ii)
Street
l,lain - Can be Paid over the bank counter'
: M Mail (iii) or order - Does not need to be deposited into an
e a,.
: sufl of : One hundred dollars only (iv) account.
- Not safe: can be cashed to a wrong person'/
on;
organisation.
.-iF-
* (vii) (ii) Bearer cheques
-)345".4140 6265004" 105 (vi) S9t
- No name of the Payee'
lun:. - 10.1: r\ sPecitnen cheque - Can be paid to anyone who presents them
to the bank.
(i) CBZ Bank Ltd
is the drawee; bank and
n\ es.
branch were the current account is held' - Are unsafe: anyone who picks the cheque
st I a: can become the bearer'
(ii) 25-11-12 date the cheque was issued/
-
written.
(iii) Bank draft/bank cheque
(iii) M. Mail - is the payee; the one to receive - Bank's own cheque.
l,lll'--
the moneY. - Drawn bY the bank, on itself'
(iv) Amount - in words and in figures' - Can be in foreign currency for use in
ne :', international trade.
-crj: (v) S Store - is the drawer; current account
holder who draws the cheque' - Safe: cannot be dishonoured'
--F'-
(vi) "169345"'4140 6265004" 105 - cheque - Used where large sums of moneY are
number. branch number, current involved.
account number and number used when (iv) Bank certifled cheque
:m
Processing the amount Paid' - Customer's cheque'
(vii) Signature of drawer' - Customer draws the cheque'
-:*
ti, -,:
: ) Parlies to a cheque - The bank certifies the cheque by stamping
(i) Drawer (S Store) and signing it.
- ls the current account holder' - Used in home trade'
- Is the one who completes the cheque - Cannotbe dishonoured'
form. (v) Blank cheque
i.
- Signs the cheque and gives it to the one to - Used where the drawer is not certain of
rrs.

\\ L1_ l_
-- --
be Paid. the supplier and the amount to be paid'
(ii) Drawee (CBZ Bank Ltd) - Used w'here the curent account holder
- Is the bank which keeps the current sends somebody shopping on his/her
est ::
account. behalf.

111r,\ -1,;
- Money has to be paid out of this bank and - The amount is not indicated'
given to the PaYee. - The PaYee is also not indicated'
(iii) PaYee (M Mail) - The one sent will complete the details on
- One to receive the PaYment' behaif of the drawer'
;tem - Payee's name is written on the face of the - The drawer/current account holder signs
cheque bY the drawer' the cheque before sending someone'
- Can pass on the cheque to an endorsee by - Not safe.
signing at the back of the cheque' (vi) Crossed cheque
(iv) Endorsee - Has two parallel lines on the face'
- One who receives the cheque from the - Has to be deposited into a bank account -
payee, after the payee has signed at the cannot be cashed over the counter unless
back of it. oPened.
- Can obtain money from the bank in place - Cash will be Paid after clearing'
ofthe PaYee.

i71l
1

Finance and banking

?*
 e) Types of cheque crossings Alterations on the cheque are not signed
for by the drawer,
(i) General Crossing
- Two parallel lines on the face of the
The drawer is bankruPt/insolvent c
specified.
cheque. i
- Two parallel lines on the face plus 'and
- There are no funds in the account. f
company'in between the lines' g) Stale cheque :1

- Two parallel lines plus 'account payee' - A cheque whose issue date is 6 or more :1

only in between the lines' months Past. :

- Two parallel lines plus 'not negotiable'in
- For example, a cheque issued on 17 Apri'
2014 is said to be stale after 16 October
between the 1ines"
2014.
- 'Not negotiable' rvritteniprinted on the
face ofthe cheque. - It cannot be honoured.
- The cheque can be deposited into any - The payee will need to have the drawer
bank account.
write another cheque.
- There is no named bank or branch where h) Post-dated cheque
the cheque has to be dePosited. - A cheque issued earlier than the date or
- Cannot be cashed over the counter. which it can be cashed or deposited.
- lt is less safe. - It has a future date.
(ii) Special crossing - The drawer issues it anticipating tha:
there will be funds in their account or
- Two parallel lines plus name of bank in
that future date.
between the lines.
- Trvo parallel lines plus name of bank and
- It cannot be honoured before the date'
name of branch in-betrveen the lines.
- The cheque can onlY be Paid into an Advantages of using a cheque
account at the named bank (at times at a - It can be crossed to make it safe.
narned branch). - A cheque can be posted cheaply using ordinan
- Cannot be cashed over the counter. mail.
- Provides addecl safetY. - A returning cheque acts as proof of payment.
- Can be posted cheaPlY. - Check stubs act as records of transactions made'
0 Dishonoured cheques - It can be written any timc.
A cheque tnay be dishonoured if: - Saves time of going to the bank, counting notes o:
- Amoutrt in rvords differs from amount in giving change.
figures. - Payment can be made using a post-dated cheque.
- A post-dated cheque presented before the - It can be endorsed - can be transferred to the credl:
actual date. of a third party.
- It is stale six months after the date of - The drawer can stop payment befbre the cheque i.
issue. cleared.
- It is tom, dirtY or mutilated. - Convenient than carrying cash.
- The signature on the cheque differs from - Customer receives bank statements regularly.
the specimen signature at the bank.
- There are insuffrcient funds in the drarver's
Disadvantages of using a cheque
account to cover the cheque amount.
- The cheque r.r'as stopped by the drawer.
- Not suitable for very small payments.
- lt is presented to the bank after the current - Payeemusthave abankaccount ifpaidby a crossec
cheque.
account is closed.
- The drawer is dead or insaneimad.
A debtor may issue a cheque even when they dc
not have money in the account.
- There is incomplete/missing detail on the
I

i cheque e.g. no date.

Not legal tender.
I

Finance atd,bauhing @
,i
{*
F
 1l

- Payment takes longer than cash payment. - Intervals between payments vary.
- The creditor initiates payments.
Cheque cleoronce - Bad debts are minimised.
-.;heque goes through a process ofclearance when it is - Saves the cost of sending reminders to debtors.
-:posited into a bank account by the payee. The clearing - Payments are made directly to the creditor by
. ,rcess may take any one of the three forms depending the bank.
- *'hether the drawer and payee have accounts with - The debtor would have given prior authority
: same bank. to the bank to do so.
-\ -- Branch clearing (Internal) - Debtor completes direct authorisation form in
Occurs where the drawer and payee use the same advance.
bank and branch. - Both the debtor and creditor must have bank
Clearing is done at the same branch. accounts.
lras = The branch credits the account of the payee and - Bank transfers money into the creditor's
debits the account of the drawer. account.
Head office clearing b) Stop/Standing order
date r:
Occurs where the drawer and payee use the same - Used to pay fixed amounts such as hire
:d.
:ank but different branches. purchase instalments, subscriptions or
insurance premiums.
Clearing is done at the bank's head office.
- The bank transfers a flxed sum of money from
The cheque is deposited at the payee's branch.
the debtor's account to the creditor's account
The payee's account is credited. at regular intervals.

date
lhe cheque is sent to the bank's head office. - The debtor initiates payments by completing
\11 branches keep accounts with the head office. stop order forms.
:{ead office debits the drawer's branch and credits - Both the debtor and creditor must have bank
:3\'ee's branch. accounts.

-he cheque is sent to the drawer's branch where - Saves the creditor additional interest as a result
I LII ur!-! ofoverdue accounts.
.:e drawer's account is debited.
J:nkers' clearing (Central bank clearing) - Reduces bad debts - no need for creditor to
nent. send reminders.
-,.'curs where the drawer and payee use different
,ns mad'
- :- ..1.^
i 1l{s.
- Payee receives prompt payment.
- There is less paper work.
--.earing is done at the Central Bank where all
,nks keep accounts. c) Credit transfer
-:: cheque is deposited at the payee's branch and
- Commonly used for paying salaries, wages or
red cheqr '.-.: payee's account is credited. dividends.
I to the c: -:e cheque is sent to the bank's head office where
- One cheque used to pay many accounts in any
-: drawer's branch is debited and the payee's
bank in the country.
the cheq -:'nch is credited. - The payees must have bank accounts.

- .
head office cheques for similar banks are
- Used to make several payments at the same
: *:dled together. time.

regularlY' --: bundled cheques are sent to the central bank

- A multiple transfer form is completed.

-:re each bank's indebtedness is calculated. 1O.7.4. Bonk overdroft

-' : accounts of banks that owe others are debited
--le those that are owed are credited.
- Available to current account holders only.
rts.
- Informal short term borrowing.
raidbY a '0.7.3 Processing poyments - Interest is charged on the overdrawn amount

:n rvhen
. firect debit daily.

Used to pay varying amounts such as

- Interest rate is variable depending on the
telephone, electricity or water bills. current rate of interest.

Finance and banking

 - Interest rate is higher than the rate on the bank - Can make payments on behalf of the customer.
loan. - Uses Zim Switch facilities.
- Repayments are variable - repayment period - Saves on paper work and labour.
is not flxed.
- It is fast.
- Collateral security may not be required.
- Clients have personal identification numbers
(PIN) for security.
10.7.5. Bonk loon
- The PIN can be changed.
- Formal way of borrowing /client completes
- Money can be transferred from one account to
application forms.
another.
- Long term borrorr ing.
- A loan account is opened for the customer. 1O.7.7. Night sofe
- Interest rate is lower than on overdraft. - Offered by commercial banks.
- Interest is charged on the whole amount and - Customers put money and deposit slip into a
may be fixed at the start of the loan period. lockable bag.
- Available to anyone who meets the - The bag is dropped into the bank's vault
requirements. through a slot/chute.
- Repayment is by equal instalments. - The customer's account will be credited with
- Collateral security is required. the amount the following working day.

Bonk loon Bonk overdroft

A loan account is opened for the customer. - No new account is opened the
existing current account is used.
- Amount borrowed is lixed. Amount borrowed is not fixed.
Formalbonowing. - Informal borrowing.
- Rate of interest flxed. - Rate of interest vary.
Lower interest rate. High interest rate.
Regular instalments. - Irregular payments made through
deposits into the borrower's account.
Can be taken by any customer. Given to customers who have current
accounts.
Interest charged on the whole amount Interest calculated on the daily balance
borrowed. of the amount borrowed.
Borrowing for a long time. - Short term borrowing.
Borrowed to provide long term capitalisation. Borrowed to provide working capital.

lihlr : 'l'ltr, ii.fft,rurt'r,s b(tn'rt,n o hurtl; Iornr urrd trtr orL,r'drufi

l(1. I

10.7.6. ATM (Automoted Teller Mochinel

- The customer has a key to a trap door.
- The bank has a key to the bag/wallet.
- Provided by most banks.
- Prevents loss of money due to theft if money
- Usually located on the outside walls of banks was kept in the business premises after
or shops. working hours.
- Enables fast withdrau,al of money at any time.
- Allows deposits to be rnade at any time. 10.7.8. Debit cords
- Customer can request for cheque book. - Can be used to obtain goods and services from
- Provides mini-statement. the suppliers without paying cash.
- Offers self-service. - The supplier in turn will be paid by the bank.

Finance and banking

i74 l

,.i
[: 3t:{i

i
)me: Amount due is transferred from the (iii) Receiving bank statements
customer's account into the supplier's account (iv) Balance enquiry
electronically. (v) Receiving automatic update information
It is safe - the customer does not carry cash each time the account is credited with
around. amounts received on the customer's
nbers
Allows for limited withdrawals at other banks behalf.
other than the customer's. - Saves on time as there is no travelling to the
The customer has a PIN. bank and queuing.
unt:-
.38 Modern trends in bonking 10.8.2 Money tronsfer focilities
- Banks are working hand in hand with money
'10.8.1 Telebonking transfer organisations both locally and
internationally such as Mukuru.com, Westem
lntLr i - Enables a customer to obtain banking services Union, EcoCash, TeleCash, One Wallet and
through the phone such as: MoneyGram.
\ au-: (i) Order cheque book - Customers do not necessarily have to have an
(ii) Payment of bills account with the bank.

Common errors
G Credit transfer and direct debiting are often mistaken.

T The deposit account is mistaken for buying goods on credit where

instalments.
a followed by

C. corporate tax.
D. foreign tax.
5. Inflation can be reduced by
rilft,u lpls choice questions
A. devaluing local currency.
-ch one is a function of money?
B. importing more goods.
Legal tender
C. printing more money.
Dir.isibility
D. high production costs.
Stability of value 6. One can obtain financial advice from
Store of value
A. schools.
= tbllowing is one of the methods of saving B. accounting firms.
-:ne
:anking.
C. social clubs.

.e1ling.
D. non-trading firms.
'.r 7. Which of the following offer current accounts?
orking.
:orrowing.
A. Building societies
B. Commercial banks
:re following, which one not a borrowing
:,r'l
C. Discount houses
D. Savings banks
T InONJ Bank overdraft
8. An overdraft occurs where one
es at:= Bank loan
A. deposits more money in the account.
Trade credit B. is given interest on the amount in the account.
Cash payments C. transfers money to another person's account.
': the following are tax heads except D. withdraws more money than in the accouirt.
:ustoms duty. 9. A crossed cheque
:rcise duty. A. has to be deposited into a bank account.
re bam

Finance and banking

 B. can be cashed over the counter. (b) What are the causes of inflation [10]
C. cannot be dishonoured by the bank. 3. (a) How can inflation be reduced tl0]
D. has to be endorsed by the drawer. (b) Discuss any three borrowing options
t6l
10. Which financial institution would assist a trader (c) What are the consequences of financial
with funds to buy a shop building? mismanagement to a business t4l
A. Commercial bank B. Finance house 4. State: (a) the functions of money t5l
C. Building society D. Discount house
(b) characteristics of good money t5l
5. Explain the importance of banking to business
Structured guesiions people. l20l
1. (a) State the sources ofpersonal finance lsl 6. How do banks assist business in making and
(b) Draw a personal cash budget [15] receiving payments? l20l
2. (a) Explain the tax heads used in your country 7. Give reasons why a cheque may be dishonoured?
I I0l
\'-_-.---_----- t6l

Glossory
Legal tender anything acceptable as purchasing power - notes and coins.

Mortgage finance offered by building societies for the purchase or construction of buildings (homes or
factories).

Overdraft to withdraw more money than in one's account.

k:
t
Finance and banhing
 3=;ryry
m
ttf_'9

:!:1-{i
* 3 Obiectives - It is money used for the day today running of
the business.
': :ld of this chapter learners will be able to:
[!+
. :.:in business'need for finances; II.3 Sources of business finonce
--:tr[' the sources of business finance;
: :.:in the different types of capital; Table I 1.1 shows the different forms of business
organisations and their sources ofcapital.
- ,..:rsuish between short-term and long-term
- -.:le: and NB: Sources of finance can either be internal or external
as shown below:
- , .:rguish between debt and equity capital.
Sources of finonce
' Susiness' need for finonce
Externol sources
: i :;S fle ed money for the following reasons:
Savings Loans
::in up business operations and finance the
- - ..,-tion of goods and services. Retained profits Mortgages

- ::emises and equipment. Debt factoring Hire purchase

- : :rarketing, advertising and promotion efforts. Sale of existing assets Trade credit

-
- . .he day to day operational expenses like rent Running down stocks Debentures
' - 'trges. Issue shares
.- : operations ofexisting business. Grants and subsidies
ll.3.l Sovings
Copitol ond types of copitol - In cases where a lessor amount of money
money that is used to start the business
is required to start business operations, a
proprietor may use money that has been put
day to day running.
aside from personal eamings.
- -t-'l Fixed copitol - This is usually the case with sole proprietorships
and partnerships.
-:--s refers to the investment that is represented
:he flxed assets ofthe business. It.3.2 Retoined profih
. i property used for a long time before it can - The part ofthe business'proflts that is ploughed
. :eplaced.
back into the business to fund operations.
- J Working copitol - Reducesshareholders'dividends.

- .s refers to the funds available for the 11.3.3 Loons

:-:etions of the business in the short term
: . rh€ payment of utility bills, salaries and
- These are funds borrowed and are to be repaid
-. :urchase oftrading stock. with interest.

:irng capital is the difference between 11.3.4 Bonk overdroft

- ---:3nt assets and current liabilities, i.e.:

::<ing capital : Current assets - Current

- An arangement in which a firm can withdraw
more money than it actually has in the bank
...;tieS
account.

Finance of the business units

 Savings Personal
Sole proPrietorshiP
Bank loans Bank
Profit reserves Firm's resources
Moftgage Building societies
Debt factoring Firm's resources

Savings Partners
Bank loans and overdrafts Bank loans and overdrafts
Profit reserves Firm's resources
Mortgage Building societies
Debt factoring Firm's resources

Shares Shareholders
Limited comPanies
Debentures Bank and investors
Overdrafts and loans Banks
Retained profit Internal resources
Debt factoring Internal resources

Loans Central bank and other bank

Government
Govemment grants Treasury
departments/
Government bonds General investing Public
Statutory bodies

kthle t l. ! : f ortns of' hrtsiness tnd their sour('es o/'t'upitul

The equipment belongs to the seller until it ''
- It is an informal way of taking a loan' fully paid for and failure to pay will result ::
- It is a short-term form of flnancing on which the repossession of the assets and the loss r -
interest is charged on the daily balance' installments alreadY Paid.
The Hire Purchase Act provides sufficie:-
11.3.5 Leose ogreement protection against unfair repossession'
- Firms produce and trade using hired property,
equipment and machinery. 11.3.8 Debt foctoring
- These are hired from leasing companies' - A firm can raise funds by selling its invoic=:
- An annual fee is paid for the use of the debtors at a discounted Price.
machine. - The factoring company pays cash that is lc.'
- The firm can thus get access to machines than the actual book debts and the right ':
without having to Purchase them' recover the debts is transferred to them'

- At the end of the leasing period, the ownership

11.3.9 Mortgoge bonds
of the hired assets either reverts back to the
leasing company or transfers to the hiring firm These are long term loans for the purchase .'
depending on the agreement. construction of premises, factories and oI:tr
immovable ProPertY.
11.3.6 Trode credit
Traders or manufacturers often give stock/
ll.3.l0 Debentures (long term loon
- certificotes)
inventory on credit to othet traders for tesale'
These are long term loans given to cc::::
- This provision of credit is a form of flnancing'
by private investors.
11.3.7 Hire Purchose They carry a fixed interest rate and c-
redeemed at a future date for a fixed amc -:*
- Firms can acquire assets through hire purchase'
Interest is payable whether or not the cor:-:
- They can use the equipment while paying for
makes a proflt.
them.

Finance of the husiness anits

 Preference shareholders do not have
- Holders of debentures are not owners of the
voting rights in the company's rneetings'
company but lenders or creditors'
They hence do not control its operations'
ll.3.1l Toxes ond rotes They are regarded as debt capital, which
is borrowed caPital.
- Taxes collected from companies and
individuals are received into treasury and part
b) Ordinary shares

of the funds is distributed to statutory bodies These are the shares that confer ou'nership
as grants and subsidies' of the comPanY to the holder'

- Local authorities charge rates to property The rate of dividend is variable and
depends on the availability of di stributable
owners and to traders. These funds are used
tofinance their operations and facilities' p.ofltt will not get a dividend if there
-
are no distributable Profits'
Municipal authorities also have trading and
recreational facilities that generate money' The shareholder has voting rights in the
company's meetings and hence controls
ll.3.l2 Gilt-edged securities its running.
They get a dividend only after preference
- Securities issued by the govemment'
dividends have been Paid'
- Entitles the holder to fixed interest over a They are a risky investment because
period of time.
if there are no proflts for the year, no
- Redeemable on maturity.
divrdend is paid and nothing accumulates
- Examples are treasury bills and government for future payment. When the company
bonds. fails they also lose their investment.
They are regarded as equity capital. which
ll.3.l3 Shores (see olso Business is owner's capital.
Orgonisotionsl
- It is capital contributed by several shareholders' II.4 The Zimbobwe Stock Exchonge
- is owner-provided finance that
(zsEl
Share capital
represents ownership of a limited liability - This is Zimbabwe's own organised market/
company (owners' equitY). facility for the buying and selling of second-
- Investor can put money into the company by hand shares - under the Zimbabwe Stock
buying the comPanY's shares. Exchange Act 24:1 8.
- Shares are either traded on the Stock Exchange
ll.4.l Orgonisotion of the Zimbobwe
(for public limited companies) or by private
placing (for private limited companies).
Stock Exchonge
- Shares can either be ordinary or preference - The Zimbabwe Stock Exchange is governed
shares. by the Ztmbabwe Securities Council (ZSC).
- Ordinary share are equity (or owner) capital - The council sets tules and the code of conduct
while preference shares are debt capital. for the stock broking fraternitY.

!! -
- Different types of shares carry different 11,4.2 The role of the Zimbobwe Stock
rights to ownership, control and claims to the
Exchonge
distribution of the company's profits:
Regulates the admission of new members.
a) Preference shares
Sets code of conduct for members.
- These are shares that eam a fixed rate of
dividend which is paid ahead of ordinary Disciplines members, when guilty of
share dividends. misconduct, through flnes and expulsion.

- The shareholders get a dividend even Administers the fund that is used in redressing
when the company makes no Proflt. investors.

- Prestdes over disputes between stockbrokers.

The payment of the dividend can be made
in the next flnancial period in the case that Ensures the prices of shares are influenced
cash is not available in the current period. only by forces of supply and demand -

Finance of the business unils

 Debt copitol Equity copito!
Borrowed funds Owner provided funds
Lenders are the firm's creditors Confers ownership to the provider of funds
Lender gets fixed interest or dividend even when Shareholder gets dividend at varying rates
there are no profits made. only when there are distributable profits.
Interest paid to the lender is an expense to the Dividend paid is an appropriation of proflts
company. and not a business expense.
The capital is repayable at a specifled dare. Not capital repayment made though
shareholder can sell interests in the firm.
Examples include loans, overdrafts, leases, hire Examples include ordinary shares, retained
purchase, debentures and preference shares. profits and reserves.
!ublr I)iili'rcttt'tr tttIttt,ttt d(ht (.ttpilfiI untl ctyui1.1' t.upiluI
prevents insider trading where parties could concerning share dealings. They are licenced
use privileged information for personal under the Zimbabwe Stock Exchange Act.
enrichment.
- Determines the type of securities to be traded. 11.4.4 Stockbrokers
- Provides settlement and information services - Buy and sell shares on behalfofinvestors.
to members. - Advise investors on the prospects and
performance of certain shares.
11.4.3 lmportonce of the Stock Exchonge
- Provide quotations ofshares.
- Transfers share (business interest) in a public
- Assist investors in achieving their investment
limited company from one investor to another.
objectives.
- Valuation of companies on the basis of share
- Ensure that selling clients receive their
performance.
payment.
- Quotes and publishes the prices of shares. - Offer investment and planning services to
- Enforces a strict code of conduct on companies clients.
with the aim of protecting investors.
- May register, hold and manage a client,s
- Help firms get financing for their operations investments.
and expansion.
- They are paid a commission called brokerage.
- Markets government stocks to raise capital for
government supported projects and statutory 11.45 Stockiobbers
bodies.
- Buy and sell shares, stocks and bonds.
- Publishes information that is useful to investors
when making decisions on buying and selling
- Operate as merchants or wholesalers, buying
the shares in large volumes.
shares.
- Educates the public on how to invest in shares.
- Deal with shares of specific sectors, like
handling shares in the insurance industry only.
- Lists and delists companies.
- Deal with stockbrokers who in turn deal with
- Markets loan stock capital such as debentures
the public,
for profitable, reputable and quoted companies.
- Work on the stock exchange shop floor.
- Compensates investors who may be defrauded.
- Get a jobber's-turn as remuneration.

NB: The people or institutions that help investors 11.4.6 Common stock exchonge terms
buy or sell shares on the Stock Exchange
are called stockbrokers and stockjobbers.
- Speculator: An investor who anticipates
profits to arise from a decrease or increase in
They give advice and services to the public
the future price of shares.

*
Finance ofthe business unib @
#
 Bull: A speculator who buys securities - Discounting: Selling newly issued shares at a
anticipating the share price to increase so that price lower than the issued Price.
they can earn a profit u'hen they sell the shares - Blue chip: The ordinary shares of a well
at a higher price. performing public limited company.
Bear: A speculator who offioads securities
in anticipation of a fall in price' They seek to
gain from buying back the shares at a lower 11.4,7 Foctors influencing shore prices
price.
Stag: A speculator who buys newly issued a) Economicenvironment
shares hoping to sell them at a profit once
these new shares start trading on the Stock
b) Alternative forms of investment

Exchange. c) The firm's trading record

Bullish market: It is a share market d) Government policy
environment that has a sustained upward trend
e) Issue ofnew shares
in share prices as investors buy more shares.
Bearish market: It is a share market f) Takeover rumours
environment with falling share prices as g) Demand and supply
investors seek to sell offtheir shares.

It- Common errors

\,
I

t'.
t

.
!

Failure to distinguish between shares and debentures. ,/

I

C. issuing shares.
YOURSELF D. paying operating expenses.
5. Which of the following is not a type of share
rnn.tiple choice questions capital?
i hich of the following statements is true about A. Ordinary shares
:3 3entures? B. Preference shares
\. They are irredeemable. C. Cumulative preference shares
3. They have voting rights. D. Second-hand shares
rl. They earn dividends at the end of the flnancial

; .-;
)'ear. Structured questions
l. They are debt capital. 1. (a) State reasons why firms need financing. t4l
,. :ublic corporation can be financed by (b) Distinguish between shares and debentures.
savings. u2l
treasury bills. (c) Explain internal and external sources of
shares. finances. t4l
debentures.
2. (a) Explain the following types of capital:
:at is the function of the Zimbabwe Stock (i) debt capital l2l
;hange?
Regulates the admission of new members.
(ii) equity capital 12)

f Controls the prices ofshares.

(b) What are the functions of the Stock Exchange?
lt21
Tells investors what shares to buy.
-) c) Explain the difference between Ordinary and
Shuts down companies that are not performing
ri ell.
Preference shares. t4l
: -srnesses need finance for the following reasons
3. (a) What are the functions of stockbrokers?
:1c€pt I10l
{. buying premises and equipment. (b) Explain the following terms:
i u orking capital requirements. (i) Stag (ii) Bull

@
*
Finance of the business units
 (iii) Bear (iv) Speculator (b) Describe the following concepts:
(v) Blue chip [ 10] (i) Giltedged securities. l4',
4. (a) What is the role of the Zimbabwe Stock (ii) Debt factoring t6l
Exchange? tl0l

Gtossory
Finance money for business start up and operations.

Debenture long term loan given to companies by private investors.

Share portion of a limited company a person owns measured in relation to money contributed.

Finance of the business unils

'tt

ia

:J
..j;

s
jr. €
::i
".1, !a

'2.0 Obiectives - Probabilities can be calculated.

- It must be accidental.
: :he end of this chapter learners wi1l be able to: - It must be large enough to cause a hardship to
deflne insurancel the insured.
explain the pooling of risks; - It must not be subject to the same loss at the
Jistinguish between insurable and non-insurable same time as a large number of other risks'
:iskl - A fair premium can be lixed.
..utline the steps taken to obtain a policy and make - The insurance company must be able to
: claim; calculate the chance of loss.
:rplain the principles of insurance; - Examples are fire and theft.
::scribe all the tYPes of insurance;
12.2.2 Non-i nsu ro ble risks
:rstinguish insurance from assurance; and
i:ate the functions of actuaries, underwriters, - Cannot be assessed/calculated.
::sessors and insurance brokers. - No consistent Past records.
- A fair premium cannot be fixed.
"l1 Defining insuronce - Probabilities cannot be calculated.

to cover against risks like flre and

- Examples are war, bad management'
:,)urance is
.:ti. 12.2.3lmportonce of stotisiics in
.s the pooling of risks wherebY: insuronce
\{any people (the insured) contribute money
into a common fund - pay premiums into a
- lnsurance contracts are based on statistics'

common pool;
- Risk is assessed to determine whether it can be
accePted or not.
Premiums are paid at regular intervals;
- Help to determine whether risk is insurable or
The pool is managed and invested by an
non-insurable.
insurance company;
- Help in determining a fair premium at a
In the event of a loss to the insured, the burden particular place, in a particular year.
r-rf loss is shared among many people insuring
:ne same tYPes of risks;
- Help in calculating probabilities.
- Enables insurance comPanies to:
The insured is Paid comPensation;
(i) Cover against claims tiom the insured'
: rom the Pool of Premiums:
(ii) Cover expenses incurred by the insurance
Instilling confidence in the insured. company.
(iii) Cover profit of the insurance cotnpanies'
[.i lnsuroble ond non-insuroble risks - Help to fix a lair Premiurn.

"? ?.1 lnsuroble risks 12.3 Principles of insuronce

- :re loss must be capable of being defined.

- :n be assessed/calculated. 12.3.1 Utmost good foiih (Uberrimo Fidesl

- :rrm past records/statistics.

@
ffi
Insurance and assuranee
 Insurer and insured should be the - The insurance company may buy an item
truth. whose value is the same as that of the
- Must show all relevant details on the proposal damaged item.
and claim forms. - Ifthe insured person is taken to court, the
- Failure to provide truthful information makes insurance company will represent him or
the policy void. stand in his/her place.

- The insurance company must also explain all - Prevents the insured person from making
the terms and conditions accurately. a profit out of a loss according to the
principle of indemnity.
- Allows assessment of risks.
b) Contribution * if an item is insured with two
- Accurate information helps to fix fair
or more insurance companies, when a loss
premiums and fair compensation.
occurs, each insurance company pays part
12.3.2 ! nsuro ble interest
of the compensation in proportion to the
premiums paid.
- One can only insure one's properly such as - Aims to prevent the insured from making
one's own house or car. a profit
- The insured must be the one to directly suffer c) Average clause - ensures that the insured does
a financial loss if the risk occurs.
not gain from under or over insurance.
- If one insures someone's properly one may be - When a loss occurs, the insurer will not
tempted to cause the risk to occur deliberately compensate the full value of the loss.
so as to gain out of a loss.
- The insured will become his/her own
- It prevents the insured from making a profit insurer for the remaining loss.
out of a loss.
- average clause formula:
- It helps the insurance company to determine
False value x loss or damage
whether or not an applicant is entitled to any
cover. Actual value I
- One cannot insure someone else's properfy,
say a rented house, for he/she does not have Example
ownership rights. Value of goods ss000
Insured at $3000
12.3.3 lndemnity
Goods worth $500 destroyed
- lt applies to properry insurance.
Therefore he is $3000 x $500
- It restores the insured to his/her original entitled to $5000 I
financial position before the risk occurred.
- It does not apply to life assurance because no
amount of money can adequately compensate 5300 is the
compensation
someone's life.
- Amount of compensation is paid to the insured
after loss has occurred. The insured becomes own insurer for
- The insured must not gain out of a loss. $2oo (ssoo - s3oo)
- The principle of indemnity is guided by the One cannot claim more than the actual
following doctrines: loss, but is restored to the former position
before the loss occurred.
a) Subrogation - once the insured person has
been compensated adequately and precisely, Insured should not make profit out of a
the insured item damaged in the accident loss e.g. goods valued at $10 million are
belongs to the insurance company. insured for $15 million against the risk
offire. The goods are later destroyed by
- The insured cannot sell it.
the fire. The insurance company will pay
- The insured may be given cash equivalent
to the value of the item damaged in an
accident.

fnsurance and assutance

F
 $10 million as compensation because the - Contains terms and conditions of contract.
goods were over insured.
Ll-!
- Used to claim compensation in the event of a
- Insured shouldnotgain fromthe insurance loss.
company.
LLC
- Issued:
d ) Proximate cause - The insurer considers the
(i) When immediate insurance is required
immediate not the remote cause of a loss to
e.g. car insurance.
pay compensation, which is the insured risk.
(ii) Awaiting issue of actual policy document.
- Compensation is not paid if loss results
from an uninsured risk e.g. a shop insured
(iii) When investigation on information given
is in progress.
against fire is struck by lighting and then
catches fire. no compensation will be (iv) After payment of first premium.
paid.
12.45 Policy
'14 Documents used in insuronce - Issued after a cover note.
- A contract ofinsurance.
12.4.1 Prospectus - Gives details of the risk covered.

- Gives information to those wishing to take out

- States premium to be paid.

::- insurance policy. - Contains terms and conditions of contract.

- It contains types of risks to be covered.
12.4.6 Cloim form
- Shows name of the insurance company.
. - Cornpleted by the insured in utmost good faith
Gives guides on premiums to be paid.
when clai nring compensation
- States compensation to be paid.
- Asks questions about:
12,4.2 Proposol form (i) Risk insured

- (ii) Loss incurred (detaiis and value of the

An application fbr insurance cover.
loss, dates)
- Forms the basis for an insurance contract.
(iii) Policy number
- Gives details of item to be insured, completed
(iv) Policy holder
in utmost good faith (truthfully).
. .\sks questions about the item to be insured. (v) Cause of risk

" If information given is false the contract - All the above information enables the
insurance company's assessors to:
becomes void. The given information enables
the insurer to: (i) Assess the exact cause of the risk.

I i) Assess details of risk (ii) Calculate rhe amount of compensarion.

tii) Calculate fair premiums

tiii) Decide whether or not to accept the risk I25 Obtoining on insuronce cover
uv) Determine whether or not there is Contact an insurance company/agent/broker
insurable risk and obtain a prospectus.

'L43 Quototion
Discuss the risk to be insured.
Obtain a quotation.
The document that outlines details of estimated
Complete a proposal form in utmost good
benefits of a policy and amount of premiums
faith.
ro be paid.
The proposal is assessed.
'L4.4 Cover note A fair premium is fixed.
-\ contract of insurance. A cover note is issued.
Provides temporary cover. A policy is later issued.

Ins urance: and "assurflfiee

 12.7.2 EmPloYer's liobilitY
12.6 Moking o cloim
- Taken out bY the emPloYer'
- Insured contacts the insurance company or
insurance broker to complete a claim form
- To cover emPloYees'claims'

honestly giving details of loss (in utmost good - Against injury or death at work or disease
faith). caused bY emPloYment'

Insurer checks on the provisions of the - Covers injury due to negligence of the
-
agreement to ensure if there is no breach of employer.
the contract' - ComPensate the emPloYee'
- Insurer considers if the loss is a result of the
- A legal requirement under the workman's
risk covered compensation e.g' in Zimbabwe we have
- lnsurer assesses the loss, calculates the amount National Social Security Authority (NSSA)'
of compensation to be paid and indemnifies
the insured according to the principle of 12.7.3 Consequentiol loss
indemnitY. - Taken by the empioyer in conjunction with
fire or theft insurance PolicY'
12.7 Types of insuronce - Ensures that continues to receive
a firm
reasonable payments in lieu of profits'

12.7.1 Morine insuronce - Assists business to pay rent or rates whilst

business is closed.
- Covers several risks occuming at sea'
- The following are types of Marine Insurance:
- Covers:
(i) Loss resulting from an insured loss'
a) Cargo insurance
(ii) Loss resulting from temporary closure of
- Covers against loss of goods transported
business'
by sea or goods carried bY shiPs'
(iii) Loss of revenue, income from rents, costs
- Covers against damages or loss of goods
of salaries payable to employees, cost
during transit.
of leasing the building and interest on
- Can be voyage policy; cargo is insured for
debentures.
a Pafiicular joumey'
- Can be oPen, giving cover for goods 12.7.4 FidelitY guorontee
worth a stated value or amount'
- Taken out bY emPloYer.
b) Hull insurance
- To cover against dishonesty of employees who
- Covers damage to a ship itself, its fixtures
handle money, for example cashiers'
or machinery or other shiPs'
- Provides security to employer against
- Damage can be a result of storms, flre or
embezzlement or misappropriation of funds
collision.
and forgery.
- Fleet insurance covers a number of ships
under one PolicY.
- Insurer restores money stolen by the employee
after the employee has been convicted in court'
- Voyage policy covers a ship for a specific
journeY.
12.75 Public liobilitY
- Time policy covers a ship or a fleet for a

sPeciflc Period.
- Taken bY an emPloYer.
- Covers claims made by the public who get
c) Ship owner's liability insurance
injured within the firm's premises, for example
- Covers damage due to collision with other
a customer injured by falling due to a shop's
vessels:
slippery floors.
(i) Claims by injured crew and passengers
- Covers against injuries due to a business's
(ii) Pollution of beaches negligence.
(iii) Damage caused to docks

fns ura.nec snd assurance @

*
;
12.7,6 Export Credits Guorontee (ii) Driver was under the influence of alcohol
Deportment (ECGDI or Export (iii) Vehicle was mechanically defective
Credit Guorontee Corporotion
(ECGC) in Zimbobwe
12.8 Life ossuronce
- Covers risks of non-payment by importers as a
result of:
- Covers against events that will definitely occur
such as death.
(i) War outbreak
(ii) Political instability - It benefits the spouse and children who are
beneflciaries.
(iii) Insolvency/bankruptcy
- The principle of indemnity does not apply
(iv) Lack of loreign currency because no amount of money can adequately
(v) Overseas state interference compensate someone's life.
- Provides speciflc policies.
- Compensates exporter if importer defaults. 12.8.1 Endowment policy
- Investigates credit worthiness of importers. - It is regarded as an investment.
- Monitors importers'risk charge. - The policy may be with or without profits.
" Guarantees payment by banks. - It is taken for a specific period of time e.g. l0-
- Finances expofts in the interim. 15 years.
. Collects overdue debts. - Premiums are paid up at the end of a given
period or upon the death ofthe assured before
'L7.7 Motor vehicle insuronce the policy matures.

. Third party insurance - If the assured lives up to the end of period

- (maturity date) the sum assured is paid to him/
A basic requirement for all vehicles.
her.
- Compulsory under the Road Trafflc Act
(RrA). - If the assured dies before maturity date, the
sum assured is paid to his/her dependents.
- Covers claims from members of the
public who may be injured by the vehicle. - Can be used as collateral for bank loans.

- Covers public properfy damaged by the

12.8.2 Whole life policy
r ehicle.
- Does not cover: - One assures hisiher life for a certain sum of
money which matures at the time of his death.
Injury to ow'ner of the vehicle.
Damage of vehicle itself.
- The assured pays premium for his/her entire
life.
Claims from fee-paying passengers who
:rlav be injured whilst in the vehicle. - The premium is based on age and sum to be
assured.
- -..:rehensive policy
Ln expensive type of motor vehicle
- The assured does not enjoy the benefits.

lSUrance. - The sum assured is paid to beneflciaries.

, rr.ers against a wide range of risks like:

12.8.3 Retirement onnuiiy
-::ft of vehicle
::sonal injury to the driver
- It provides regular payments to the assured
from retirement time until one dies.
-:::age to the insured's own vehicle
- -r - Premiums are paid up to retirement date,
of third party thus paying hospital
::3nSeS
12.8.4 Funerol ossuronce
- .'. :is towing expenses
- It covers burial expenses of the assured
. :-.:ensation will not be paid if the:
(member and beneficiaries).
- --.:r u'as not licenced

f ns urance ind assuranee

 12.85 Pension fund Determine what has been damaged.
Calculate and recommend the amount .
- A requirement under Zimbabwean law
compensation to be paid.
- Provides pension for employees when they
Negotiate amount to be paid out against .
retire.
claim.
- Payment is until death of member and
beneficiaries. 12.9.4 lnsuronce brokers
- Act as a link between members of the pub-':
I2.9 Terms used in insuronce and insurance companies.
- Gather information on insurance companie:
12.9.1 Premium - Give expert advice to prospective poli;'
' A payment into a central pool made by each holders.
member at regular intervals, at fixed amounts. - Obtain several quotations from differe:-
. Premium depends on the value of property insurance companies.
insured/maximurn possible loss. - Choose the best policy for a client.
. The probability of loss occurring. - Assists a client with the completion of propos;
. The size of the poolr'number of people insured forms.
against the same risk. - Effect a policy for client.
. Premium is a percentage of the amount - Assist clients in claiming compensation.
insured. - Arrange re-insurance for clients.

12,9.2 Actuories
- Collect premiums on behalf of insurer.

- Calculate statistics of risks. 12.95 Undenpriters

- Analyse these risks. - Institutions that undertake to indemnifr t:=
- Assess the risks. insured in the event the insurance compar-'
- Calculate probabilities of risks in mortality/ fails to do so.
theft. flre. - May form syndicates to cover big risks.
- Fix fair premium to be paid. - Pay compensation when loss occurs.
- Calculate premium based on degree of risk. - Sell policies to merchants via brokers.
- Sign or accept risks.
12.9.3 Assessors - Fix premiums.
- Assess details on the claim tbrm. - Can reinsure big risks to spread the risks.
- Examine the damaged item. - Pay commission to brokers/primary insurer.
- Ascertain the exact cause ofthe loss/proximate - Assess risks.
cause. - May specialise in certain risks, for exoftp :
- Calculate the cost of the damage. marine.

Common errors
of-making a claim with obtaining cover.
risks but sovers against risks and is based on the of resources.

Hints:
Most multiple choice questions are set on fidelity guarantee. employer's liability, public liability and consequenl.'
loss.
For fldelity guarantee, the insured only receive compensation when the employee has been convicted
sentenced in a court of law.
Pay attention to Export Credit Guarantee Corporation (Zimbabwe) and Export Guarantee
t (International). Many candidates fail to answer the most basic questions on that.
I

h, Ins*rance and assurance @

&
i
@ Structured questions
1. (a) "Insurance is an essential service to a tobacco
Multiple choice questions farmer." Support the statement. [0]
-, Insurance is defined as (b) Explain the following insurance terms:
.{. protection of life. (i) Public liability lsl
B. pooling of risks. (ii) Actuaries t5l
C. covering risks. 2. Explain the following in relation to insurance:
D. compensation for loss. (i) Utmost good faith tsl
-{n example of a non-insurable risk is (ii) insurableinterest lsl
A. financial risk. (iii) Indemnity t8l
B. risk of change in fashion. (iv) proximate cause l2l
C. investment risk.
(a)
3. Describe the work of the following:
D. theft.
Insurance premiums are calculated by
(i) Underwriter t5l
{. agents. B. brokers.
(ii) Insurance broker tsl
C. underwriters. D. actuaries.
(iii) Actuary tsl
Risks that are unpredictable and do not have (iv) Assessor tsl
statistics are called 4. (a) What steps are taken to make a claim from an
\. probable. B. insurable. insurance company? t10l i

C. non-insurable. D. consequential. (b) Explain each of the following insurance i

I
policies:
\ beneficiary in an insurance contract is a I

\. broker. B. insurer. (i) Consequential loss tsl I

I

C. third party. D. insured. (ii) Employer's liability tsl l

)

3 ossury
.-l.Euit). a contract sold by an insurance company designed to provide payments to the holder/
insured at specified intervals, usually after retirement.
; n,Jowment a life insurance contract designed to pay a lump sum after a specified term (on its 'maturity')
or on death.
:nsirrable risk a risk that can be measured actuarially or in which the chance of loss is not so high that
insurance can be written against it.
\rm-hsurable risk a risk that cannot be measured actuarially or in which the chance of loss is so high that
insurance cannot be written against it.
l:m-ium the periodic payment made on an insurance policy.

Ins urance and assurance

,il
 l:l'

l3.O Obiectives - The safety of transmission.

- Urgency of the message.
By the end of this chapter learners wrll be able to:
a) definecommunication: 13.3 Meons of communicoticin
b) outline the factors considered rvhen choosing a
Communication services can either be postal oi
mode ot' cotnmunicatiott:
Telecommunication.
c) expiain the need fbr comtnunication in commerce;
d) describe the different modes of postal and
13.3.1 Postol services
telecommunication sen ices:
of - These are provided by a post office (Zimpos:
e) state the advantages and disadvantages each
in Zimbabwe).
mode of comn-runication: and
- Physical transmission of documents from one
0 outline the recent (latest) modes of communication.
point to the other.
a) Letter post
l3.l Defining communicotion - Sending and receiving ordinary mail.
- Communication deals with the transmission - Post office receives letters from senders.
of infonnation and messages from one place - Transporls the letters to the receiving pos:
to the other and fiom one person or entity to ottce.
another. - Customers either collect letters from the
post office or the letters are brought tc
l3.I.l lmportonce of communicotion them by the Post office.
- Ensures speedy contact between buyers and (i) Surface mail
sellers, and emplol'ers and employees. - Letters are sent to destinations by land.
- Sending and receiving information, payments, Uses ordinary envelopes.
inqurries, orders and documents. Postage rates are low.
- Allou's for the lodging of complaints, settling Takes a long time to deliver mail.
of queries and arranging contracts. (ii) Airmail
- Allows dialogue to take place over any Mail is sent by air.
distance at any time by telephone, telex etc.
Fast means of delivery.
Postage rates are high.
13.2 Foctors to considerwhen choosing - Mail carries airmail stickers.
q mode of communicotion b) Private bags
- The nature of infomation. - Canvas bags rented from the Post OfEce.

- The cost olcornmunication.

- Each bag has a number and name of the
organisation.
- The speed of transmission.
- It must be lockable.
- The accuracy of transmission.
- Mail is collected and delivered from anc
- The reliability of transmission. to the Post Office during wcrrking hours.
- The availability of media. - It is most suitable for people without
- The accessibilitv of media. street addresses e.g. rural areas.

B usiness co mm unic atio n

'Il
 It can cary mail or small parcels. All mail is written ,.business reply
It can either be ordinary mail or registered service".
0 Free post
lgE! c) Post office boxes It is a variation of business reply seruice.
Installed on the outside of the post The user should have a licence.
office.
User needs to seek for approval from the
Customer pays rent for the box
post office.
Each box :
A deposit is paid.
(i) has a number
"Freepost" envelopes are provided.
(ii) has a key
Sender does not pay for postage.
iii) is lockable.
Recipient pays a surcharge on usual
Customer collects mail at any time. postage.
It is surtable for people without Encourages customers to reply.
addresses, for example farmers.
s) Recorded delivery
Letters can be collected at any time since
Articles are delivered personally by post
the boxes are fixed outside the post office.
office personnel.
d) Franking machine
Each article has a registered number.
Used when sending large volumes of mail
Has proof ofpostage and proof of delivery.
regularly by large organisations.
The machine prints postage paid on each
No compensation is paid if lost, but can
be traced.
envelope.
The machine has a meter for recording Security is provided for items in transit.
total postage. Articles to be sent are handed over the
It is rented from the Post Office. counter.

The hirer pays deposit before using the Recipient has to produce positive
machine. identiflcation.
Has a security seal to prevent cheating. Used to send important documents such
as certificates.
Saves time:
h) Registered mail
(i) No sticking stamps
Articles are handed over the counter.
(ii) No cancelling stamps
Has proof ofposting and proof of delivery.
e) Business reply service
Can be traced or compensated if lost.
A facility provided by the post Offtce.
It is usually used by traders who are doing Used to send valuable documents (like
market research or advertising so that tittle deeds and certificates) and cash.
they get responses from customers. Uses special envelopes and each article
Self-addressed printed reply cards/ has a registered number.
envelopes are provided. Recipient must produce positive
Postage is paid by the trader requiring the identifi cation on collection.
It is more secure than ordinary mail.
It is used by mail order firms. Has an extra cost for insurance.
Addressee must have a licence and license D Poste restante
number. Used mostly by people with no fixed
Licencee pays deposit and only postage addresses, for example by travellers/sales
on mail returned. persons when they are away from their
Respondent sends in base.
*:-
free of
charge. May be useful for people in rural areas
It encourages responses from customers. where there are no mail deliveries.

B usiness communication
 - Authoriry to use service is sought from - For overseas parcels a fee is charged
the post office. based on distance and weight.
- Mail is addressed to the nearest post office. - Parcel is handed over the counter.
with the words "POSTE RESTANTE" - A declaration form is filled in to facilitate
/..TO BE CALLED FOR". customs clearance and the payment of
- Mail is kept at the post office and collected duty.
by addressee on production of positive - Receiver produces valid identification on
identification. collection.
j) Cash on delivery (COD) - There is proof of posting and delivery.
- Post office collects payment for goods
being delivered before they are handed 13.3.2. Telecommunicofion servtces
over. - In Zimbabwe these services are provided
- Sender ofgoods pays for the service. by operators like Tel One, Netone, Telecel.
- Seller does not have money tied up in bad Econet, Powertel and Africom.
debts/nor does he need to send reminders - It is the transmission ofmessages electronicalll
to debtors. through cables and satellites.
- Customer needs not to send monev in - The Post and Telecommunications Regulatorl
advance. Authority of Zimbabwe (POTRAZ)
It is used by mail order flrms. controls and regulates the operations of
telecommunication service providers.
Sender reveals money to be collected by
the Post Office. a) Telephone
Parcels are written C.O.D - Subscribers are allocated numbers.
k) Expedited mail service (EMS) - Allows dialogue.
Used to send important documents - Offers immediate contact.
urgently. - Sends and receives information.
Courier Connect is the parastatal that - Reply is immediate if attended.
provide EMS in Zimbabwe. - Can be used to make calls locally and
Sender hands the parcel over the post internationally.
office counter. - Can be used with an answering machine.
There is hand to hand transfer of mail. - Offers free phone, time calls and reverse
A consignment note is filled in triplicate charge calls.
by the sender. - Direct calls can be made using STD or
Mail is delivered to final destination by a IDD.
post office messenger and EMS vehicles. b) Datel
Postage rates are high. - Send and receive business information
Recipient produces positive identity on using computer via a telephone circuit.
receipt of article. - Stores data and displays information on
Recipient signs for the mail to computer.
acknowledge receipt of article. - Information can be retrieved and printed
Used rvhen safety is necessary. (written records).
The following privately owned companies - Uses modems (equipment consisting of
also offer the same service: DHL, Swift modulator and demodulator)
and FEDEX. - Information can be sent and received
Compensation is paid when items are lost. anytime
r) Parcel post - Can transmit information accurately
Delivery of parcel is done both inland and - Information can be edited/corrected
abroad. before sending.
A fee is charged on the weight for inland - Used in banking or foreign currencv
parcels. markets.

B usines s c omm unic atio n

F
t
 Conserve privacy. - Gives updates on exchange rates, weather
and share prices.
Fast to send information.
Fax (Facsimile) 0 Tele-conference (confravision/video
c)
conference)
L:! Machine consists of a photocopier and
telephone circuit.
- Used to hold conferences/conduct
interviewers.
To send and receive information on
document. - Contact/face to face dialogue when
participants are in different places.
Produces information as it is (exact
copies). - Do not need to travel to a central venue.
Ideal for detailed information, such as - Saves on conference expenses.
plans and diagrams. - It uses satellite dishes anri television
Provides a written record. screens to transmit images to distant
places.
Message is received even if office is
unattended. - It is fast than assembling in one location.
rsL
Can produce multiple copies. - People are able to see and talk to each
other over a television screen.
z'-f
Subscribers have fax numbers.
It is fast. - It allows immediate feedback.
d) Radio paging - It is cheap (saves on traveling expenses)
Is a public address system. - It saves on accommodation, hiring of
conference rooms and food.
Used to pass information to all people at
once or to a specific person in the shop. g) Electronic mail (e-mail)
All people will hear the message but only - Sending and receiving information using
the intended person will react to it. a computer via a cell/telephone circuit.
Provides a one way communication - The information is sent from one computer
system. to another or from one computer to
It provides a beeper. several computers at the same time.
Message sent is of limited number of - Information received can be stored,
words/send brief messages. retrieved and printed.
Used by people in the same organisation, - Message can be typed and corrected
for example a till operator can use it to call before sending.
for assistance when there is a problem; a - There is quick transmission of messages.
doctor in a large hospital can be called to - lt uses modems.
attend to an emergency in another section
- Each subscriber creates/composes an
of the hospital.
e-mail address e.g. tinachido@gmail.
It is fast in transmitting messages. com.
It is cheap and easy to use.
- Each subscriber has a secret code or
e) Prestel password for security.
Uses a computer via telephone to send - Can send files with attachments.
and receive up-dated information fast.
- A cheap means of sending information.
One dials the phone into a computer - It shows time rvhen message was sent or
nefwork to other computer sights offering
received.
up-dated information to get an answer,
for example on exchange rates.
h) Telex

The datar'information may be:

- Subscriber has a number.

(i) printed - Messages are sent and received via a tele-

printer and a telephone circuit.
(ii) displayed
(iii) stored
- Message is produced simultaneously.

(iv) retrieved
- Quick transmission of message.

Business communication
I Message
transmission.
can be
Provides written record.
corrected before - Can buy and sell goods and services using
computer communications, electronic
mail via the World Wide Web or direct
computer to computer communications.
Can operate unattended.
Can produce multiple copies.
- Can browse online catalogues, choose
merchandise, type in a credit card number
Can provide an immediate reply. and shipping address and receive your
Cheap and enables immediate contact. merchandise in a few days.
i) Cellular telephone (cellphone) - Can also be used to check bank accounts
Provides quick sending and receiving of and subscribers have own website (www-
information. World Wide Web).
Allows dialogue. - There is electronic data interchange (EDI)
such as edifact.
Is portable and a trader can be reached
anywhere, anytime where there is - lnvolves electronic funds transfer (EFT)
network. through smart cards and credit cards.
Can receive more than one call at a time
- May include electronic forms of doing
and putting them on hold. business such as fax, telex, video-
conferencing, e-mail and e-banking.
Can use more than one line on the same
phone. - One can read news on the web, which is
up to date.
Has a Personal ldentiflcation Number
(PN) for security. - Explore library- one can search forbooks
and borrow online.
Can send and receive message by e-mail,
voicemail, fax, SMS, MMS or Whatsapp.
- Books are published on the web and can
be read on the screen or printed out to be
Calls can be diverled or directed to read later.
another number.
- Can get software through the web
- Allows access to news bulletins, financial (software download)
and sports highlights.
- Can watch television, play games, get
- Information can be store, corrected or college degrees, exchange messages and
edited. even run programmes on the computer.
- Have extra services like internet access, k) Computer
calculator, dictionary, diary, alarm, - A digital electronic device that accepts
reminders, games, camera and calendar.
data as input; processes and stores it, then
- Volume is adjusted. it provides output as useful information.
- Shows details of call: - A device that enhances productivitl
(i) Time spent on each call reduces drudgery (labour) and speeds
(ii) Time when a call was made responses to problems.

(iii) Cost of each call Advantages of a computer

(iv) Missed calls, dialled calls , received - It accepts input data.
calls
- It processes the data.
(v) Caller's name and number
- It stores processed data (huge volumes).
j) Internet - It executes instructions at great speed.
- Interconnection of networked computers - It processes a large number of instructions
(servers) on a global scale, allowing them accurately.
to share inlormation. - It is cost effective.
- It enables business transactions online via - It produces quality reports.
internet. - It can do repetitive work rapidly and
- Speed up ordering ofgoods and payment accurately.
system. - It does text processing.

B usin es s comm unic utio n

 Are highly technical (have shortage of
It manipulates characters and symbols'
"Hi-Tech" staff).
It does mathematical oPerations
Cannot decide how it should be
(calculation is done in numbers - numeric
programmed.
values).
Cannot create own data.
- It does logical and comparison operations
(can comPare two values)' Cannot imPlement decisions'

- It does recovery processing (can recall or Cannot think (can only perform instructed
recover data at a later stage)' commands).
Computer actions must be activated
Disadvantages of a comPuter humanly.
Rely on steadY flow of electriciry'

Common errors
G
t' a

Structured questions
YOURSELF 1. (a) Why is communication important to a trader?
t8l
r' .,,ltiple choice questions (b) Distinguish between surface
\\-hich of the following is a postal service? t8l
\. E-mail (c) What are the disadvantages of using a

B, Expedited mail service telephone? t4l

C. Cellphone 2. State and explain the importance of the following
D. Radio paging communication serv ices:
* -re method of sending messages through (a) business rePlY service t4l
-,'mputers is known as (b) freepost t4l
\. telex. B. e-mail. (c) radiopaging t4l
-. facsimile (fax). D. datel. (d) facsimile l4l
allows subscribers to access (e) e-mail t4l
- --i."""ti", *orlci-wide?
J. Under what circumstances would a trader use:
Facsimile (fax) B. Internet
(a) dated t4l
Telex D.
Video conferencing
which makes use of
(b) franking machine 14)
= communication service (c) poste restante i4l
airmail. B. free post. (d) telephone t4l
I .1\. D. radto. (e) cash on delivery t4l
;h is not an advantage of sending by 4. (a) Define a computer. t4l
.:ered mail? (b) Outline eight advantages and six disadvantages
?roof of postage B. Can be traced of computer communications. t 141
I
Speed ofdelivery D. Security What is

ory
communication channels through which news, entertainment, education,
data, or promotional messages are disseminated/spread'

a \\ ide Web (www) the collective total of all computer installations that are connected to the
intemet and provide access to other computers connected to the internet'
modulator-demodulator) an electronic device that makes possible the transmission of data to or
from a computer via telephone or other communication lines'
I

B usiness communication
 l4.O Obiectives b) Production concept
The bupiness will be concentrating on
By the end of this chapter learners will be able
production efficiency and to produce at low
a) justify the need for marketing; cost.
b) explain different marketing concepts; The business concentrates on production costs
c) identif,, types of markets; and ignores consumer needs.
d) explain market segmentation; Selling concept
e) identiflz marketing mix variables; :, The business produces whatever it can produce
0 explain the importance of advertising; and tries to sell the goods to customers.

s) identif, different types of advertising; d) Marketing concept

h) list and distinguish between methods of advertising The business will flrst research on customer
appeal; needs.
i) identi[, types of advertising media; The aim is to identifiu and understand the
j) explain the role of advertising agents; and consumer needs so that the product will be
self-selling.
k) explain the contents of the advertising code of
conduct and justify its need. e) Social marketing oriented company
Produce what the customers need and what is
good for the customer.
l4.l Morketing
- This approach is not used by profit oriented
- Anticipation, identification, generation and business.
satisfaction of consumer needs and wants by:-
- finding out the types of goods and services 14.1.2 Types of morkets
wanted by the consumers. a) Physical markets
- finding out the packaging wanted by the - A market in which commodities such as grains
consumers. and gold are traded for cash.
- advertising and selling the goods. - There is immediate delivery.
- flnding out the price that the customers are - Also called cash markets or spot markets.
willing to pay. - The buyers can physically meet the sellers and
- anticipating change in consumer needs. purchase the desired products.

l4.l.l Morketing concepts

Advantages of physical markets
a) Product concept A variety of goods are always available.
- Business produce quality goods and services Customers have choice.
from their point of view not that of the
customers, Low price due to competition.
- The goods produced may not be needed by the Sellers have personal contact with customers.
customers. Buyers can negotiate.
Flexible shopping hours.

Marketing and advertising

ll
It
Disadvantages of physical markets d) Promotion
IT
II - Goods can be of poor quality. - How the goods and services are to be
tI
It
ll
- The sell on cash basis only. advertised.
tf - Sometimes the environment will be - What other fypes of promotions are to be used.
unhygienic. - How the customers react to the different
b) Virtual markets promotional ideas.
- Non-physical markets.
14.1.4 lmportonce of promotion
- Buyers and sellers trade goods or services
online.
- Increases sales and profits.
n:
- Improves company image.
; - Competes with competitors.
.{dvantages of virtual markets
- Buying can be done at anytime. - Creates a brand image.
- Any distance (convenient). - Introduces new product.
- Wide coverage.
14.15 Morketing opprooches
- Saves on travelling expenses.
- a) Mass marketing
Variety ofgoods from several producers.
- Shopping can be done in the comfort of the
- There is mass production.
customer's home. - Many people buy the product e.g. bread,
washing powder, miik, cooking oil and
tooth paste.
Disadvantages of virtual markets
- Large volumes of sales.
- Pictures may not portray the real quality of
goods.
- Serves a larger market.

- No human follow up or clariflcation.

b) Niche marketing

- Impersonal.
- Marketing strategy for small and
specialised markets.
- Some questions may not be answered.
- - That is, small part of a larger market.
High cost for postage, advertising.
- Usually not served by large businesses.
14.1.3 Morket mix - Few sales.

- The various marketing activities for a product - They are smaller than mass markets.
by a business. - They cater for customers with similar
needs.
These are place, product, price and promotion.

14.1.6 Morket segmentotion

Uarketing mix variables
a ) Place
- When a market is divided into different
segments of similar characteristics:
- Forms of distribution channels used in
order for the goods and services to reach the
consumer. Location
b) Product Age Income
- The nature ofthe product.
- The design and quality of the product.
- Consumer reaction to a new product.
Criteria for market segmentation
c) Price
The price at rvhich the 'product will be sold.
The price should cover' the costs of producing
the goods or services.
fe-style
Price comparison , to be done
is with
competitors.

Marketing and adv ertising

Methods of segmenting a market 14.3 TYPes of odvertising
- Demographic- age, gender, religion and social
class. 14.3.1 lnformotive odvertising
- GeograPhical- location' - Provides useful facts, knowledge or
a product, fitm or events'
- Behavioural - usage rate and frequency of information about
purchase' - An example is when the public is informed
- Psychological how people think of about price or sizes of goods available'
themselves in relation to others' contact details of the firm, tfrne and venue fo:
upcoming events- rules lor competitions o:
promotions and the goods that are in stock'
Reasons for market segmentation
- IdentilYcomPetitors. 14.9,2 Persuosive odvertising
- Allow effective advertising' - Induces customers to buy and use a product
i:
- Allow Promotional activities' preference to its substitutes'
- Enables production of qualiry goods' - Used to convince customers that a product
:'
superior to those of comPetitors'
- Enables customer targeting'
- To convince customers that a product is stl-
relevant and better than newer products e ;
14.2 Advertising the catch phrase for Vaseline Blue Seal' 'O\
;:
- It is a form of marketing communication used a hundred years of a mother's love''
to inform, persuade, remind and encourage - lt is competitive in nature it is done to 1u:.
-
customers to take a buying action or continue
customers away from competing firms' I:-.
with their buYing action'
catch phrase for Astra Paints says: 'There '
- The desired outcome is to influence customers no substitute for qualitY''
to favour a certain brand'
- Advertisers emphasise the better qualities -

- The Latin 'ad vertere'means 'to turn the mind their Product.
towards'. Advertising is hence an effort to
Each firm stands on its own in promotine
:-
build a positive thinking about a company's
-
brands.
brands in the customer's mind'

14.2.1The PurPose of odvertising NB: Competitive advertising is sometimes s.s

- To introduce new products to the market' as a type of advertising that is distinct r:::
persuasive advertising' This is bec'rc
- To maintain and increase the level of product -t
competitive advertising focuses on be;:
sales.
competitors while persuasive adven.'-:g
- Reviving declining levels of demand'
focuses on the customer's behar ' - '
- Fight off competition and negative publicity' -'*
The difference is however very thin s
- Improve the firm and the product's public persuasive adverts do imply comP'-lu
image. brands and competitive adverls also pert '*
- Supplying imporlant information to customers customers to believe that what the firm c i*'*
.u.h u. prices, where to buy or on how to use is better than the products of competing :-::u'
goods'
- Educating the public on any issues e'g' HIV/ 14.3.3 Generic/collective odvertising
AIDS. This is when two or more firms jointly pr: -
- Inviting job seekers and recruiting labour' their common Products.
- To tell of events to come' They share costs of advertising, mak':-i
- To increase Profits. cheaper.

Marketing and advertising

 The adverts do not mention any specific 145 Methods of odvertising oPPeol
brand but just promote the general use of the
products being advertised. - These are difl'erent approaches that show
the underlying reason or etnotion linking the
The meat industry as a whole, for example,
product or sen'ice to the customer's need or
may promote the general consumption of meat
r.vant.
using the catch phrase: 'There is more to meat
than meets the eye'. No speciflc abattoir or
butchery is implied. Toothpaste manufacturers 14.5.1 Appeol to rornonce ond sex
may promote the use of their product without - It attempts to attach the audience to the product
mentioning brand names like Colgate. Close- through sexual attractiott.
up or Aqua Fresh. - lt appeals to the beauty of rvomen and the
masculinity of men.
'.,1,4 Torget of odvertising - An example is u'hen a woman \vears a

communicotion certain perfume brand and she becomes more

attractive to men.
'"$.4.1 Direct odvertising
145,,2 Sociol occeptonce oPPeol
It is achieved by door to door canvassing to
ilI.
:pecific customers.
- Lures customers by creating an impression that
they get more fiiends. respect, recognition,
I- ses physical visits to homes or places of acceptance and approval tiom others if they
'.r
ork or direct mailing. use the advertised product.
- sually includes personal demonstrations and
.:rnples. 14.5.3 Comedy oppeol
-. is used when products appeal to a smaller - It associates the product with humour, joy and
:-:mber of people.
happiness.
"2 42 lndirect odvertising - Africa Lotto, fbr example. models popular
comedian. Gringo, in their promotion to
, :is is advertising aimed at the general public.
appeal to the public to PlaY lotto.
. 'le method is used when many people use the
::,rduct or service. 145.4 Success ond ombition oPPeo!
--ir efiisements (adverts) are placed in
- The advefiisement is attached to people's self'-
-.r',\ spapers, on television, over the radio, on
esteem, pride and need for success.
: ,:ters or any other media that reaches the
.=:eral public. - The product is paraded as a means for
achieving these or as a favourite of those who
* s3 lnstitutionol odvertising have achieved success.

.. done to improve the public's perception of

14.5.5 Hero worshiping
,- t-rrg&nisation.
:plifts the fltm's image and goodwill and - The method makes use of popular personalities
: - i ire s positive relation with the public. like sports persons, musicians and DJs.
--:. erample is 'ZRP, your partner in crime - These personalities give their approval of the
ention'. product and it is hoped that other people will
=',
also like to use it.
"r l4 Product odvertising - Boom Washing Porvder, for example. uses
musician Oliver Mtukudzi to advertise their
.:J to promote a particular product, service
- ::and. product.

Marketing and advertising

 145.6 EconomY - They can be regional (Gweru Times and i
ili

Manica Post) or national (The Herald and iil}

ll
- It suggests that the use of the product being Newsday).
advertised results in a reduction in expenses or
- Advertisers buy space in these papers to have
waste.
their advertisements placed in the papers'
- Zimbabwe Electricitv Distribution Company
(ZEDC), for example' flights adverts
Advantages of newsPaPers
encouraging consunlers to use energy saver
bulbs to economise on electricitl''
- Many people will likely see the advertisement
because they are ividely circulated.

145.7 Sofety ond security - Low cost.

- The advertisement assures customers that they - Short notice is required to place and withdras
will not be exposed to danger if they use the adveftisements.
advertised product. - Flexible in terms of frequency and length.
- It is comtnon with medicines, equipment, - Pictures and colour combinations can be used
foods and skin care chemicals. to make the adverlisement attractive'
- The advertisements could have a 'no side - Can be reserved for future useireprint.
effects' clause. - Can be in various sizes, for example full page.
half page or classified advertisements.
145.8 Fomily love - Advertisements can be placed in relevant
- It associates huppy families, family love and sections of the newspaper e.g. sportsw'ear in
motherly care to the use of the product. the sports section of the PaPer.
- It is common rvith products used by a family
like soap and foodstufl's. Disadvantages of newsPaPers
- It may use catch phrases iike: 'big enough for - Newspapers have a short life span (are
the whole family' or 'as gentle as a mother's 'perishable') hence advertisement is quickll
love'. thrown away.
- Only literate people will have access to the
145.9 Cleonliness advert.
- It portrays fi'eedom tiom dirt so as to attract - Lacks repeat exposure unless reprinted.
smart conscious customers.
- Common with washing powders, detergents 14.6.2 Mogozines
and disinfectants. - These are periodical publications that focus on
various aspects of life.
l45.t0 Appeol to feor - Most magazines are monthly publications'
- Uses moderate levels of fear to discourage - Specialist magazines serve the interests of
certain behaviours. a particular group of people e.g. The Neu
- Examples are anti-AIDS and road traffic safety Farmer (targeted at farmers), Fair Lady (for
campaigns. female health and beautv), Kick-Off (for
soccer news) and Teacher in Zimbabwe (for
the teaching profession).
14.6 Types of odvertising medio
- Different vocations and professions also
- An advertising media is the means by which produce journals and periodicals that
information contained in an advert is conveyed disseminate information that is relevant to that
to the intended reciPients. profession.
- Different forms of media are discussed belorv.
Advantages of magazines
14.6.1 NewsPoPers
- They have a longer life and the advert can be
- They are either daily (e.g. The Daily Nervs and seen over aud over again.
The Chronicle) or weekly (e.g. The Financial
Gazette and The Sunday Mail) publications.

Markering and advertising @

]

J
il!*
 - Impressive and colourful pictures can be Disadvantages of television
presented. - There are feu'er TV sets in rural areas hence
- The advertisement can be targeted at the right the advertisement's publicity is limited.
audience by placing it in the right specialised - Television adver"tising is comparatively more
magazine. expensive.
- Cost per reader is relatively low since more - The vieu'ers are left r.vithout reference once
people share the same magazine. the advertisement is screened.
- The advertisement has a short life and no
Disadvantages of magazines lasting impression is made unless it is repeated
- Inflexible since space should be booked ahead over and over again.
of publication.
14.6.4 Rodio
- Not ideal for advertisements relating to current
events and scenarios that keep changing since - Firms may sponsor radio programmes or make
publication is infrequent. announcements over the radio for the purpose
- Selective specialist periodicals miss other of selling their products or giving information
potential customers. to the public.

- Relatively costly as compared to newspapers.

Advantages of radio
14.6.3 Television (W) - A large number of peopie can be reached
- Advertisements can be screened on television. because many people have access to radios.

- Some advertisements are put on national - Selective broadcasts can be done during
television but some companies, like banks and programmes of interest to the target group.
retail shops, put television sets inside their - Repeat advertisements can be done.
shops and place adverts on them. - It is cheap relative to the wide coverage
- Companies can sponsor certain TV achieved.
programmes and advertise their products when - Fast transmission of messages.
the sponsored programme is being broadcast. - Different national languages can be used.
- Advertising on TV is more expensive during
prime time - when more people are watching
Disadvantages of radio
TV. This is usually betrveen 6pm and 9prn
lvhen the main programmes are being shown. - The advertisement has a short life.
- No demonstrations can be made.
.\dvantages of television - Some areas do not have transmission.
- Demonstrations can be made on how to use
the product.
14.65 Cinemo
i
\1. A lasting impression is
made through a - Short colour adveftisements can be played in
i., combination of sight, sound. colour, u'ritten cinema in-betr.veen a popular movie.
:- word and motion.
:,- - Wide exposure is achieved because many Advantages of cinema
people watch TV. - Combines sound. vision and motion.
- Advertisements can be repeated. - Advertisement can become popuiar when
- Advertisements can be placed selectively to associated with a popular movie.
target the correct audience such as advertising - Targeting can be done as the intended viewers
toys when children's programmes are being are regular cinema goers of different ages.
broadcast.
Different languages can be used on television.
Disadvantages of cinema
- Both literate and illiterate people can - Preparation of the advert clips is very
understand the advert.
expensive.

@i Marketing and advertising

dt
 - Coverage is limited to film goers only. Advantages of digital/electronic billboards
- No repeat exposure because few people watch - High repeat exposure.
the same movie more than once. - High message recall rate.
- Digital video technology has signiflcantly - Easy to update messages.
reduced the number of fllm goers.
Great impact due to motion pictures.

14.6.6 Direct moi! Boards can be placed at different busy points

Many boards can be monitored by on; I

- Colourful and elaborately printed catalogues

computer, making it economical.
are mailed to potential customers.
- These will be having pictures of products on
offer. Disadvantages of digital/electronic billboards
- The method is mostly used by mail order - They use a lot of electricity making ther:
companies. expensive to tun.
- Samples are also sent to customers. - It is costly to place an advert on them.
- Motion boards can distract the attention c -
Advantages of direct mail drivers on the roads and cause accidents.
- Great audience selectivity.
- No wasteful circulations as catalogues are sent b) Posters
only to intended recipients. - These are pieces of paper of varying sizes th".
- Customers can make informed decisions from are designed to be eye catching.
the reading of detailed catalogues.
- They are designed with pictures, graphics an:
- Samples are tried and customers decide in the textual information.
comfort of their homes.
- They are put on the wall or any vertical surfac;
- It reduces impulse buying as customers have
all the time to look at and try the products.
Advantages of posters
- There is no competition for space within the
same medium as it is with radio, newspapers - Can be placed on the walls all over the tars;
and television. area.
Can be attached almost everywhere -o:
Disadvantages of direct mail trees, walls, vehicles, billboards or on stre;.
- Cost per customer is high. lampposts.

- Coverage is limited to available contact list. Easily replaceable.

- The catalogues are often dismissed as 'junk Effective if well positioned.
mail'. Can be seen by many people.
- It cannot work in rural and remote areas. Ideal for local areas.
- Prospective customers may change address Can use local language for easie:
and mails continue going to the old address. understanding.
Poster can be placed at a position that ensurei
14.6.7 Locotionol odvertising medio
it is seen by the intended customer.
- Selling messages are displayed where a large Vivid impression of the event.
number of people gather or Pass bY.
- Can be in the form of any of the media
Disadvantages of posters
discussed below.
- They can be pulled down - if they are ::
unprotected places.
a) DigitaVelectronicbillboards
- The method leaves too much to chbnce. Th-
- These are billboards on which digital images adverliser cannot guarantee that it is seen b''.
and text change electronically by use of a the relevant people.
monitoring computer.

fuIarketing and advertising [B

L &
 It is expensive to target a scale of
- Lacks the imPact of motion.
advertising.
- Leaves the environment untidy when torn.

c) Flyers e) Neon lights

- Small paper with graphical

pieces of - These are brightly illuminated electrifled bulbs
presentations and information about a or tubes fl11ed with gas or rarefi.ed neon.
business, its products and contact details. - The lights glow and flash producing different
L --:
- They are distributed freely on the street, sent colours based on the gas in the tube.
by mail, placed inside newspapers or deposited
into letter boxes. Advantages of neon lights
ls - Attract the public through flashing lights.
: -_
11. Advantages of fl-vers - Appropriate for brief messages.
- Reaches many people. - Can be seen by passers-by at night.
- Cost effective. - Brand names, logos, catch phrases, brief
- Each customer gets a personal copy of the messages and company names can be
advert which they keep and keep referring to. displayed easily.

Disadvantages offlyers Disadvantages of neon lights

!::: - Too many flyers are being given out and many - Illuminated lights are erpensive.
customers no longer take them seriously. - Not quickly visible in congested areas.
- Many people take flyers and never read them - Only available in electrified areas.
at all.
- Lack of detail.
- It is costly when a larger group is targeted.
- Customers' continual reference to the advert
0 Adverts on vehicles
cannot be guaranteed.
- Adverts can be placed on cars, delivery vans
rl: _
and public transpor-t that pass through densely
d) Billboards populated areas.
- These are big boards that are placed on busy - The vehicles may belong to a company whose
roads so that the advert can be seen by people products are being adverlised or may belong
entering or leaving tow'n, pedestrians and to other people who allow the company to
drivers. place their adverts on their vehicles.
- They are placed on busy roads.
Advantages of vehicle advertising
Advantages of billboards - Transit advertising reaches many people every
- Attractive colour and picture combinations day.
can be used. - Adverts can be targeted on the relevant
- It is flexible as they can be placed at different customers e.g. school stationary adverts can
..!:
places and can be easily changed or modifled. be placed inside a school bus.
- They are large in size hence can be seen by
many people. Disadvantages of moving adverts
- High repeat exposure. - Limited to places that have good transport
- Relatively lou'competition on billboards. networks.
- No lasting impression.
Disadvantages of billboards
14.6.8 Disploys ond trode foirs
- Creativity is limited for standardised boards.
- Erection of billboards may damage the natural - Public exhibitions, expos and trade fairs can
environment. be used to advertise and promote goods.

,m Marketing and advertising

i*s
 Advantages of trade fairs - Packages and wrapping paper.
- Advert is seen by a large number of people. - Souvenirs or promotional products like cups.
- Product use can be explained and demonstrated. hats, T-shits, bottle openers, key holders, anc
- Focus of advert is on potential buyers only labelled statlonery items.
since people go to trade fairs speciflcally for - Mailshots in which advertising material i:
business. posted to many selected people at once.

14.6.lI Foctors lo considerwhen selecting

Disadvantages of trade fairs
odvertising medio
- It is onl.v a periodic opportunitv that is not
there throughout the vear. - Cost

- The advert reaches only those u'ho attend the - Effectiveness

fair - hmited coverage. - .Target group
- High cost of display' and extra personnel. - Accessibility of the market
- Size of the market
14.6.9 I nternet/Onl i ne mo rketing - Method of appeal
- Involves advertising, marketing and promoting - Types ofgoods adverlised
goods and serv'ices on the intemet.
- Expected profit
- Potential customers can vieu,banners, e-maiis,
search-engines result pages and classified
advertisements on the World Wide Web. 14.7 Advertising ogenh
- The intemet is a fast grolving adverlising - An advertising agency is an independer,
medium. company that is hired to handle oth.:
companies' advertising tasks.
Advantages of online marketing - Agencies are usually run through the follou'ir:.
- It can reach customers at a global scale. departments: production (filming, drai.r'ir"
and lettering); media (books space and time i
- The target audience can be selected.
TV radio and newspapers); visual departme:
- Low adverlising costs. (visual art designing); research departme:--
- impact of the advertisement can be measured (carries out fleld and product research) a:_:
through interaction l,'ith those rvatching it. administration (Accounts and managemenr r

- The method is quick in sending the message

across. l4.7.l Functions of on odvertising ogencl
- More details can be piaced on the internet - Market research.
with fbcus being placed on ditTerent aspects or - Advising the client's business.
features of the product.
- Creating advertising clips.
- It has a quick fbedback mechanism.
- Production of advertisements and cai::
phrases.
Disadvantages of online marketing - Placing advertisements on relevant media.
- IVlarketing material can be easily copied bv
rivais.
14.8 Code of odvertising proctice
- Adverts are cluttered on the u,eb.
- Customers have too man) options on the - This is a set of ethics for adveftisers.
internet. - it is laid out by the Advertising Mei;
- The global extent of the advert coverage may Association (ADMA).
be unnecessary tbr local firms. - It ensures that advertisements are hon";
truthful, morally acceptable and legzil.
14.6.10 More qdvertising medio - The code looks at the following issues:
- Yellou,pages in telephone directories.

Marketing and advertising @ ,d

,ffi
 '14.8.1 Misleoding odvertisements - Advertisers of personal services like health,
marriage and friendship clubs to give their fuIl
-Jvertisers should not mislead customers by: addresses in the advert.
- Suggesting unrecognisable qualities of the
product. 14,8,7 Advertisements for chority
- Causing offence to any member of the public. Advertisements for charitr, :

- Applying scientific jargon. - Should not be charged a commission.

rg - Making false claims about the product. - Must enjoy lorver rates.
- Saying a product is new when it has been on
the market for more than twelve (12) months. 14.8.8 Worrontees ond guorontees
- Showing or saying things that endanger - Terms of a guarantee on a product must be
children. clearlv stated.
- Giving malicious or scandalous information.
14.8.9 Disporoging references
14.8.2 Credit sole ogreemenfs - No unfair reference should be made to a rival
Credit sale agreements must show: firm's products or services.
- Both the cash and the credit price.
- t4.8.lO Exoggeroted copy
Deposit or dou'n payment required.
- Sum payabie for each instalment.
- Adverts should not contain words like
'magical '. 'miraculous' or any other word
- Number of instalments.
that exaggerates the product's attributes or
- Interests, finance charges and administration performance.
costs.
l4.8.Il Testimoniols
14.8.3 Advertisements for competitions
- No adverliser should make misleading
\dvertisements f,or competitions must: declarations to confirm untbunded claims
- State the competition's closing date. made in the advert.
- State prices to be won.
- 14.8.12 Comporotive pricing
Clarify the criteria for rvinning.
- Enable competitors to w'in on merit and ability - No advertiser can claim to be selling goods 'at
rather than chance. cost', 'below cost', ',rt producer's cost', or 'at
wholesale price' unless this can be proved.
14.8.4 Advertisements for lotteries
14.8.13 Permitted odvertisements
-\dvertisements for lotteries must:
- Follow, the provisions of the State Lotteries - For instance, for rnedical products. products
that have been tested can be advertised as cures
and Gaming Act.
for certain conditions like malaria, baldness,
- Give the value and nature of the prizes. asthma. gout and influenza.
- State the closing date of the lottery.
14.8.14 Prohibited odvertisements
14.85 Advertisements for betting
- No claim must be made that a medicine cures
Advertisements for betting must show: such conditions as Aids, cancer, leprosy,
- Real winnings at on offer and not estimates. blindness and alcoholism.
- Date when the winnings u,ill be announced.
14.8.15 Free publicity
14.8.6 Street qddress - Advertisers registered with ADMA must give
ADMA requires: free publicity to any of their clients.
- Mail order traders to give their full names and
physical addresses.

t1051
;
d{&
Marketing and advertising
 14.9 Advontogey'benefits ond 14.9.3 Dongers to customers
disodvontogeVdongers of Makes customers buy on impulse thus
overspending.
odvertising
- Advertising cost may actually result in an
increase in product prices.
14.9.1 Benefits to customers
- Adverts may be immoral and contrary to
- Gives cllstome'rs infbnlation about new social norms e.g. exploiting women and their
products, prices of goods and places where to femininity through romance appeal.
buy frorn.
- Adverlising creates wants in people and in the
- Forces prodttcers to improve the quality of end they become materialistic and buy things
goods because ol competition. they do not really need.
- Customers benefit fiom lower prices as firms - Customers may act upon false claims by the
compete. advertiser.
- Reminds customers of eristing brands. - Customers may be led into buying harmful
- Customers get to knorv rvhat is on the market products.
w'hile in the comfort of their homes.
14.9.4 Dongers to monufocturerVtrqders
14.9.2 Benefits to mo n ufoctu rery'troders - lt is expensive to effectively adverlise.
- Increases demand and hence sales of the - Cost may not meet benefit as sale may no:
product. increase in accordance with the cost o:
- More profits are realised. advertising.
- Rel'ives the demand tbr the firm's products - May trigger an unhealthy price war witi:
thr:ough reminder advefis. competitors.
- Improves the cotnpan,v's image as it can be
uscd to fight off bad publicity.

Common errors
Marketing is not the same as simple Marketing is much more than Learner:
confuse the trvo.

N{ethods of appeal are often confused for types of advertising.

Canclidates otten give points fbr functions of adver-tising agents u'hen a question has been askec
on code of adl'ertising conduct.

3. The objective of marketing includes the followin;

TEST YOURSELF except
A. Growth.
Multiple choice questions B. increase market share.
1. Of the follorving u,hich one is not a marketing mix C. making profit.
variable ?
D. obtain loans.
I
A. Product is a criteria for segmenting a marke--
B. Price A. Life style
c
C. Performance B. Language
D. Promotion C. Technolog-v
2, Which of the fbllowing is not a type of a market?
D. Product
A. Mass market 5. There are many methods of segmenting a mark;:
{ i

B. Physical market one of them is

,.i

C. Niche market A. demographic. fl

D. Rusiness market B. Biblical. ilI

Marheting and advertising u-qgj

*t.
E
 C. equality (") S",. ..pl"t, the
State and explain ;l*,tft
drff.** rnarketingl
th; different
D. periodical. "rd
concepts. tl2l I

Which advertising appeal is used when a happy 2. (a) \I/L^+

What are the f^^+^*-
^-^ +1^^ factors +^ ^^-^: J^- --.L
to consider when ^.^ I

:amily is shown enjoying the consumption of a segmenting a market? t5]

: ertain product together? (b) Describe market segmentation. t15l
il \. Comedy appeal 3. (a) Whatisthedifferencebetweenmassmarketing
E. Family love and niche marketing? t1l
tl. Social appeal (b) Explain the market mix variables. U2)
fur' D. Personality appeal (c) Discuss the features of physical market. t4l
ryl .-iow has the internet influenced advertising?
\. Goods can bejudged by appearance.
4. (a) State and explain any four forms of advertising
B. Self-service can be enjoyed. appeal. I8l
C. Feedback can be received from the audience.
(b) List four
D. Goods can be displayed on shelves.
disadvantages of advertising to a
customer. t4l
"Only Boom can wash your laundry clean". This
advert is an example of (c) Explain the importance of adverlising in
A. informative advertising.
business. tSl
B. genericadvertising. 5. (a) What factors influence the selection of a
C. reminderadvertising. suitable advertising medium? il0l
D. cornpetilive advertising. (b) Explain how advertising benefits producers?
Choose a media that should be used to advertise t4l
new tools for dentists. (c) Explain how the Code of Adverlising practice
A. Radio protects consumers. t6]
B. Tradejournal 6. (a) List six advantages of advertising on the
C. Television internet. 16l
D. Billboard
(b) Distinguish between generic and cornpetitive
t. Which of the following is not a function of an
advertising agent?
advertising. t8l
A. Choosing relevant media
(c) Explain how advertising can be a disadvantage
to manufacturers.
B. Market research t6l
C. Creating adveftisement clips 7. (a) Explain the following as they. are known ir
D. advertising:
Drawing up the code of advertising practice.
(i) Genericadvertising t4l
Structured questions (ii) Romance appeal l4l
(a) Name the' 4 Ps'which make up the marketing (iii) Flyers t4l
mix. t4l (b) State the advantages and disadvantages o
(b) Explain the need for marketing. 14) digital billboards. t8l

Glossory
rdvertising a form of marketing communication used to encourage, persuade, or manipulate an
audience (viewers, readers or listeners) to take or continue to take some action.
rdvertising appeal - a marketing technique that is aimed at influencing the way consumers view themselves and
how buying certain products can prove to be beneficial for them.
ldvertising media various means (advertising vehicles) such as billboards, magazines, newspapers, radio,
television, and internet by which promotional messages are communicated to the consumers.
tlarket - place or situation where buyers and sellers come to contact
\[arket segment - a sub group a whole market in which consumers have similar preferences

mt M ar ke ting d adv ertising

a- an
ffi
 .a
..I
r*l

,-'}iilE,
t ,-c!llr

(vii) Customers, and

l5.O Obiectives
(viii) Documents.
By the end of this chapter learners will be able to:
- Goods and services can be advertised or
a) trace the development that took place in transport vehicles.
systems;
b) explain how transporl assists trading activities;
15.3 Foctors to consider when
c) state the factors to be considered when choosing a
choosing on efficient mode of
mode of transPort;
d) outline the advantages and disadvantages of each
tronsport
mode of transPort; Nature of goods being carried - fragile, bulh.
e) explain the modern developments in transportationl perishable, liquid, valuable or live cargo.
0 list and explain the documents used in Distance to be covered.
transportation; and Quantity of goods.
g) explain the role of seaport and airport authorities in Cost of transporting.
transporling goods.
Urgency with which the goods are required.
Accessibility of the destination using tha:
I5.l Evolution of tronsPort means of transport.
Availability of the mode.
Long ago horses, donkeys, and scotch carts
were used as means of transPort. Availability of facilities for that mode e.g. ra-
line, airport, loading and unloading facilities
This had a disadvantage of taking long to
complete the journeY. Safety of the mode.
Large quantities of goods could not be carried Possibility of return loads.
at once.
ln 1825 rail transport was invented. 15.4 Modes of tronsPort
Rail buckets carrying raw materials and goods
were pushed by people. 15.4.1 Rood tronsPort
Invention of motor vehicles was in 1892.
Advantages
An aeroplane was then invented in 1903'
Raw materials, goods and people were now
- Provides door to door delivery.

being transported by rail, road and air transport.

- Reduces trans-shipment of goods.
- Cheap and faster over shotl distances.

15.2 How tronsport ossists (oidsl trode

- Less damage and pilferage of goods.
Smaller companies can afford own transport.
- To carry (ferry, deliver, move, transfer, convey, Cost of maintenance is lower.
ship, bus): There is a wide variety of vehicles for differer
(i) Raw materials; situations, conditions and needs.
(ii) Finished goods; Greater security.
(iii) Machinery; Flexible timetables.
(iv) EquiPment: Wide road networks, hence can reach more places
(v) Spare Parts for machinery; Can carry a variety of goods.
(vi) Employees, managers and executives,

Transport
rrt
irm
. :advantages - Public transport strikes will not affect operations.
tlt Slow over long distances. - Staffcan be ferried to and from work.
ll[f,l
il
tn
rtI
Jostly when carrying goods over long distances. - Will have special vehicles to suit goods dealt with.
il,,r \ot suitable for carrying very bulky goods. - It saves on hiring costs.
It may be difficult to get return loads. - Can be hired out.
Goods can be affected by bad weather.
\ffected by traffic congestion, especially in urban Disadvantages
areas. - It is expensive to buy a fleet ofvehicles.
Affected by poor roads. - Maintenance costs are high.
- Overhead costs such as insurance are increased.
lqcuments used in rood tronsport - The administrative burden is increased by the need
to manage the fleet. Focus may be removed from
- Delivery note
the firm's actual activities.
Used when the goods are transported using the
supplier's own transport.
- Hiring may actually be cheaper than owning.

It is issued by the supplier.

- There are times when the vehicles are idle because
there is nothing to carry. This is a cost to the
It is written in duplicate.
company.
It accompanies the goods being transporled. - Vehicles can be abused by the workers.
It is not a contract of carriage but just a record of
goods in transit. 15.4.2. Roil tronsport
It shows names and addresses of buyer and seller,
description of goods, quantity of goods and place Advantages
of delivery. - Fast and cheap over long distances.
.J It does not show freight charges. - Has fixed timetables and fixed routes.
It is signed by the receiver to acknowledge receipt - Can carry bulky and heavy goods.
of goods. - Can carry a variety of goods by use of
containers.
' Consignment note - Free from traffic congestions.
It is used when goods are transported using hired - Can operate in poor weather conditions.
ransport.
It is issued by the hired transport company. Disadvantages
lt is a contract of carriage. - It is inflexible due to fixed routes and schedules.
It is written in triplicate: copies for the supplier, - It needs other forms of transport to complete
customer and transpofter. the process - it is not a direct form oftransport.
It shows names and addresses of buyer and seller, - Slow over short distances.
description of goods, quantity of goods and place - Very costly to set up a rail system.
of delivery. - Not ideal f<rr small loads.
It shows freight charges. - Limited access - rail links are not so
widespread.
-oving own fleet of vehicles
r t\antages Freightliners
Goods can be moved at any time. - These are high speed trains that travel long
Movement of goods is safer and faster. distances.

.{dverts can be placed on the vehicle. - They travel on flxed timetables and fixed routes.
Proper planning ofcarriage and handling ofgoods - They have a high carrying capacity.
can be done. - They can carry goods in containers.
Drivers and handling staff can be trained so - They travel between inland cities.
that they can demonstrate to customers how the - They link cities to seaports.
products are used on delivery.

Transport
- They can carry a variety of goods (mixed cargo) c) Oil-Bulk Ore (OBO) ships
and they can also cany passengers. - Specialised huge vessels designed to carry bulkl
cargo.
Documenis used in roil tronsport - Carry oils like petrol and diesel.

a) Consignment note (see road transport)

- Carry ores like coal, chrome, iron or any other
mineral.
15.4.3. Seo ironsport - They do not travel on fixed routes.
Advantages - They do not have flxed timetables.
- Can carry bulky goods cheaply. - Loading and unloading is mechanised e.g. use o:
- There are a variety of vessels to suit different cranes.
transportation needs.
- Can carry goods in containers. d) Roll on roll off ships (Ro-Ro)
- Vessels can be specialised, for example - Specialised vessels designed to carry mobile cargc
refiigerated to carry perishables. - Cars, lories, tractors and other vehicles are driver-
- Some ships have flexible timetables and onto the ship.
routes. - Each vehicle is parked in its own parking bay/lc.
on the ship.
Disadvantages - Some will be empty while some could be havin.
- Relies on other forms of transport to complete their own loads on them.
the transportation process. - On offioading the vehicles are driven off the vesse-
- It is a slow mode of transport that is not suitable - They are safe because the vehicles are not damage;
for transporting urgently needed goods. through handling and there are lessor chances fc:
- Mechanised loading and off-loading makes theft.
the process expensive. - It is easy to load and unload the vessel.
- More risk of theft, piracy and damage. - Route and timetables are fixed and strict.
- It is not direct will require other means of
transport like road. e) Tankers
- It is expensive to build vessels and seaports/ - They are vessels designed to carry
harbours. and water.
- They are large ships with mechanised loading ar:
Types of ships unloading facilities.

a) Cargo liners
Documents used in seo tronsport
- Have fixed timetables.
- Follow strict routes.
a) Bill of lading
- Fixed freight charges.
- The document used when goods are transported b.
sea.
- Not for hiring.
- It acts as both a contract of carriage and a docume:.-
- Ideal for goods needing careful handling.
of title.
- Freight charges are determined at a conference.
- As a document of title, it is quasi-negotiab =
(ownership can be transfered to another persc-
b) Tramps while the goods are still in transit and the ne',,
- No fixed routes. owner can use the document to claim ownership ,-'
- No flxed timetables. the goods upon arrival).

- Charges are very low. - lt acts as a receipt for the goods on board the shi:
- Freight charges are not fixed but are negotiated. - It contains:
- Ideal for hiring. (i) Details of the goods like quantities and quali:
(ii) Names ofport ofloading andporl ofunloadin:

Transport
 .ri) Freight charges and details of who pays
lnsurance costs.
(x) dock labour force; and
(xi) dry docks.
- .',ndition of the goods: it can either be a clean bill
: an unclean bill (a clean bill is issued when the
. ,rds are in good condition and an unclean
bill is 15.4.4 Air tronsport
,:,.ed when some of the goods are damaged). Advantages
- It is very fast over long distances.
- narter party - Cheaper over long distances.
- . a document written when -
a ship is being hired. Can safelycary very valuable goods.
i issued by rhe shipping company. - Can carry a variety of goods.
-
'
:iows the name of the hirer and the conditions of - Can use containers.
:-ng.
- Operates on fixed timetables and routes hence
:rng charges are based on the space available allows planning to be done.
on
-. I eSSel.
- : hiring contract can either be a voyage - Less risk of theft and damage to goods.
chafier
: : time chafter.: Disadvantages
. r age charter is when the ship is hired for a
- It is very expensive to start up an air transport
specific journey. system because ofthe high costs ofaeroplanes
Time charter is when the ship is hired for a specified and construction of airports.
time period. - High running costs.
The vessel can be hired together with its crew - Requires other forms of transport to get goods
{_ (charter by demise). to their flnal destination.
The document specifies demurrage charges. - Not suitable for short joumeys.
These are charges made for delays in loading and - Has limited carrying capacity.
offloading a vessel.
- Accidents are usually very fatal and without
Lay-days are given to load and offioad a vessel. recoveries.
Dead freighr is paid for unoccupied space in a
vessel.
Reasons for the increase in air cargo
- Air transport is quick.
Seoport outhority
- Greater safety, lower insurance costs, less theft
Vaintain harbours/docks. of goods and less packaging material needed.
Ensure that the inland is accessible through road - Increase in the number of air planes and
and rail networks. airports.
\,Ionitor the movement of ships. - Increase in the volume of international trade.
Provide: - Competitive freight charges.
(i) security; - The planes can be specialised e.g. to cany
rii) information e.g. on weather and timetables; goods needing refrigeration.
riii) communication facilities e.g. telephones and - Use of containers.
radar;
!

Eftu
riv) warehousing facilities for temporary storage Document used in oir fronsport
:
of goods in transit; Airway bill
r\') facilities for loading and unloading of ships - It is a contract of carriage when goods are
I: e.g. cranes;
transported by air.
rvi) office space for complementary organisations - It is a receipt of goods _ shows that the airline
e.g. banks and immigrations;
[T received the goods.
tvii) waiting rooms and toilets: - It accompanies the goods.
ry
ri,iii) parking space; - It contains:
tix) ship refuelling facilities;

GT
s Transport 1{
fl
{r
 (i) A description of the goods 155 Trends in tronsport
(ii) Address of origin and destination
(iii) Freight charges 155.1 Conloi nerisotion
(iv) Name of airline
- Containerisation is the use of large standard
(v) Obligations of all the parties involved metalboxes to carry large quantities of goods.
- The boxes are used in road, rail, air and sea
Airport authority transport.
- Maintain airports - The goods are loaded and the boxes are sealed
- Provide: in the presence of customs officials and will
(i) communication links; only be opened at destination.
(ii) runway and landing space;
(iii) storage facilities; Advantages
(iv) security; Act as storage of goods in transit.
(v) parking for cars; Containers are very safe.
(vi) loading and unloading facilities; Less deterioration of goods due to bad weather.
(vii) good road networks; Less handling ofgoods.
(viii) duty free shops; Less damage and theft of goods.
(ix) information on weather and timetables; Quick clearance of goods as they are inspected
(x) office space for banks and other before they are sealed. They are not opened a:
the border posts.
complementary facilities;
(xi) rest rooms and waiting rooms; and Easy to handle mechanically by use of cranes

(xii) customs and immigrations offices. Ensures fast movement of goods and quick
turnaround of traffic.
15.45 Pipelines Can be carried using different modes o:
transport.
Advantages
Goods can be carried in bulk.
- Carries goods in bulk.
Containers can be hired.
- Less risk of theft.
They can be stacked to save space.
- Instant and continuous flow of fluids.
- Low operational costs.
Disadvantages
- Direct form of transport.
High initial capital costs.
- Saves on time and labour.
Need special machines for loading an.
- No congestion or pollution.
offioading.
- Can carry different fluids e.g. the same pipeline
Retum loads may not be available.
can be used to transport both petrol and diesel.
Difficult to get a full container load.

Disadvantages 155.2 E-ticketing

- High initial capital outlay.
- Buying of tickets on-line.
- Not suitable for other types of cargo other than
- Can be done in the comfort of one's ou:,
fluids.
home.
- One way system without return loads.
- At any time and at any distance.
- It is prone to attacks and vandalism especially - Saves time on queuing.
in times of war.
- Great loss of fluids if it leaks. 155.3 Toll gotes
- Over high gradient, more pumping stations are
- Points along major highways were motoris:'
needed.
pay for using the roads.

Transpart

J
 The Zimbabwe National Road Agency - Used to safeguard the vehicles from hijackers.
TZINARA) collects money from these points
rn Zimbabwe. 1555 Globol positioning remote system
Raise revenue for the govemment. - A tracking device which is used to trace the
'55.4 Vehicle trocking system movement of a vehicle even in different
regions or countries.
A device installed on vehicles and controlled - Drivers will find it difficult to divert routes.
lrom information technology department. - Safeguard the vehicle from hijackers.
Used to monitor the activities of the driver.
...

e*rnrmon €rrors
' There is a misconception that pipelines carry liquids only yet pipelines carry fluids, not liquids
t: only. Fluids include liquids and gas.
' . Types of ships are often confused, especially tramps and liners.

:,sr ?cupgFr1ffi
exception of
A. toll gates. B. e-ticketing.
nu ltiple choice questions C. remote transport. D. vehicle tracking system.
Of the following which one was not a means of
Siructured questions
:ransport long ago?
:E .\. Horses B. Scotch carts 1. (a) List the ways which were used as means of
long ago
c. Donkeys D. Aeroplane ,, "untrort
(b) . t4]
Explain the trends in transport t16l
; which ship is suitable for hiring? 2. (a) Explain the importance of transport
{. Tanker B. Cargo liner services to a manufacturer of clothes. 18]
C' Tramp D. Roll on Roll off shipt (U) What are the advantages of road transport?[6]
The document used when goods are transported by (c) Explain the disadvantages of owning o fleet of
sea is called a vehicles. t6l
.{. billof lading. B. consignmentnote. 3. (a) What factors does a trader consider when
C. delivery note. D. statement of account. choosing a mode of transport'? t71
- What is the work of a port authority? (b) Give reasons to explain the increase in the
{. Compiling statistics on expo(s and imports. volume of goods transported by air. t8]
B. Charging and collecting customs duty. (c) What are the disadvantages of rail transport?
C. Providing customs and immigrations offices. 15]
D. Controlling bonded warehouses (a) Distinguish between cargo liners and tramp
I What is the advantage of road transport ships' t8]
'---r - - ' over other ,,
modes? (b) What are the advantages to a trader of having
their own fleet of vehicles?
,{. It is affected by congestion. ,
(c)
t8]
Under what circumstance is a delivery note
B. No transhipment of goods. used?
I

lal
C. Slow over short distances. s (a)
5. /-\ n^.^-;L^ +L^ contents
Describe the ^r aL._
^^_+^-+^ of the .^,, ^__-,.- -
following
t
]

D. Carries heavy goods. documents:

which document is not a contract of carriage? (i) Airway bill U)
A. consignment note B. Airway bill (ii) Bill of ladrng tSl i
tgl
C. Bill {li9ilq _D. Delivery note (b) Explain the advantages of sea transporl. [5];
rst J

3lossory
rluasi-negotiable ownership of goods in transit can be transferred to another person.
)emurage charges for delays in bringing back a vessel after hire.

i
Ilansport ,'
T

{
i

Stabilises/steadies /evens out the supply of

16.0 Obiectives goods /prevents shortages.
By the end of this chapter learners will be able to: Stabilises/steadies Prices.
(a) deline warehousing; Protects goods against bad weather.
b) explain the need for warehousing; Reduces the risk of theft and damage.
c) give factors to be considered in siting warehouses; Enables packaging, branding, blending'
d) state the types of warehouses; and bottling, tinning and canning to be done'
e) tist the functions of warehouses used in home and Enables seasoning, ripening and maturing ol
foreign trade. goods.
Preserves perishable goods.
Warehouses can be pledged as collateral
16.l Definitions
securify by owners in order to get loans'

16.l.l Worehouse
- A place/building for keeping goods/resources'
16.3 Foctors to be considered when
- Where goods are containerised, they may be
siting o worehouse
stacked outside. but the area has to be fenced Cost of building, buYing or renting
or rvalled. Neamess to suPPliers
Neatness to customers
16.1.2 Worehousing
Availability of land
- Is an aid to trade. Local authoritY regulations
- Is the storage of inputs, equipment, machinery Availability of transport network
and output waiting to be used /demand' Availability of communication network
- Ensures safety ofgoods soon after production Availability of water
until theY are used. Availability of power/electricity
Safety/security
16.2 Need for worehouses
(lmportonce of worehousingl 16.4 Types of worehouses
Enables storage of:
16.4.1 Primory Produce worehouse
(i) lnputs/raw materials
(ii) Finishedgoods/outPut - Are specialist warehouses for speciflc types of
products, for examPle:
(iii) Machinery and equiPment
(i) grain elevators/silos - for large storage oi
(iv) Spare parts grain.
(v) Goods awaiting delivery (ii) cold storage warehouse - for storage of
(vi) Goods in transit perishables.
(vii) Goods in entrePort trade (iii) wine cellars large underground rooms
(viii) Goods produced ahead of demand situated near vineyards used for bulk storage
Clears production lines. of wine. Enable wine to mature.

Warehousing
,@
#
it 16.4.2 Monufocturer's worehouse - After expiry of the time allowed" the goods are
m
lt sold for the benefit of the state.
!t
|l - Owned or rented by manufacturers.
il - For the storage of: 16.4,6 Tro nsporter worehouses
It
l;t
(i) raw materials/inPuts - Owned by those in business of moving goods.
(ii) semi-finished goods/u'ork in progress - Keeps goods in transit safe.
(iii) finished goods awaiting demand - Keeps goods awaiting delivery.
(iv) equipment and spare Pafis
16.4.7 Bonded worehouses
16.4.3 Wholesqle worehouse
- Found at points of entry e.g. aitports, seapofis,
- Stores goods in large quantities/in bulk road border posts.
- Enables: - May be privatelyipublicly ow'ned.
(i) bulk breaking to suit customer's - Store dutiable goods.
requirements - Goods are released from the warehouse after
(ii) grading according to qualitY duty'has been paid.
(iii) blending of goods - Store goods in entre-Port trade.
(iv) branding of goods - Allow goods such as u,'ine to tnature.
(v) packing/bottling/tinning/canning of - Ensure that goods in bond are not manufactured.
goods - Goods can be:
(vi) seasonal goods to available on demand (i) bottled/tinned/packed, branded. blended.
graded or sarnpled.
16.4.4 Retoil worehouse (ii) transferred from one bonded r'varehouse
- Orvned by retailers. to another.
- Enables retailers to buy goods in large (iii) sold whilst in bond.
quantities. (iv) removed in smaller lots from the
- Goods in the warehouse are used to replace rvarehouse.
goods on shelves which are sold/reduces
shortages. 16.4.8 Port outhority wqrehouse
- Enables packaging, blending, branding to be - Owned by port authorities.
done by retailers.
- Stores goods for exporters and impofters.

16.45 Public worehouses - Rent is charged by the port authority for

storage ofthe goods.
- Owned by central and/or local government
and by parastatals.
Used for storing public goods. 165 Storoge of liquids ond goses
Used for storage of dutiable goods where Require specialised facilities in fbnn of tanks.
importer fails to pay duty. Most of them are flammable.
Importer is given time to find money to pay Greater precaution has to be taken in
duty while goods are safely kePt. warehousing such commodities.

1l} Common errors

E +qi . Candidates often write as if goods are manufacfured in the warehouse. They may only be packaged,
branded. processed, finished or given time to mature in the warehouse. It is not a production area.
tri:r{- .
Warehouse and warehousing are commonly regarded as one thing yet they are different.

Warchousing :
 l- THST YOURSELF
What is not considered when siting a warehouse?
A. Rentals of the area
B. Accessibility in terms of transport
Multiple choice questions C. Seasonal goods
1. Which one does not apply to bonded warehouses? D. Availability of labour
A. They are located at the entry points. 5. One of the benefits of warehousing is that
B. They are supervised by customs authorities. A. increasesshortages.
C. Save manufacturer's capital. B. evens out supply ofgoods.
D. Allow perishable goods to be stored before C. creates demand for goods.
duty is paid. D. covers goods against transit risks.
2. Identifu a public warehouse.
A. Bonded warehouse Structured que$ions
B. Manufacfurer'swarehouse 1. Describe the importance of a bonded warehouse.
C. Retailer'swarehouse
D. Wholesale warehouse 2. (a) Outline the importance of warehousing to a
3. does not benefit from long storage poultry producer. [1
periods. (b) State the factors to be considered when siti
A. Tobacco B. Cheese awarehouse. t
i c. wine D. Fruits (c) Describe wine cellars. t
\._*_*_

Glossory
Bonded warehouse abuilding or other secured area in which dutiable goods may be stored, manipulated, or
undergo manufacturing operations without payment of duty.
Cellar to store wine in a special room, usually below ground, that has an optimal temperature or
provides optimal storage conditions.

Depot a place for storing goods.

ZIMRA abbreviation for Zimbabwe Revenue Authority, a government department responsible for
the collection of duty and other taxes.

Warehoasing
 SECTION B
m

x
[,
rl I
e*s *E
gt
ffi* I
TT
x\ sS
3H ***H*fi$*lHfi
ffi!
ffi
#fi;
-.,, +*;; *:ii

PAPER I
EXAMINATION PRACflCE

117 :,

*t-- Examination Pructice Paper I il

 There are 6 examination practice papers in this section. A. Hypermarket B. Mail order
Each paper has forty questions. Ansu'er all questions. C. Chain store D. Departmental store
For each question there are four possible ansrvers: A. 8. A common feature of large retailers is that they
B, C and D. Choose the one you consider correct and
record your choice in soft pencil on a separate answer
A. sell a variety of goods.
sheet. B. are situated in the citY centre.

The time allocated for each paper is t hour 15 minutes.

C. have large buildings
D. have large capital.
9. Which of the following is not a requirement
Exominotion I self-service?

1. is an example of primary production? A. Goods should be bar coded.

A. Milling B. Fishing B. Goods should be pre-packed.

C. Tanning D. Nursing C. Goods should be branded.

2. A _- is involved rvith direct production. D. Goods should be graded.

A. teacher B. barber 10. Choose the statement which is not true about
voluntary chain stores.
C. retailer D. subsistence fatmer
A. Group of retailers belonging to the same
3. The following are disadvantages of barter trade company.
except
A. coincidenceolwants.
B. Provide w'holesaling services to small scale
retailers.
B. indivisibility of goods.
C. Advertise as a group to beneflt all members.
C. scarcity of goods.
D. Brand goods with group name
D. measurelnent of goods.
11. Which communication service is not normally
4. Which sen'ice is not normally offered by
used by mail order firms?
wholesalers to both retailers and manufacturers?
A. Cash on delivery (COD)
A. Breaking bulk
B. Business reply
B. Advertising goods
C. Free mail
C. Storage of goods
D. Franking machines
D. Transportation of goods
12. All tele-communication services
5. Which product would normally not be distributed
through a wholesaler?
A. provide a written record.

A. Sugar B. Mealie-meal B. allorv dialogue.

C. Bread D. Spices
C. are fast.

6. Which of the follor.ving is sold through a commodity

D. operate even after hours.

market? 13. Which communication service is used to locate and

call w'orkers within the same premises?
A. Insurance B. Shares
C. Tea D. Flour
A. Confravision B. Fax

7, "situated on the outskirts of a city, sell a r,'ariety

C. Radio paging D. Telex

of goods, hal'e a lot of parking space." What is the 14. Which is an advantage of a cellular phone over a

retail outlet described in the statement? telephone?

t

Examinalion Praetice Paper I @

.9
 \. Allows dialogue A. $8 000 B. $9 000
rllf
irm
irm B. Cheaper c. s12 000 D. s1s 000
iIII of
irf, C. Keeps records of calls made 22. Which of the following is not true about the use
iril
ir.x statistics in insurance?
irm D. Calls can be made from any location
A. Statistics is used to calculate the premiums.
,e the diagram to answer questions 15 and 16.
B. Statistics is used to measure the probability of
risk occurring.
C. Statistics is used to calculate compensation.
i\DARD BANKFife Street 24.03.12
D. Statistics is used to measure the size of the
risks.
G. Makhanda 23.
sum of Two hundred dollars onlY. s200.00
=
GOODWRITE BOOKS:
FOR ALL YOUR STATIONERY NEEDS
.red: B.Sibanda

The above statement is an example of which

, Who is the drawer? advertisement?
A. ZBBank B. Standard Bank
A. Competitive B. Collective
C. G. Makhanda D. B. Sibanda
C. Informative D. Generic
. When will the cheque be stale?
24. What would a farmer inform members of the
use to
A. 24.0',7.r2 B. 24.05.12 local community that he/she will be selling goats?
c. 24.09.12 D. 24.06.12 A. Poster B. Newspaper
'. Which service is offered by commercial banks and C. Trade journal D. Radio
not building societies?
25. A,public warehouse stores
A. Deposit accounts B. Loans
A. beef. B. mealie-rneal.
C. Overdrafts D. Savings accounts
C. medical drugs. D. branded goods.
f. Which service allows the customer to make
26. Goods stored in a warehouse cannot be protected
payments to many account holders using one
against
cheque?
A. credit transfer B. moneY order
A. flre. B. price fluctuation.

order D. C. theft. D. weather conditions.

C. standing telegraphic transfer
27. Choose the most suitable mode of transport
.9. Which of the following is an example of a life
carrying coal from Hwange to Klvekwe.
policy?
A. Employees liability A. Road B. Rail
B. Workers liability C. Air D. Pipeline
28. Which statement is not true about freightliners?
C. Retirement annuiry
D. Public liability A. They travel anyrvhere in search of cargo.

:t,1._ prevents people from insuring

B. They cary both goods and passengers.
property that they do not ow'n. C. They interlink cities with sea ports.
A. Utmost good faith D. They travel long distances at great speeds.

B. Insurable interest 29. The term groupage in transpotl means

C. Proximate cause A. classifying goods according to their type.
D. Consequential loss B. classifying goods according to their
destination.
I 1. Mr Daka insures his car valued at $20 000 for S 15
000. An accident occurs and the cost of repairing C. grouping goods according to their origin.
the car is $12 000. How much will the insurance D. putting different consignments in one
company pay Mr Daka as compensation? container.

m0
rf-
Examinarton Practice Paper I
6B
a A. Allows dialogue A. S8 000 B. $9 000
r
I
I
B. Cheaper c. s12 000 D. $ls 000
I
I C. Keeps records of calls made 22. Which of the following is not true about the use of
I
I D. Calls can be made from any location statistics in insurance?
A. Statistics is used to calculate the premiums.
Use the diagram to answer questions 15 and 16. B. Stattstics is used to measure the probability of
risk occurring.
STANDARD BANK Fife Street 24.03.12 C. Statistics is used to calculate compensation.
D. Statistics is used to measure the size of the
risks.
Pay G. Makhanda
23.
The sum ofTwo hundred dollars onlv. s200.00
COODWRITE BOOKS:
Signed: B.Sibanda FOR ALL YOUR STATIONERY NEEDS

15. Who is the drawer? The above statement is an example of which

advertisement?
A. ZB Bank B. Standard Bank
C. G. Makhanda D. B. Sibanda A. Competitive B. Collective
16. When will the cheque be stale? C. Informative D. Generic
A. 24.07.12 B. 24.05.12 24. What u,ould a farmer use to inform members of the
local community that he/she will be selling goats?
c. 24.09.12 D. 24.06.12
17. Which service is offered by commercial banks and A. Poster B. Newspaper
not building societies? C. Trade journal D. Radio
ii
A. Deposit accounts B. Loans
25. Apublic u,arehouse stores
il
,!
li
C. Overdrafts D. Savings accounts
A. beef. B. mealie-meal.
18. Which service allows the customer to make C. medical drugs. D. branded goods.
payments to many account holders using one 26. Goods stored in a warehouse cannot be protected
cheque'/ against
A. credit transfer B. money order A. fire. B. price fluctuation.
C. standing order D. telegraphic transfer C. theft. D. weather conditions.
19. Which of the following is an example of a 27. Choose the most suitable mode of transport
policy? carrying coal from Hwange to Kr,vekwe.
A. Employees liability A. Road B. Rail
B. Workers liability C. Air D. Pipeline
C. Retirement annuity Which statement is not true about freightliners?
D. Public liabilitv A. They travel anyrvhere in search of cargo.
20. prevents peopie from B. They carry both goods and passengers.
---.- that they do not own.
property C. They interlink cities with sea ports.
A. Utmost good faith D. They travel long distances at great speeds.
B. Insurable interest 29. The term groupage in transport means
C. Proximate cause A. classifying goods according to their type.
D. Consequential loss B. classifying goods according to their
21. Mr Daka insures his car valued at $20 000 for Sl5 destination.
000. An accident occurs and the cost of repairing grouping goods according to their origin.
the car is $12 000. How much will the insurance
putting different consignments in one
company pay Mr Daka as compensation?
container.

i 11rj
Examination Pracfice paper I
G- ffi
 Which of the follorving the private It is a document of ownership of goods.
sector? It is an acknowledgement of receipt of goods
A. Public corporation aboard a ship.
B. Public company 38. Which one of the following is suitable for sale

C. Parastatal through hire purchase?

D. Municipality A. House B. Factory

3r. Which document u'ill allow a private limited C. Car D. Stock
company to start trading? 39. Give a disadvantage of a credit sale.
A. Memorandum ofAssociation A. Interest is charged
B. Trading Certiflcate B. Payment is spread over a long period
C. Arricles oIAssociation C. Improved standard of living
D. Certificate of Incorporation D. No deposit is required
32. Of the following investments. u'hich is most
secure?
A. Cumulative preference shares
B. Debentures
C. Ordinary shares
D. Preference shares
33. The follou,ing information reflects the books of
Vieka Trading. The above symbol shows that
sales
Cost of S20 000 A. the goods have been tested for quality.
Turnover $50 000 B. the goods are below satisfactory standard.
Overheads s18 000 C. the goods have not expired.
Average inventory S 12 000 D. the goods weigh as stated on the label.
What was the net profit?
A. sr0 000 B. S12 000 Exominotion 2
c. s20 000 D. s30 000 1. In rvhich part of production is teaching classified?
34. What is the document used to certifu prices by the
A. Direct services B. Primary
exporting country called?
B. C. Secondary D. Construction
A.Consular invoice Certificate of origin
D. 2. What are the three stages of production?
C. Indent Import invoice
is not an objective of customs duty.
A. Extraction, selling and distribution.
35.
B. Exporting, manufacturing, and wholesaling.
A. Raising revenue
C. Extraction, construction and manufacturing,
B. Protecting local industry
D. Extraction, manufacturing and distribution.
C. Reducing exports
3. Production is complete when
D. Preventing dumping
Which of the following is not a function of a
A. goods are purchased by the consumer.

fonvarding agent? B. goods are manufactured.

A. Arranging transport for exporters C. goods reach the local shop.

B. Finding buyers for exported goods D. goods are despatched.

C. Preparing shipping documents 4. In direct production

D. Arranging transit insurance A. each family provides its own needs.

37. Which statement is not true about a bill of lading? B. division of labour is well developed.
A. It is a contract of carriage. C. many basic human wants are satisfied.

B. It is used to demand payment. D. surplus goods produced are sold for cash.

120
Examination Pruetice Paper I 4
j

m
 5. is part of commerce. C. Paying for using another trader's name
)c:: A. Accounting B. Constructing D. Selling goods on commission
C. Distributing D. Nursing t4. Which document is used to correct an undercharge
f: on an invoice?
6. What is the factor of production whose reward is
profit? A. Credit note B. Debit note
A. Capital B. Organisation C. Delivery note D. Statement of account
C. Labour D. Land 15. Which document will a trader
issue when payment
7, Which pair contains aids to trade only? is expected from a customer before supplying the
goods?
A. Banking and wholesaling
B. Communication and exporting
A. Quotation B. Letter of enquiry

C. Insurance and retailing

C. Debit note D. Pro-forma invoice

D. Warehousing and transport

16. The trade flgures for country D are given below:

Which one is a small scale retailer?

Export of goods Sl20 million
Import of goods S100 million
A. Chain store
Export of service S90 million
B. Departmental store
Import of ice S110 million
C. Independent store serr,

D. What is the country D's balance of trade?

Supermarket
9. Retailing means A. S20 million B.
million $0

A. clearing the manufacturer's production line.

C. Sl0miliion D.
$l20million
B. informing the wholesaler of goods available. 17. What is Country D's balance of payments, using
the figures given in question l6?
C. reducing products into smaller quantity.
D. A. $20 million B. $10 rnillion
selling goods on credit to consumers.
C. $0 million D. $30 million
10. Which shop uses self-selection as a method of
selling?
18. Which is a function the Standards Association of
Zimbabwe?
A. A departmental store
B. An independent retailer
A. Enforcing the code of advertising practice

C. A service station
B. Providing facilities for testing manufactured
goods
D. A supermarket
C. Monitoring the rise in the cost of basic
What contributed to the growth of self-service commodities
retailing?
D. Settling disputes befween consumers and
A. After sells service and branding traders
B. Pre-packaging and branding 19. Which of the following acts protects the consumers
C. Trading stamps and pre-packaging against buying stale bread?
D. Trading stamps and after sells serv'ice A. The Food and Food Standard Act
12. A customer buys a motor vehicle on hire-purchase B. The Price Control Act.
from a car-dealer and the instalments are paid over C. The Trade Description Act
24 months. Who is the legal owner of the vehicle
D. The Trade Measures Act
during this period?
A customer buys goods worth $40 000 from a
A. The customer
rvholesaler and is entitled to 40%o trade discount
B. The car dealer and 5ot'o cash discount. How much is received bv
C. The finance company the seller?
D. The insurance company A. S22 800 B. sl 200
What is franchising in the retail trade? c. $16 000 D. S24 000
A. Advertising goods through catalogue 21. Which is the most suitable advertising medium for
B. Inviting capital from interested traders a tractor manufacturer?

Examinafion Practice Paper I

 journal B. C. The stock exchange attracts new customers for
A. A trade A Poster
the comPanY's Products'
C. A newsPaPer D' A radio
D. The stock exchange ensures that the company
22. What is a bar code'l does not suffer losses.
A. A method of selling goods by multiple shops'
29, Which one is legal tender? 35
B. A product sold belou its cost price to attract
A. Bank certified cheques
customers.
of buying and selling
B. Bank notes and coins
C. A system goods
electronicallY'
C. Bills of exchange 36

D. A set of r"erlical lines representing product D. Personal cheques

intbrmation. 30. When a crossed cheque is opened, it means that the
warehouses? cheque
23. What is not true of bonded 31

A. They are located at border entry points only' A. can be cashed over the counter'

B. They are supen'ised by customs authorities' B. can be Paid at anY bank branch'

C. They save on tnanuf-acturer's working capital' C. can no longer be dishonoured'

D. They store goods on rvhich duty has not been D. can be Paid into a bank account'

Paid. 31. Why is packaging important to a manufacturer? 3t

24. Which one is not a function of money? A. lt distinguishes products from others'
A. Measure of value B. It enables customers to identiff products'
B. Medium of exchange C. It prevents others from using his/her brand
name.
C. StabilitY of i"alue
D. Store of r'vealth
D. It protects goods against soiling'

25. Acheque can be dishonoured when the 32. APorl authority is not responsible for
A. amount in words is the same as the amount in
A. collecting customs duties'
figures. B. ensuring adequate securitY'
B. amount on the cheque is less than that in the C. monitoring rePair Yards'
bank account. D. providing office sPace.
C. drawer has requested the bank to stop payment'
D. signature on the cheque is the same as the Read the extract below and answer questions
specimen in the bank' 33 and 34.
one is an advantage of a sole proprietorship?
26. Which Mrs.Mapurisa insures a car wofth $150 000 for $120
A. A lot of Pro{rt is made 000. Th; car was later damaged in an accident and $75
B. Decisions are made quicklY 000 is needed to rePair it'
C. The orvner gives himself time to rest 33. Hor'v much the insurance company pay to Mrs'
will
D. There is no risk to personal property Mapurisa as comPensation? t
27. Aprivate limited company raises its capital mainly A. s4s 000 B. $60 000 l
by c. s75 000 D. $120 000
A. borrowing fiorn banks' 34. What doctrine is used to calculate the amount oi
B. issuing out shares to members' comPensation?
C. obtaining government grants' A. Contribution B. Average clause

D. selling debentures. C. Proximate cause D. Subrogation

28. What is the advantage obtained by a public

company for listing on the stock exchange? Use the following information to answer
A. The company receives profit from the trade of questions 35 and 36.
its shares on the stock exchange'
Trading figures for M. Kundai. a sole trader, are giver'
B. The company's shares are traded freely below.
without atTecting the company's capital'

Examinution Practice PaPer 1

@6
H*

i
 E
Sales sl0 000 A. are easy to advertise.
Cost of sales $6 000 B. are easy to handle.
Cost ofaverage stock S2 000 C. can easily be displayed.
Total expenses s3000 D. have a long shelf life.
' ,Jow much is the net profit? 4. A consumer is the last link in the chain of
\. sl 000 B. 54 000 A. consumption. B. manufacturing
c. s7 000 D. $8 000 C. production. D. transpofi.
- r,\'hat is the rate of stockturn?
5. A claim is a
\. 1,5 times B. 2 times A. request for insurance cover.
C. 3 times D. 5 times B. cover note.
- iVhich postal service leaves an impression on C. proposal.
,etters to indicate the pre-payment of postage
stainps?
D. request lor compensation.

\. Franking machine B. 6. After sales service include

Free post
C. Prestel A. blending. B. delivery.
D. View data
, Which one is a disadvantage of advertising on
C. branding. D. free gifts.
:elevision to the consumers? 7, An advantage of a departmental store to a retailer is
{. Advertising can be targeted. A. shopping under one roof.
B. It combines visual impact with sound. B. bulk buying.
C. It often interrupts television programmes. C. self-selection.

D. It reaches many people countrywide. D. variety.

Which statement best describes enteport trade? 8. How have small scale retailers been able to
continue surviving?
{. The importation of duty-free goods.
B. The re-importation of exported goods.
A. They carry out intensive advertisin"

C. The re-exportation of imported goods.

B. They employ trained staff.

D. The sale of goods abroad more cheaply than at

C. They buy goods directly from manufacturers.

home.
D. They offer personal service to customers.

- The access to large amount of information stored

9, Wholesalers for manufacturers only.
on memories of computers world-wide is done A. find markets B. provide finance
through C. transport goods D. give information
-\. e-commerce. B. e-mail. 10. The importation of goods in order to export them is
C. datel. D. internet. A. export trade. B. barter trade.
C. entrepoft trade D.
imporl trade.
Exominotion 3 11. protects consumers against expired
flour.
is not part of industry. ---
A. The Food and Food Standards Act
{. Construction B. Extraction
B. The Trade Measures Act
C. Manufacturing D. Trade
C. The Trade Descriptions Act
, Commerce is about the
D. The Price Control Act
.\. distribution of goods.
12. A document used to correct an overcharge on an
B. manufacturing of goods. invoice is a
C. processing ofgoods. A. credit note. B. debit note.
D. provision of goods. C. pro-forma invoice. D. advice note.
' One benefit ofbranding is that goods

t''El
--:l- I ilh
r Examinatian Practice Paper
*a
 The table below shows foreign trade figures for Calculate the rate of inventory turnover.
country R. Use the information to answer questions A. times
12,5 B. 5 times
13 and 14.
C. l0 times D. 4 times
Goods Services 21. Amultinational company
Imports (in $ m) 620 600 A. does not belong to one country.
Exports (in S m) 630 5',70 B. exports products to many countries.
C. has operations in the whole country.
13. Country R's trade balance is D. has branches in many countries.
A. $30m B. S10m 22, A commercial bank service used to pay fixed
C. $ 10m D. S30m amounts at regular interv'als is called
14. What is country R's balance of payments? A. bank draft. B. direct debit.
A. S20m B. -S20m C. credit transfer. D. stop order.
C. S30m D. S30m 23. To whom is a cheque system offered?
15. How can an unfavourable balance of payments be A. Cash account holders
corrected? B. Current account holders
A. Encouraging citizens to tour other countries C. Deposit account holders
B. Increasing imports D. Savings account holders
C. Encouraging exports 24. Abank loan is
D. Eliminating trade with other countries A. an informal way of borrowing.
16. A document issued when adequate capital has been B. a formal way of borrowing.
raised by a public limited company to allow it to C. given to applicants without security.
start trading is
D. available to account holders only.
A. a statutory declaration.
25. The clearing house is provided by
B. a certificate of trading.
A. B.
accepting houses. commercial banks.
C. a certificate of incorporation.
C. finance houses. D. reserve bank.
D. an srticles of association.
26. covers workers injured at work.
17. Limited companies are controlled by
A. Employer's liability
A. customers.
B. Consequential loss
B. debenture holders.
C. Public liabiliry
C. shareholders.
D. Fidelity guarantee
D. board of directors.
27. Insurers who cover the insured are
A. actuaries. B. underwriters.
Answer questions 18, 19, and 20 using the C. assessors. D. brokers.
information below.
A vehicle valued at $ l5m was insured for S
Sales s25000 l0m against fire. Later, fire partially damaged the
Cost of goods sold 20000 car, to the value of $ 9 m. What was the value o:
Cost of average inventory 5000 compensation to be paid?

Total expenses 2000 A. $ 10m B. $ 13,5 m

18. Gross profit is C. S6m D. S15m
A. $5000 B. s1000 29. The principle of indemnity includes

c. s7000 D. s3000 A. insurable interest and proximate cause.

19. What is the net profit? B. contribution and insurable interest.

A. 55000 B. 53000 C. proximate cause and subrogation.

c. $7000 D. s1000
D. subrogation.

Examination Pruetice Paper 1

t'
 -10. The combined use of computer and modulator is 39. Collective advertising by those in the same industry
achieved through a service called is called
A. telex. B. fax. A. informative. B. persuasive.
C. confravision. D. datel. C. generic. D. competitive.
,11. Large volumes of letters can be quickly stamped in 40. tests products for quality and
ink using allows use of its seal of approval.
A. telex. A. Advertising Media Association
B. registered mail. B. Consumer Council of Zimbabwe
C. business reply service. C. Code of advertising practice
D. franking machine. D. Standards Association of Zimbabwe
32. People with no fixed address who are visiting a
speciflc area for some time can receive letters Exominotion 4
through
A. poste restante. B. private box. 1. Which of the following is an example of a direct
service?
C. business reply. D. registered mail.
33. The type of ship w.hich is for hire to carry
A. Insurance B. Banking
cargo
anywhere is called C. Warehousing D. Teaching
A. a container. B. a tramp.
2, What is trade?
C. ro-ro ship. D. a tanker.
A. Gold panning and flshing
34. How best can 2800 tonnes of timber be moved
B. Producing goods and services
from Mutare to Bulawayo? C. Distributing goods and services
A. By pipeline B. By air D. Buying and selling goods and services
C. By rail D. By road 3. Which of the following is an aid to trade?
35. Goods transported by air are accompanied by A. Manufacturing B. Construction
A. a bill of lading. C. Retailing D. Advertising
B. a consular invoice. 4. Why do some retailers buy direct from
C. a consignment note. manufacturers'/

D. an airway bill. A. They require regular supplies.

36. Imported goods on which customs duty has not yet B. They buy in small quantities.
been paid are stored in a C. They need emergency supplies.
A. producer warehouse. D. They have their own warehouses.
B. wine cellar. 5. One advantage of division of labour is that
C. bonded warehouse. A. it leads to monotony/boredom.
D. wholesale warehouse. B. it results in industrial fatigue.
37. What is the advantage of using containers? C. work becomes easy.
A. They can be carried by different modes of D. it reduces job satisfaction.
transport. 6. What is mail order business mostly used for?
B. They require special loading and offioading A. Furniture B. Perishables
facilities.
C. Capital goods D. Producer goods
C. They increase customs checking time at border
7. Which retail outlet offers self-selection and
post.
luxurious shopping facilities?
D. They increase the need for warehousing at A. Chain store B. Supermarket
border posts.
C. Single shop D. Department store
38. While in a warehouse goods may not be
8. An agent who sells goods by accepting the highest
A. sold. B. branded. bid is
C. blended D. manufactured. A. a broker. B. a factor.

Examinafion Praaice Paper I

it
,it,
 C. auctioneer. D. a merchant.
an C. Large volumes of fuel
9. Which serice is now rarely performed by D. Bulky goods
wholesalers? 19. What type of vessel runs on flxed routes to fixed
A. Providing a variety of goods timetables?
B. Branding and packaging of goods A. Liners B. Ferris
C. Financing a retailer C. Tankers D. Tramps
D. Bearing the risk of keeping goods 20. A isadocument of title.
10. A quotation is a response to an A. charter party B. bill of lading
A. order. B. application. C. airway bill D. consignment note
C. enquiry. D. invoice. 21. The use of pipelines is restricted to the
11. All these measures protect consumers w,hen buying transportation of
goods and seruices except A. fluids. B. irregular cargo.
A. The Price Control Act. C. small cargo. D. liquids.
B. The Fair Trading Act. )', A seaport authority provides these services except
C. The Companies Act. A. collecting customs duty.
D. The Merchandise Marks Act. B. dry docks.
12. Who owns a private limited company? C. maintaining clear access.
A. The Registrar of Companies D. loading and offioading facilities.
B. The managers of the company 23. In sea transport, tankers
C. The directors of the company A. use fixed routes and flxed timetables.
D. The shareholders of the company B. carry liquids and gases.
13. What does a statement of financial position show? C. carry both goods and passengers.
A. The rate of stock furn D. are hired to carry different types of cargo.
B. The revenue and expenses 24. Which is legal tender?
C. The firm's asset and liabilities A. Cheque B. Bank notes
D. The allocation of profits C. Bank draft D. Credit card
14. What is a hire purchase transaction most suitable ,( Who is the drawer on a cheque?
for? A. The account holder who makes out the cheque.
A. Clothing B. Flowers B. The bank into u.hich the cheque is deposited.
C. Groceries D. Tractors C. The person to whom the payment is made.
15. Which of the followine is a wholesaler? D. The bank where the current account is held.
A. Unit shop B. Chain store 26. Zimbabwe's central bank is the
C . Auction house D. Discount shop A. Post Office Savings Bank.
16. Wholesalers stabilise prices through B. Zimbabwe Banking Corporation.
A. branding. B. warehousing. C. CentralAfricanBuilding Society.
C. packaging. D. bulk buying. D. The Reserve Bank of Zimbabwe.
17. Which document is used when a seller hires 11 A bank draft
transpofi to deliver goods?
A. has a written agreement.
A. Consignment note
B. has no interest charge.
B. Advice note
C. is given by commercial banks only.
C. Credit note
D. is given to savings account holders only.
D. Debit note
28. Which communication service enables users to'see
18. What is most likely to be transported by air? and talk to each other from different places?
A. Fresh flowers A. Television B. Video-conferencing
-1,

B. Chrome ore C. Facsimile D. Datel

Examination Practice Paper I m

:s-
29. An example of a telecommunication servlce ls A. hire purchase. B. agents.

A. airmail. C. auction. D. direct sale.

B. recorded delivery. 39. Which product is stored in a warehouse?

C. business rePlY service. A. Eggs B. Sugar

D. facsimile C. Tomatoes D. Meat

30. Which postal service allows a business person to 40. is the imporling of goods with the

receive mail whilst aw'ay from home and does not intention of re-exPorting them.
have an address? A. Export trade B. EntrePot trade
A. Franked mail B. Business reply serv'ice
-C. Imporl trade D. Barler trade
C. Poste restante D. Recorded delivery
31. What is the best media for a trader to advertise a
Exominotion 5
sale to local customers?
A. Direct mail B. Posters 1. Which of the follow'ing is in the secondary sector
of production?
C. Cinema D. Neon signs
A. Dairy farmer B. CarPenter
32. Generic advertising
C. Musician D. Lumber jack
A. is when several companies make a single
advertisement.
2. Which ancillary service ensures seasonal goods are
constantly available?
B. uses the brand names of the products.
B.
to
A. Banking Warehousing
C. enables consumers differentiate similar
products. C. Insurance D. Advertising

D. is used by companies to advertise certain 3. Tea as a primary product is distributed through

products sen ices. A. commodity exchange

33. Which is one of the criticisms leveled against B. stock exchange
adverlising? C. bill of exchange
A. It widens the variety of goods on the market. D. foreign exchange
B. It increases consumer spending on goods. 4. Who is first in the chain of distribution?
C. It reduces prices of goods. A. Consumer B. Retailer
D. It increases sa1es. C. Wholesaler D. Producer
34. A person taking out an insurance policy is called 5. Specialisation has the following disadvantage:
the A. high productivity
A. insured. B. insurer.
B. division of work
C. underwriter. D. The third parry. C. interdependence
3s. What does fidelity guarantee policy cover? D. increased skill
A. Bad debts 6. Who forms a co-operative wholesale society?
B. Embezzlement of funds A. Producers B. Consumers
C. Goods in transit C. Wholesalers D. Retailers
D. Loss of proflts due to fire 7. Franchising is
36. Which document is a request for compensation? A. selling goods to chosen customers.
A. Cover note B. Policy B. selling goods belonging to one producer.
C. Claim form D. Proposal form C. hiring out a reputable business name.
37. Who works in the insurance business? D. giving products a unique name.
A. Factor B. Merchant 8. A wholesaler is most useful when
C. Broker BullD. A. technical goods are sold.
Tobacco can be sold through all these methods B. products are easily breakable.
except

Examination Practice Paper I

 C. products are in bulk. 16. What is Zimbabwe's balance of payments?
D. the retailer is tiny. A. 22m B. 18m
9. Rugare bought 100 bags of potatoes on l0 July C. 48m D. 58m
2013 at $10 per bag under the following: 17. Which is the function of the Consumer Council of
Trade discount: l0%o Zimbabwe (CCZ)?
Cash discount : 2o/o if payment is made within 20 A. Testing standards for manufactured goods.
days. B. Registering firms for ISO 9000.
How much was paid if the account was settled on C. Investigating consumer concerns
2l luly 2013?
D. Certi$ring origins of goods.
A. 5980 B. 5900 18. Which document reflects the purpose of a
c. $882 D. 5880 company's existence?
10. Chipo received a consignment of goods with some
A. Certificate of trading
items damaged in transit. What document does
Chipo receive when she sends back the damaged
B. Memorandum of association
goods? C. Certificate of origin
A. Consignment note D. Articles of association
B. Debit note 19. Which organisation is in the private sector?
C. Credit note A. Multinational corporation
D. Advise note B. Public corporation
11. Giving goods a unique name or mark is C. Municipality
A. braiding. B. branding. D. Trading department
C. blending. D. grading.
12. In international trade Use the following figures relating to Nxurnalo
General Dealer to answer questions 20 and 21.
A. the same language is used.
B. same standards are used on goods. Turnover $12 000
C. the same currency is used. Opening inventory $ 800

D. there are high costs of packaging.

Closing inventory $
1200

13. What can be purchased through credit sale?

Purchases $ 6000

A. A bus
Expenses s 1000
B. Premises
20. What is Nxumalo's gross profit?
C. Blankets D. A farm
A. 5 400 B. 6 000
14. The following is not a trade restriction?
c. 6 400 D. 5 600
A. Tariffs 21. What is Nxumalo General Dealer's rate of
B. Excise duties inventory-turn?
C. Quotas A. 5.6 times B. 2.8 times
D. Foreign curency controls C. 2 times D. 6 times
)', The main purpose of building societies is
Use the following information relating to A. factoring.
Zimbabwe to answer questions 15 and 16
B. approving building plans.
Total goods exported: $200m C. providingmortgages.
Total goods imported : $ l60m D. fundinghire-purchase.
Insurance paid other countries : S4m Direct debit is used to effect
Receipts from tourists : S22m A. different amounts at irregular times.
I
15. What is Zimbabwe's balance of trade? B. numerous payments on one cheque.
I
A. 40m B. 58m C. large one-off payments.
C. 58m D. 22m D. flxed monthly instalments.

Examination Praetice Paper I

 14. The Reserve Bank of Zimbabwe (RBZ) is also 33. Which ship has no fixed schedule or particular
known as ports of call?
A. Finance House. B. Central Bank. A. Coaster B. Liner
C. Building Society. D. Merchant Bank. C. Tanker D. Tramp
15. Which insurance policy covers a customer whose 34. Transporting 20 tonnes of flowers from Victoria
head is injured by a falling ceiling in a supermarket? Falls to Lesotho can best be done through
A. Public liabiliry A. rail. B. road.
B. Employer'sliability C. air. D. pipe.
C. Fidelity guarantee 35. What document goes with goods ferried by sea?
D. Transit insurance A. Bill of exchange B. Consignment note
:6. A cheque crossed on its face must C. Bill of lading D. Advice note
A. not be honoured. 36. Which one is not an advantage of using pipeline
B. be referred to the drarver. transport?
C. be deposited into a bank accounr. A. Cheap to maintain

D. be cashed over the counter. B. Suitable for irregular cargo

17. Mr Mudenda insured a car valued at S20 000 for C. Minimum transit loss
$16 000. The car was involved in an accident and D. Large carrying capacity
the cost of repairing the 'n.ehicle amounted to Sl0 37. Which advertising medium shows digital images
000. How much was he paid by the insurance changed electronically outdoors?
company in compensation?
A. Television B. Electronic bill board
A. $8 000 B. S 10 000 C. Neon lights D. Moving vehicle
c. sl6 000 D. S20 000 38. The code of advertising practice makes sure that
18. What is covered by employer's liability? advertisement are
A. Unsuspected breakage of stock A. colourful.
B. Theft of cash by till-operators B. creative.
C. Injury to buyers in the shop C. truthful.
D. Accidents to employees while at work D. accessible to consumers,
19. A travelling sales person au,ay from their base 39. "Javelin Lotionl Over a thousand years of mother,s
would use the following postai service: care ! "
A. Postrestante B. parcel post The above is an example of
C. Express mail D. private bag A. social acceptance appeal.
30. The likelihood of a risk occurring is calculated by B. personality appeal.
insurance experts called C. romance appeal.
A. speculators. B. actuaries. D. family love appeal.
C. brokers. D. assessors. 40. Which way of advertising would be most suitable
31. A telex for a Chinese manufacfurer of combine harvesters
A. enables diagrams to be transmitted.
coming to Zimbabwe?

B. facilitates face to face communication. A. Digital bill board B. Radio

C. allows dialogue to take place.
C. Trade fair D. Newspaper
D. makes it possible to correct messages before
sending. Exominotion 6
32. The following is a telecommunications service: 1. What are the three stages of production?
A. postrestante B. electronic mail A. Extraction, selling and distribution
C. expedited mail D. money order B. Exporting. manufacturing and wholesaling

L2U Examinafion Practice paper I

* f l
 C. Extraction, construction and manufacturing To cancel an invoice wrongly sent to the
D. Extraction, manufacturinganddistribution potential buyer.
2. What is a disadvantage of direct production? To enable the potential buyer to choose the
A. It leads to industrial fatigue. supplier with best terms.

B. It results in the loss of craftsmanship. C. To refund the potential buyer when empties
have been retumed.
C. The absence of a rvorker results in bottlenecks.
To request the potential buyer to pay before
D. The quantity of goods produced is low.
goods are delivered.
3. Primary products such as coffee are distributed
ll. How does the Grain Marketing Board (GMB) help
through
farmers in Zimbabwe?
A. commodity markets. A. It flxes quantities to be grown.
B. consumer markets. B. It provides tillage for farmers.
C. local u'holesale markets. C. It purchases the harvested crop.
D. retail markets. D. It transports the crop from farms.
4. In which trading outlet do members elect a 12. Which one is not a reason for Zimbabwe to export
mana-qement commi ttee?
beef to other countries?
A. Co-operative retail society
A. To sell its surplus.
B. Discount store
B. To obtain foreign currency.
C. Hypermarket
C. To promote peace and friendship.
D. Multiple shop
D. To supplement shortages.
5. Laptops are examples of
A. consumer goods.B. consumer durables. Use the following figures for Country X to
C. fragile goods. D. producer goods. answer questions 13 and 14
6. Which aid to trade gives goods added value? $ Million
A. Adver-tising B. Communication Goods bought from other countries 400
C. lnsurance D. Transport Goods sold to other countries 500
1 Why do wholesalers allow trade discount to Banking services provided to foreigners 100
retailers? Insurance services provided by foreign companies 50
A. To enable retailers to purchase in bulk. Tourists to country X 200

B. To encourage retailers to pay promptly. Payments to expatriate doctors in country X 300

C. To improve the wholesalers cash flow. 13. The balance of trade is

D. To reduce bad debts resulting from non- A. - $100 million B. - S50 million
payment.
C. + $100 million D. + $150 million
8. Which one is not an advantage of a hire purchase
14. What is the balance of payments?
agreement?
A. Goods can be repossessed if the buyer defaults.
A. - S50 million B. - 5250 million

B. Goods are under guarantee during the hiring

C. - $50 million D. - 5250 million
period. 15. Products with the Standards Association of
Zimbabwe (SAZ) seal
C. Payment is spread over a long period of time.
D. The buyer uses the goods whilst paying for
A. are of better quality than those without seal.

thenn. B. are of good quality.

9. On which document would 'E and O.E'appear? C. should be sold at controlled price.

A. Advice note B. Consignment note D. will go bad if not used by the expiry date.

C. Invoice D. 16. Parastatals

Quotation
10. Why u'ould a pro-forma invoice be issued to a
A. allocate dividends to shareholders.
potential buyer by a seller? B. are formed by an Act of Parliament.

Exomination Practice Paper I @

*
 C. are run by elected boards of directors.
D. To get payment of a claim, the cause of the
D. raise capital through the sale of shares. loss must be the one insured against.
1 7. The voting rights of shareholders in a company are 25. Household furniture valued at $25 000 was insured
stated in the for $20 000 against the risk of fire. How much
A. articles of association. compensation w.ill the insured receive if fire later
B. cerliflcate of incorporation. damaged furniture \i,ofih $15 000?

C. memorandum of association. A. $12 000 B. $1s 000

D. statutorydeclaration. c. s20 000 D. S2s 000
18. Where are second hand securities bought and sold? 26. Why is insurance a pooling of risks?
A. Baltic Exchange A. The burden of loss is shared among many
people.
B. Commodity market
C. Flea market
B. The insured can be indemnified after a loss.

D. Stock exchange
C. The insured can be restored t original position.

19. Who is a drawee on a cheque? D. The insurer owns a damaged car after an
accident.
A. The bank where the customer keeps the current
27. Which postal service would a retail outlet use to
account.
send monthly statements of accounts to its many
B. The bank whose name is written between the customers?
parallel lines.
A. Express post
C. The person to whom the cheque is payable.
B. Franked letter post
D. The person who writes and signs the cheque.
C. Post restante
10. Which is a function of a merchant bank?
D. Recorded delivery
A. Clearing country cheques 28. Which list contains telecommunication
B. Controlling money supply only?
services

C. Discounting bills of exchange A. Cellphone, confrarision and freepost

D. Providing mortgage loans B. Confrarision, e-mail and recorded delivery
11. Which of the following is legal tender?
C. Datel, facsimile and radio paging
A. Banknotes B. Cheques D. Post restante, telephone and telex
C. Money orders D. postal orders 29. When would a trader prefer to use a post office box
12. Which financial instirution would Mrs Ndebele instead of a private bag?
approach if she wants to get a loan to buy a house?
A. When mail is to be collected at any time.
A. Building sociery B. Commercial bank B. When mail is to be collected during business
C. Discount house D. Finance house hours only.
13. Which insurance policy covers a company against C. When the trader sends out large volumes of
employees who handle cash? letters.
A. Consequential loss D. When the trader wants to conduct market
B. Employer's liability research.
C. Fidelity guarantee 30. What sen ice should a trader use for customers to
D. public liabiliry respond to a survey without the customers paying
for postage?
i.l. Which statement explains the doctrine ofproximate
cause? A. Business reply
A. Both parties to an insurance contract must be B. Cash on delivery
honest. C. Private mail bag
B. The insured must suffer a loss in the event of D. Registered letter
the risk occurring. 31. A bill of lading can be endorsed to another person
C. One is restored to the position he/she was in because it is a
immediately before the loss occurred. A. contract of carriage.

-$
l{.
Examinafion Practice,paper I -trl
 B. document of title B. get goods released from bond.
C. quasi-negotiable instrument. C. manufacture goods which are in bond.
D. receipt for goods. D. receive a refund of the duty paid.
32. Which ship has its freight charges fixed at 37. "Shop at Shumba's Supermarket where you get
conferences? value for money." This is an example of
A. Coaster B. Liner A. disparaging advertising.
C. Reefer D. Tramp B. genericadvertising.
33. Which is not a responsibility of a sea-port C. informativeadvertising.
authority? D. institutional advertising.
A. Dredging of the harbour 38. The work of an advertising agent does not include
B. Maintaining dry docks A. enforcing the code of advertising practise.
C. Providing unloading equipment B. investigating consumerproduct preferences.
D. Supervising bonded warehouses C. producing of the advertisement.
34. What is the advantage of rail transport over road D. recommending the best media.
transport'?
39. What advantage has a trade journal over a poster
A. No transhipment of goods. when advertising?
B. Cheaper over long distances. A. It can use colourful pictures.
C. Suitable for carrying perishables. B. It has a captive audience.
D. Provides door-to-door delivery. C. It can target potential customers.
35. An example of a public warehouse is a D. It has a wide coverage.
A. bonded warehouse. 40. How has branding influenced advertising?
B. manufacfurer's warehouse. A. It allows goods to be rvell displayed on shelves.
C. retailer'swarehouse. B. It enables goods to be easily identified.
D. wholesaler'swarehouse. C. It facilitates self-service in supermarkets.
36. A customs warrant enables the importer to D. It makes goods to be judged by appearance.
A. calculate the amount of duty payable.

Examination Practice Paper I @

*
 SECilON C

ff*r
rglr.;4.,
.
r+
--€#"X
$ffIllffillllgI
q:ffi,€

PAPER 2
EXA'I'II NATI ON PRACTI CE

133 i
.t Examination Practice Paper 2
*
 There are 6 examination practice papers in this section. Exominotion I : ', 'r ':' '' :' "
Each examination paper consists of nine questions.
Attempt all questions although in the examination you Examination 1 is an e-marking specimen paper. This is
will usually be required to answer four questions only to familiarise you with the e-marking paper structure, 1

(in the examination, make sure you read carefully the In the actual examination you will be required to write
instructions on the question paper). your answer on the spaces provided. The space for the
answers will depend on the marks allocated for that
The time allocated for each paper is 2 hours.
question or part of it.

Surname Forename(s) Centre Number Candidate Number

ZTYIB ABWE SCHOOL EXAMINATIONS COUNCIL

General Certificate of Education Ordinarv Level

COMMERCE 7103t2
PAPER 2
E.MARKING SPECIMEN PAPER
2 hours
Additional materials:
Answer booklet

Allow candidates 5 minutes to count pages before the examination.

Time 2 hours

INSTRUCTIONS TO CANDIDATES
Write your name, Centre Number and Candidate Number in the spaces at the top of this page
and your Centre Number and Candidate Number on the top right corner of every page of this
paper.

Check if the booklet has all the pages and ask the invigilator for a replacement if there are
duplicate or missing pages

Shape all your letters very clearly.

Answer any four questions in the spaces provided.
Write your answers in the spaces provided on the question paper using black or blue pens.

INFORMATION FOR CANDIDATES

The number of marks is given in brackets [ ] at the end of each question or part question.

This question paper consists of 7 printed pages.

Copyright: Zimbabwe School Examinations Council

'Examination Practice Paper 2 @

&
r!r
IGr[ Centre Number
I}II Candidate,s Number
t3r
r$r
iril
llD
]il
2

Answer any four questions.

:rplain the following terms:

.t) Commerce

t5l
r ) Production

t5l
Describe any four benefits of warehousing
to a farmer.

[10]
what are the services of a retailer to the consumer? State anv five.

[10]

Examination Practice paper 2

 Centre Number Candidate's Number

3
2. (b) Distinguish between hire purchase and credit sales.

[0]
3. (a) Define an advice note.

I6l

(b) state three reasons for establishing market boards for primary products.

t6l

(c) outline any eight features of cooperative wholesale society.

(t

t8l

Examination Practiee Paper 2 : 136

s
 Centre Number NL,,-k-_
C.andida+o,c Number
Candidate's

(a) What is telebanking?

t4l
b) Explain any four functions of money.

t8l
, c) What are the advantages of paying a
creditor by cheque?

t8l
r a) State any four disadvantages of owning a fleet of vehicles.

&

k
L4l
Describe any four functions of airport
authority.

t8l
fi3a
\..--_/
Examination practice paper 2
*
 Centre Number Candidate's Number

(c) Explain three differences between cargo liners and tramps.

t8l

6. (a) Distinguish between competitive and collective advertising.

tsl

(b) How does the Standard Association of Zimbabwe (SAZ) protect consumers?
Explain any four ways.

U)

(c) Explain any four disadvantages of advertising to consumers.

l8r

Examination Practice Paper 2

 Centre Number Candidate's Number

ia) Below are foreign trade figures for country Y for the year ending 3l Decemb er 2013.

$ (million)
Goods bought from other countries
600
Goods sold to other countries
500
Tourists from country y to other countries 300
Tourists to country Y
200
Transport services provided to foreign companies
s0
Shipping services provided to companies in country y 30

Calculate, showing all working:

(i) Invisible trade balances

t2l
(ii) Balance of trade

L2l

(iii) Balance of payment

t2)
(b) Explain any three methods that are used to correct a balance of payments
deficit.

t6l

Examination Practice paper 2

 Centre Number Candidate's Number

7. (c) What is a bill of exchange?

8. (a) Describe how a country can protect its home industries.

(b) Explain any five advantages of small to medium enterprises (SMEs).

9. (a) Explain any five differences between shareholders and debenture holders.

Examination Practice Paper 2

Exominotion 2 (c) State with reasons, how much P.Mapurisa
received from the insurance company if the
1. (a) Differentiate between Commerce and cost of replacing the stock was $ 12 000. t7l
Industry 112) 7. (a) (i) Explain the term 'containerisation'. t4]
(b) What role is played by warehousing in trade?
(ii) State the advantages of containerisation.
t8l
U)
2. (a) Outline the reasons that have led to the (b) State, with two reasons in each case, the type
survival of small scale retailers despite of transport you would use for sending:
competition from large scale retailers U)
(b) State the features ofdiscount stores. l7l (i) Mealie-meal from miller to a local shop.
a

(c) Identifr
(ii) Fresh flowers from Bulawayo to China.
the importance of pre-packaging in
business.
(iii) One thousand tonnes of bricks from
t6l
Gweru to Harare. tel
3. (a) State and explain the characteristics of public
limited companies. [10]
8. (a) Why is international trade important to a

(b) The table below shows the financial records

country? t8l
for Kundai stores as at 3 I December 2013 (b) Give reasons why countries form trading
blocs? 14)
Fixed Assets $200 000 (c) Explain the importance of the following
Current Assets s120 000 documents in foreign trade:
Current liability $ 40 000 (i) bill
Airway L4l
Long term liability s 90 000 (ii) Consular invoice t4l
9. (a) State and explain the features of money. ll2j
Calculate Kundai stores':
(b) What is the importance of Automated Teller
(i) Capital l2l Machines (ATMs)? t8l
(ii) Working capital t3l
(c) Define working capital and explain why it is
important to a trader. t5l
Exominotion 3
l. (a) Distinguish between :
(i) 1 . (a) Explain the benefits of trade to a country. [10]
An open cheque and a crossed cheque.
(b) How is warehousing an essential service to a
14)
(ii)
manufacturer? [10]
Abank draft and a bank certified cheque.
2. (a) What are the characteristics of a hyper-
t4l market?
(b) Explain the following terms: [10]
(b) Why do small scale retailers continue to
(i) Direct debit 14) survive besides stiff competition from large
(ii) Credit Transfer t4l scale retailers? l6l
(c) Outline the functions of the People's Own (c) Describe do it yourself products (D.I.Y.) l4l
Saving Bank (POSB). l4l 3. Why are the following documents important to a
(a) List and explain eight consumer rights trader?
[16] (a) Quotation tsl
(b) State any four functions of the Standards (b) Pro-forma invoice
Association of Zimbabwe (SAZ). t5l
t4l (c) Credit note
5. P. Mapurisa insured her stock valued for $12 000, t5l
against the risk of theft. Later the stock was stolen.
(d) Advice note tsl
(a) Explain why P. Mapurisa was able to cover her
4. Explain the following terms used in insurance:
stock against the risk of theft but not against (a) Pooling of risks t5l
bad management. t7l (b) Average clause t5l
(b) Describe the steps P. Mapurisa takes to make (c) Insurable interest t5l
an insurance claim. t6l (d) Consequential loss tsl

Examination Practiee Paper 2

 5. Explain the main features of the following business (c) Datel t5l
organisations: (d) Telex tsl
(a) Public corporation [10] 6. Show how these principles will be important to an
(b) Public limited company [10] insured person when making a claim:
6. (a) Outline the importance of containerisation. (a) Utmost good faith tsl
[10] (b) Indemnity lsl
(b) State with reasons the most appropriate (c) Subrogation tsl
rnethod of transPorting: (d) Average clause t5l
(i) Fuel from Port Beira to Mutare t5l 7. (a) State the advantages of air and pipeline
(ii) Bread from Baker's Inn. Harare, to a transport. lr2l
shopping centre in Muzarabant t5] (b) What are tramps? tSl
1. (a) Describe the main functions of the Reserve 8. (a) Why do consumers need protection when
Bank of Zimbabwe. [12] buying goods? t8l
(b) Differentiate betu'een a stop/standing order (b) Explain the dangers of advertising t6l
and direct debit. t8l (c) Describe the work of the Consumer Council of
8. (a) Distinguish between home trade and foreign Zimbabwe. t8l
trade. [14] 9. (a) How may a country reduce a balance of
(b) Describe the private bag postal service. t6l payment deficit? t6l
9. (a) Why do consumers need to be protected?fl0] (b) Explain the importance of trade to a country.
(b) What are the benefits of advertising to the t8l
advertiser? [10] (c) What is the role of the Standards Association
of Zimbabwe (SAZ)? i6l
Exominotion 4
Exominotion 5
1. (a) Distinguish between direct production and 1. (a) State six advantages and six disadvantages of
indirect production. ll2) specialisation. lr2l
(b) What is the importance of advertising to a
trader? (b) What are the differences between primary and
t8l
secondary production? l8l
2 (a) Describe the factors to consider in setting up a
2. (a) Outline the characteristics of a hire purchase
warehouse. t8]
contract. [10]
(b) What are the functions of a wholesaler to
(b) In what ways do businesses benefit from the
retailers? iSl
services of a wholesaler? I10]
(c) Explain the importance of bonded warehouses
to traders.
3. (a) Describe the contents and explain the
14)
importance of the following documents in
3. Explain the following terms which are associated foreign trade:
ith limited companies:
r.r
(i) lndent U)
(a) Prospectus t4l (ii)Airway bill t8l
(b) Private l4l (b) For what reasons would the government of
(c) Board of directors t8l Zimbabwe impose trade restrictions? tsl
(d) Annual General Meeting (AGM) t4l 4. (a) Outline the importance of the following ;in
4. (a) Describe the services of the People's Own connection with limited companies:
Savings Bank. t8l (i) Prospectus tsl
(b) Why would a cheque be dishonoured? t8l (ii) Memorandum of association tsl
(c) Explain direct debit. 14) (iii) Cerliflcate of trading tsl
i 5. Explain the importance of the following (b) State the disadvantages of a partnership firm.
communication sen ices: isl
(a) Fax tsl 5. (a) Differentiate between insurable risks and non-
(b) Telephone t5l insurable risks t8l

Examination Practice Paper 2

 (b) Explain why a person has a right to insure his (b) Describe the reasons for the elimination of a
properly against fire? U) wholesaler. [10]
& (c) What are the functions of an insurance 3. (a) Describe the functions of the Grain Marketing
broker? t5l Board. t8l
(a) Why do flrms need efficient communication? (b) Distinguish between trade discount and cash
t8l discount. tSl
(b) Describe and explain the importance of: (c) Why would a trader allow trade discount to
(i) Electronic mail (e-mail) t6l
another trader? 141

(ii) Mobile phone

4. (a) Explain the benefits of foreign trade to a
l6l country's economy. [14]
(a) Distinguish between a bank overdraft and a
loan. (b) How may Zimbabwe reduce a balance of
[10] payments deflcit? t6l
(b) MrChapwanyabanks with CBZ Bank, Harare.
5. (a) Distinguish between shares and debentures.
He pays Mr Dikito $5 000 by cheque.
112)
Mr Dikito deposits the cheque into his (b) Outline the contents of a partnership deed.[8]
Kingdom Bank, Mutare Branch account.
Explain how such a cheque will be cleared.
6. (a) Explain to Mrs Sibanda, a new current account
holder, why her cheque may be dishonoured.
[10]
[10]
:. (a) What are the advantages and drawbacks of
(b) Describe the contents and explain the
pipeline transpor-t? [12] importance of a bill of lading. [ 10]
(b) Outline the factors considered in choosing a
1. (a) Describe the steps taken by Ms Lister to make
mode of transport. t8l a claim with National lnsurance Company.[8]
e. (a) What is the importance of:
(b) Outline the functions of assessors. 14)
(i) Advertising agency t6l (c) Why is insurance important to Mrs Pfuka, a
(ii) Code of advertising practice t6l tobacco farmer? tBl
(b) How does the Consumer Council ofZimbabwe B. (a) What factors does a company consider in
(CCZ) protect consumers? t8l choosing a mode of transport? [10]
(b) Describe the following services:
(i) Datel i5l
Exominotion 6 (ii) Internet 15l
1. Explain the following terms: 9. (a) How is Mr Lincoln, a consumer, protected by
the Hire Purchase Act?
(a) Goods t6l
t6l
(b) State the benefits of advertising to consumers.
(b) Needs 14)
t8l
(c) Secondary production t10l (c) What is the role of the Standards Association
2. (a) What are the functions of a retailer? [10] of Zimbabwe? t6l

@
d*
Examinstion Practice Paper 2
SECTION D

ii i:
t'. i )i-j
,::q iS*
ii? r'l*i
#.,s;
r ;*
s; :a*
'"*
a3f
*iia:
i
w
wle8
ff-,t**
*s.
tei
&
a
' isi
'--'i€.,--. *-s ?-* :4sSl :1,t:
,:,,: _-li:
_-li:
:,ii i+E:
':.:.;
=
''*iiY, ,&,
a:ll #: i{U"
rE
I
'

31i TI
,ii. Sr'
eF1
&13 xe
e-" #. riH.*t *c
i
te **tr-
,gE
Eit -5 .

{si
.:..:lRl -"*>

ANSWERS

145,
!
,d Answers
6p
 .:

ri

l. Production

Multiple choice
1.D 2.C 3.C 4.A 5.C 2. (a) Distinguish between primar,,- and secondary
6.D 7. A 8.8 9.D 10. A induslrT t6l

Structured questions (b) State the advantages of'division of labour. [B]

1. (a) Explain the term production. t l0l - Allocating work to employees according to
- The provision of goods and services that their individual skills and competence leads to
satisfy human needs and wants. work efficiency.
- It can be either direct or indirect. - It allows the use of machines which results in
mass production.
- The chain of production has three stages which
are: Primary, Secondary and Tertiary. - The workers can become experts by repeating
the same task every day since practice makes
- Productive processes are supported by factors
perfect.
of production: land, labour, capital and
entrepreneurship. - Less trainingof workers is required since a
worker has to do only one paft of the whole
l. (b) How is a miller assisted by communication?
task.
[] 0l
- Telephoning and writing letters or e-mails to
- It improves the standard of living since goods
produced in large quantities can be sold
suppliers of grain, machinery and spare parts.
cheaply to consumers.
- Faxing enquiries to suppliers.
- It saves time since a worker does not have to
- Receiving quotations. move from one place to the other to do another
- Transmitting information files between task.
branches through interlinked computers. - There is also the economic use of tools since a
- Contacting retail shops to sell products. worker is just provided with the tools that he/
- For reminding debtors to pay up. she needs to carry out a task.
- Informing customers of new product brands. - A worker can develop new ideas by repeating
- Receiving feedback from customers to see the same task and thus become innovative.
how much they like the product.

Primory production Secondory production

The first stage The second stage.
Extracts raw materials. Uses raw materials to make goods.
Mostly labour intensive methods of production Production methods mostly capital intensive with
used. mechanised industrial facilities.
Most of the products are not in a usable form. Processed goods that are ready for use.
- Examples include mining, fishing and quarrying. - Examples include tanning, dam construction and
clothes manufacturing.

Answers @
s
(c) DilJbrentiate betv,een direct and indirect
production. t6l
Direct production lndirect production
Each person/unit tries to produce all their needs - Each entity produces only one line of products
on their own. which they knor,r' best.
- Production levels are very low. High level of production (goods are mass
produced).
Production for subsistence. Production for trade and exchange.
Production done manually or using simple Production mechanised.
tools.

(a) Distinguishing befiveen needs and v'ants. [4J

Needs Wonts
Things that people cannot do without i.e. Things that people can live without that is
necessities. luxuries.

Their consumption sustains 1ives. Their consumption improves the quality of life.

(b) Explain the.four factors of production. p 6l

Land
2: The proctice of trode
- Natural resources from the eafth, e.g. minerals
underground and resources in seas and water MUltiple ChOiCe
bodies' r. c 2. B 3. c 4. A 5. c
- Assists production by providing the raw
materials and the geographical location where
production can be done. StrUCtUred qUeStiOnS

Labour 1. Explain, giving examples, wlty sctme goods are

distributed directly from the producer to the
- Human input in production. consumer' t20l
- Provides the skilled and unskilled workers
who do the actual u'ork' perishabre goods
- Manage and direct the productive process' get
Goods with shor-t lif-e have to to consumer
Capital before they get stale.
- Are the machines, plant and equipment used in - For example, newspapers - news becomes
production. stale fast.
- They convert raw materials to finished goods. - Publishers have to make sure newspapers get
- They provide the productive capacity that to the public fast'
generates goods. - Milk and bread also get stale.

Entrepreneurship Goods with law turnover

- The managerial capabiliry that combines other - For example, cars.
factors so that production can be realised. - Wholesalers and retailers prefer goods that
- Entails the organisation aspect. move faster.
- Risk taking factor that invests in the hope for - Car manufactures open their own retail outletsi
profits. showrooms for selling cars.

faxI
*ff.
Answers :
 Goods made to order Helps production to take place ahead of
Customers specifl, goods they want. demand.
Goods are made to the specification of Helps goods to be always available.
customers.
For example, wedding cakes.

Fragile goods
3. Wholesole trode
- Need careful and expert handling.
- Higher risk of damage if they pass through Multiple choice
many hands. LB A 3.D 4. D 5.8
2. Explain the role of thefollowing in trade;
(a) Transport t5l Structured questions
- Producers and consumers are usuallv at 1. State the services o.ffered by wholesalers to;
different locations.
(a) Retailers tsl
- Goods have to be moved from producers to
Breaking Bulk
consumers.
- Transport helps move goods or service
- Buy goods in large quantities from
manufactures and sell in smaller quantities
providers.
to retailers. Retailers (small retailers) cannor
Without transport trade would only be local. afford to buy in large quantities.
Transport enable buyers to get goods from - Storage/ rvarehousing
other countries.
- Small retailers have little storage space.
(b) Advertising t5l - Wholesalers keep goods.
Advertising helps consumers to know the
goods available for sale.
- Retailers can replenish their stock from
rvholesalers.
Advertising helps producers to find potential
customers.
- Bears the risk of goods going bad or being
stolen while in storage.
Helps remind customers of the existence of
goods. Advice
Customers will know where to buy goods. Wholesalers advise retailers on:
May result in increase of sale. - Fast selling goods
If sales increase, prices of goods may be - Use of goods.
reduced.
Finance
(c) Communication t5l Wholesalers finance the operations of retailers b1'
Buyers and sellers can contact each other
giving them goods on credit.
through communication.
(b) Manufacturei,s tsl
Communication can be through post (e.g.
letters) or tele-communication (e.g. telephone, Clearing production Line
fax or email). - Remove goods from manufacturers enabling
Helps buyers and sellers to: send./ receive manufacturers to produce more goods.
orders; send/ receive invoices or statements of Storase/warehousins
accounts; send/ receive payment
- Store manufacturer's goods.
(d) Warehousing t|l - Bears the risk of goods going bad/ stolen while
Goods are not consumed/ used immediately in storage.
after they are produced.
Goods have to be stored awaiting buyers. Finance

Warehousing protects goods from

- Buy on cash basis from manufacturers and
deterioration/ effect of weather elements. thus giving manufacturers finance to produce
more goods.

Answers @t
&
 Information Have own transpol"t.
- Gathers information from retailers and advises Have ou,n w'arehouse.
manufacturers on market needs.
Can have goods branded in their own name.
Describe the .fbotures of ct cash and carry Customers can specify goods wanted and
wholesale. tYl goods are made to specif,cations.
Sell to both retailers and consumers.
Perishable goods need to get to consumers fast
Operate like a supermarket. before they get stale.
Does not offer credit/sell on cash basis. Some goods have low turnover, for example
Does not offer transport/no delivery service is cars.
offered to customers. 5. (a) I|/hat are contnoclitt,rnctrkets/ t2l
- Sells a variety of goods. - Markets for selling raw materials or rninerals.
- Sells mostly groceries. - Usually set up by government.
- Sells both in bulk and smaller quantities. @ Erplain the filnctions o-f commodiryn markets.
- Goods are arranged in shelves like in a tsl
supermarket. - Deal with agricultural products or minerals.
- Situated on the outskirts of town/ciry. - Sell commodities on behalf of producers.
i. (a) Explain the services offered by the Grain - Market where buyers and sellers meet to sell
Marketing Board. [1 0] commodities.
- Buys grain from f-armers. - Offer speciaiist service on commodity.
- Sets pre-planting prices of grain. - Offer advice to buyers and sellers.
- Guarantees a market for farmers. - Provide infornration.
- Offers farm inputs to farmers on credit. - Set prices for cornmodities.
- Offers advice to farmers. - Buy comrnodities from producers.
- Sells grain in times of surplus. - Conduct market research on commodities.
- Imports grain in times of shortage/drought. - Can sell in future - buyers buy goods before
- Stores grain in silos. they are produced.
- Monitors the level of grain for the nation/ - Determine levels of production by setting
making sure the nation does not starve. prices of commodities.
- Distributes grain throughout the country (from
region of plenty to those with low harvest).
(b) State the reasons y,hy the government has
commerc ia I is ed market ing boards
4. Retoil trode
tsl
- Make sure boards operate on commercial
basis. Multiple choice
- Make them accountable. 1. B 2. D 3.D 4. B 5.8
- Reduce burden on govemment (less subsidy).
- Reduce red-tape. Structured questions
- Make them profitable. 1. State the services offered bv retctilers to:
(ct) Consumers
t6l
4. Exp I ain t he c ircum s tanc es under wh ich who les alers Breakins bulk
are by-passed br- retailers and consumers.
tl0l - They buy in iarge quantities from manufacturers
- Large scale retailers have enough capital. and rvholesalers and sell in small quantities.
- Can afford to buy in large quantities from
Convenience
manufacturers.
- Can buy on cash basis.
- They are situated in residential areas near
consumers.

fo
*
Answerc
 Varier.v 2 - Explain the./bI Iov,ing terms :

- Buy from many manufacturers or wholesalers (a) Pre-packing. t6l

thereby providing variety to consumers. - Putting goods into standard packs, containers
or wrappers.
Credit
- They offer credit facilities to consumers.
- Can be labelled or branded.
- Porlable packs make goods easy to handle.
Delivery - Can be colourful/attractive.
- They deliver goods to consumer's door step if - Manufacturer can pack goods into standard
they have bought plenty.
packs having same weight and same quality.
Advice - Advertising pre-packaged products is easier.
- Advise on how to use goods. - Instructions can be written on the package.
(bl Marufacttrrers t6l (b) Branding t6l
Storage - Giving goods a distinctive name or mark.
- Near production line. - Distinguishes goods from similar products.
Information - Makes selling easy as customers can call
goods by brand name.
- Collects information from consumers and pass
it on to manufacturers. - Makes self-service possible.
Transport
- Makes adr ertising easy.
- Collect goods from manufacturers using own
(c) Franchising t9l
transport. - Using the name of a reputable business.
- Enjoy popularity of the business.
Finqnce
- Maintenance of standards.
- Buy on cash basis thus financing producers.
- Group adverlising.
Risk bearing - Franchisee receives training.
- Goods stored in bulk might go bad or get - High chances of success.
stolen.
Marketing
4. b) Describe the.feattrres ol'a h.r-permarket. [10]
- Adverlise manufacturer's goods.
- Very large retail outlet.

3. Distinguish hetw'een a chqin store and a department store. [12]

Choin store Deportment store

Situated in popular areas, e.g. growth point. Situated rn city centre.

Has several branches located in many parts of Several departments under one roof.
the country.

Single storey building. - Multi-storeybuilding.

- All branches sell same line of goods. Different departments sell different types of
goods.

Each branch has a branch manager. - Each deparlment has a buyer (manages
deparlment).
- Goods are bought by head office. Buyer buys goods for department.
Distribution to branches. Prices are high.
Prices are low. Sell high quality goods.
Goods are low quality. Has luxurious flttings such as elevators.

i150 I

Answers ;,
ji?:g
 Situated on outskirts of town. - Voluntary chains can also provide training to
Connected by a good road network. retailers.
One storey building. (b) What factors are to be considered when
Covering a large area for parking. establishing a retqil otttlet? t6l
Might have playgrounds for children. - Location - nearness to customers and suppliers

Sell large variety of goods.

- Size of the market

Customer can do all shopping under one roof.

- Competition from existing retailers

Sell on a cash and carry basis.

- Class/ target group

Self-serr,,ice shops (a large supermarket).

- Available capital
(b) What is e-commerce? - Labour requirements
[5]
Buying and selling of goods through the - Future growth prospects of area
intemet. - Legal requirements
Shops advertise through their websites. - Skills and erperience
Customers visit websites of different shops
through the internet.
- Customers place orders through e-mail. 5. Enterprise
- Goods are then sent to customers.
- Advice notes and invoices are sent through
e-mai1.
Multiple choice
- Goods are collected through COD. 1. A 2. D 3.A 4. n 5.C
(c) What ere the advantages of'e-contnterce? [5J
Tb the trader

- Wider market as website is viewed throughout

6. Documents used in home trode
the world.
- Low overhead costs.
Multiple choice
- Cash on deliverv reduces bad debts.
Tb customers
1. B 2. D 3.B 4. B 5.C
- Large selection.
- Wide variely- of
goods as customers vier.l' Structured questions
websites from many sirops. 1. Describe the following documents that are used in
- Shopping is done in the luxury of one's home. home trade:
- Customers take time to view the goods. (a) Stqtement of account. tsl
- Cuts on transport costs. - It is a document that is sent by the seller to the
buyer showing a summary of transactions for
,i. (a) Explain how, .small scale retailers continlte to a speciflc period of time for example a month.

survive in the .face o.f stilf competition from - It shows purchases made, payments, credit and
large scale retailers. t|l debit notes, credit limit, amount outstanding
- They are convenientiy situated near the and due, date when payment is due and terms
customers (residential areas). of payment.
- They have personal touch with customers
(b) Invoice. i5l
- Owner knows customers as they are in the - It is a bill given by the supplier to the buyer to
neighbourhood. charge for goods sold on credit.

- Offer credit to known customers. - lt summarises a single transaction.

- Buy in small quantities from w,holesalers. - Contains the following information: unit
prices of goods bought, total price, quantities
- Can join voluntary chains and enjoy group
bought, terms of payment, V.A.T charged, and
buying; group advertising.
description of the goods.

Answers
i

(c) Advice nore. t5l (ii) Debit note. t5l

- Sent by the supplier to the buyer to inform Sent by the seller to the buyer.
them that goods have been dispatched and are Itsupplements the invoice in the case where:
now in transit. there is an undercharge on goods already
- This helps the customer to make preparations supplied; there has been an over-supply of
to receive the goods e.g. preparing proper goods.
storage and ensuring that there will be Shows the amount to be paid as top up.
personnel to receive the goods' 3. (a) How does a quotation dffir from a prtce
- The document is sent ahead of the goods so list? t4l
that preparations are done before the goods Price list
Quototion
arrive.
- It gives the quantities of the goods and their It is prepared in answer The company has price
type and nature so that proper handling can be to a specific enquiry by a lists already prepared
done. customer and is given to and they are given to any
that customer only. potential customer tbr
(dt Letter of enquir1,. t5l adverlising purposes.
A document that is sent by the customer to
Quotes only the goods the Gives all the goods that
several suppliers of goods.
customer has enquired for. the seller prov ides in
It is sent when the buyer u,ants to know if case the customer mav
the goods required are in stock and the terms want to buy more.
offered by the different suppliers.
The buyer asks tbr types, sizes and unit prices (b) How does the use of catalogues benefit both
ofthe goods. the buyer and the seller? t6l
2. (a) Distinguish betv,cen cash discotrnt and trade Catalogues show pictures of goods:
discount. [ 10] - The seller benefits because it is easier to
Cosh discount Trode discount advertise goods in a clear and appealing way.

Given to any customer. Given only to traders. - Customers benefit in that they see the actual
product and its features hence make a proper
Deducted on the net Deducted on the gross choice.
invoice. invoice.
3. @ What are the dffirences behteen a deliven'
Recorded in the books of Not recorded in the note and a consignment note? t5l
accounting. books ofaccounting.
Delivery note Consignment note
Discount rate is lorver. Discount rate is higher.
Used when the seller or Used when hired
Deducted at the time of Deducted at the time of buyer uses own transport transpoft is used.
payment. purchase. to deliver goods to a

Encourages bulk buying. customer.

Encourages prompt
payment. Prepared in duplicate. Prepared in triplicate.

(b) Wtat is the importance of the follow'ing

Is not a contract of It is a contract ofcarriage.
carriage but just a record
documents used in home tracle'l
of delivery
(i) Pro-forma int,oice tsl
Used when: payment is required before goods (a) List any three contents and explain three ttses
are dispatched; goods are sent on approval; of each of thefollov,ing documents:
applying for fbreign curency; goods are (il Credit note t6l
dispatched on a sell or return basis. Contents

I
Serves as a quotation. - Name and address of both the buyer and the
Gives details on prices of goods and terms of seller.
payment so that the buyer makes a decision - Note number and the number of the invoice
before the actual invoice is raised. being adjusted.

Answers @
s
 - Amount of overcharge or goods being returned - Used for accounting purposes.
(depending on the reason why the credit note (b) llrhat does the abbreviation 'E & OE'stand
was raised).
t{'1 for on an invoice? t2l
- Date issued.
- Errors and omissions excepted.
1
Uses - It allows for the correction of errors or
- To correct an overcharge on an invoice. omissions that might have been made on an
- invoice.
To record the retum of crate, damaged goods,
r- goods wrongly supplied etc.
-
rii)
When seller owes money to the buyer.
Statement account.
7. lnternotionol trode
o.f t6l
rL: Contents
Multiple choice
- Name and address of both the buyer and the
seller. l. D 2.C 3.C 4.D 5.D
- Outstanding amount.
- Amount due. Structured questions
- Due date for current payment. l. (a) Why does Zimbabwe trade with other
Fi
::
- Discount offers.
countries? t?l
- Payments made to date.
- To get what it cannot manufacture.

Uses
- To obtain what it does not possess, for example
oil.
[]' - Used to remind customers of payments due.
- It is a request for payment.
- To sell surplus goods.

- A summary of transactions for the period.

- To access high quality goods thereby
improving the standard of living of people.
- Customer can check accuracy of entries.
- To access a variety ofgoods
F
- To show total amount owed, amount due,
- It enables Zimbabwe to specialise on producing
h
amount outstanding and credit available.
gw products it is best at.
(iii) Invoice. t6l - To obtain goods at competitive prices
Contents
r' - Description of goods.
- To obtain foreign currency.
. - To widen market and create employment.
- Quantity of goods.
- - To build and improve relations (peace).
Unit and total prices.
- To make profit or gain revenue.
- V.A.T charged.
- Terms of payment.
- To supplement shortages 1 seasonal goods.

- Date of invoice.
- To gain from the transfer of technology /
business skills.
- Conditions of discounts.
- To benefit from comparative advantage.
- E &
OE (Errors and Omissions Excepted-a
clause which gives the seller the right to
(b) State the methods of restricting trade. t6l
correct any effors on the invoice whenever Customs duties make imports more expensive.
they are discovered). Quotas limit the quantity of goods to be
Uses imported.
B
To show the amount involved in a single credit Embargo bans trade with other countries.
transaction. Exchange control rations foreign curency
I - It gives a description of the goods bought. allocations.
- Itformally charges a customer for goods Subsidies reduce prices of domestic products
bought on credit and is usable for making making foreign goods more expensive.
claims for payment. Import licenses limit number of importers.
- It is a contract of sale between the buyer and Devaluation of local currency makes imports
the supplier. more expensive.

1q1,l
.* Answers
tr
 (c) Otrtline the.functions of .fot *-arding agents. - Ensuring that prohibited goods are not
t6l imported or expofted.
Collect goods from manufacturers/exporters. - Collect duty on imports to raise revenue for
Transport the goods to own warehouses. the government

Warehouse the goods. - Control bonded warehouses to ensure that

no dutiable goods are released before duty is
Complete all shipping documents.
paid.
Amange shipment, insurance, packaging and
customs clearance of goods.
- Supervise public health by arranging
quarantine for animals.
Advise on import and export formalities.
- Supervise entrepot trade.
Advise on transport facilities available.
(c) What is the intportance oJ'a bill oJ'exchange?
Book shipping space for goods.
t6l
Send instructions to their representatives - An unconditional order in writing; drawn by a
abroad for final delivery ofgoods. creditor; sent to a debtor.
Ensure that -eoods are delivered to their flnal - Debtor must sign it as proof of acceptance.
destination.
- Determines payment at a future specific date
2. (a) List the problems faced b1: importers and usually three months from date of sight.
exporters. t\l - An evidence of debt when accepted by
Differences in languages importer.
Differences in units of measurements - Allow's a period of credit.
Differences in region and culture - Enables goods to be sold before the bill
Differences in level of technology becomes due.
Differences in Lau's and regulations - Can be discounted for early payment.
Differences in currency - Enables trade to exist among companies of
Complicated documents various countries.
Licences are not easy to obtain (export iicence) 3. (a) E.rplain four purposes and forur contents of the
Long distances following documents.
Delays in receiving payment
(i) Bill of Lading. t8l
High transport costs Purpose

Transit risks - Can be quasi-negotiable instrument when

endorsed by exporter in favour of someone
High insurance charges
e1se.
Risks of non-payment i insolvency of the
- Required as part of documentary credit.
foreign buyers
High storage costs
- Used whenever goods are transported by sea.

Trade restrictions
- A contract ofcarriage ofgoods by sea.

Costly market research

- Is an acknowledgement of the receipt of goods
on board the ship.
Need lor special packaging
- A document of title (shows ownership of
Political instability good)
(b) Outline the ftrnctions of customs ancl excise - It specified who pays for insurance and freight
authorities. t6l charges.
Collect and compile statistics on imports and Contents
expofts in order to show pattern of trade and
movements of goods, for example types of
- Details of the vessel used, freight charges.
markings on crates.
goods; origin and destination of goods.
Supervise the movement of goods in and out
- Names and addresses of importer/exporter.

of the country. - Condition of goods/di(y or clean bill.

Answers
 - Description of goods (natureiquality). (b) Explain wh.v excise due is charged. t4l
- Quantity of goods. - lt is charged on certain home produced goods
- Port of loadingiorigin and off-loading/ like tobacco, liquor etc.
destination. - To raise revenue for government.
I (ii) Aint,at,bill. tSl - Discourage consumption of dangerous
r
Purpose products.
- Used when goods are carried by air. - Reduce domestic demand.
- It is a contract of carriage. - Release more goods for export.
- It is a receipt lbr goods. (c) What do the .follot'ing terms used in
- Goes together with the goods. international trade mean?
Contents (, "f.o.b t2l
- It give the description of goods. - Free on board.

- It gives the origin and destination of goods. - All costs up to the ship's rail or agreed shipping
point are paid by the exporter
- It gives the flight number and name of airline.
- It gives names and addresses ofconsignor and
- The costs are normally included on the quoted
pnce.
consignee.
- Giving terms and conditions of carriage. (ii) c.i..f t2l
(b) What is cable transfer'? - Cost, insurance and freight.
t4l - Freight charges and insurance must be paid by
- A method of receiving and making payments.
the exporter.
- Payments are made by use of cables, telephone - It includes fob (free on board).
wires, telex or telegraph.
(iii) f.a.s
- Money is transferred from one debtor,s t2l
account to another (creditor's account). - Free alongside ship.

- Used by banks in various exchange markets of - The importer pays for packaging and transport
the world. costs as rvell as loading charges (dock
expenses).
- A very fast form of remittance.
(iv.) f.o.r
- A safe means of making payment. t2l
- Usually expensive to use due to bank service
- Free on rail.

fees. - Prices include production costs, rail costs and

(a) Outline the importance of other special costs up to the agreed railway
bonded
station.
v,arehouses tSl
- Stores dutiable goods.
Goods are only released u,hen duty has been
paid. 8. Consumer protecfion
Goods are transferred by bonded carmen.
Goods in bond can be packed, branded, Multiple choice
blended, sampled. bottled, sorted or graded.
Goods can be removed from bond in small lots
I i quantities. l.A 2.C 3.B 4.8 5.D
Goods can be sold whilst in bond.
; Stores goods in re-export trade (entre-pot).
Structured guestions
l Stores goods like tobacco, wine, wedding I. (a) Hov,does the Consumer Council of Zimbabv,e
cakes until they mature. protect consttmers? [6]
Controllecl by customs and excise authorities, - Settles disputes between consumers and
fbr example the Zimbabwe Revenue Authoriry suppliers.
(zrMRA) - Takes up cases with the small claims court,

@ -n
ilo
' Answers
 - Lobbies for consumer legislations. - Weights, measures or volumes to be clearly
- Conducts spot checks on shops for such things marked on packages.
as hygiene and prices. - Ensures that the weight or measure of the
- Improves consumer awareness through contents tallies with what is marked on the
educating consumers to know and understand package.
their rights. - Weight or measure shown to exclude the mass
- Monitors standards of products (product of the packaging material (to reflect the net
quality). mass and not the gross mass).

- Provides research services and inform 2. (a,) List and explain the methods that can be
consLlmers. trsed by consumers to protec.t themselves
against unscrupu lous traders. t10l
- Encourages membership throughout the
country.
(, Keeping alert
- Receives and investigates consumer
- Consumers should check products for quality
and quantity, for example, quality seals such
complaints.
as the Standards Association of Zimbabwe
- Recommends appropriate action to be taken to
seal.
solve given problerns investigated.
- Listen carefully to advertisements in order to
- Promotes ethical advertising of goods and get the infbrmation passed.
sen,ices.
- Read instructions carefully.
1. (b) Explain the importance of the following acts
of parliamenl in protecling consumers:
fti) Ll/indov,shopping
(i) - Consumers should do window shopping to
The Food and Food Srandard Act. [2] compare prices.
The act ensures that:
(iii) Fonning bu.ving clubs
- All food sold is safe for consumption. - Consumers can form buying clubs so that they
- A11 labels and descriptions on packages are contribute money and buy their groceries in
correct. bulk and obtain discounts.
- Consumers are not misled by the quality of (iv) Consumer educcttion
food being sold. - Consumers need to acquire consumer
fiil The Sqle of Goods Act. t4l education about their rights and consumer
- The goods must correspond with the description protection so that they become informed and
for which they are sold, for example, jewellery can make intelligent decisions.
sold as genuine diamonds must be made of (v) Avoiding imptrlse bul,ing
diar-nond and nothing else. - Consumers should have a shopping list or
- When selling goods by sampie, the rest of the draw a budget to enable them to buy what they.
goods must be of the same quality. have planned and can afford.
- The goods need to be of satisfactory quality, (vi) Understanding agreements
that is, goods must be fit for the purpose for - Consumers need to
read and understand
example, a rain coat must be water proof and agreements or contracts before signing them.
not otherwise.
ft) Why do consumers need protection? t10l
(iii) The Price Control Act. t4l - Malpractice by business persons - business
- Saf'eguards against overpricing of goods. persons may supply substandard defective
- Controls prices of basic commodities such as
goods or unfair goods.
sugar, bread, and mealie-meal. - Deceptive advertising - when misleading
- Also ensures that prices of goods are clearly or untrue information about the quality or
Iabelled or displayed on shelves. safety of a product is supplied by the brlsiness
person(s).
(iv) The Trade Meqstrres Act. t4l
- Guards against underweight and incorrect
- Spurious goods - business person(s) can
supply fake commodities or duplicates of the
weights and measures of goods.
original.

Answers l1so-]
&
!i The customer cannot easily differentiate - For example, education, health, electricity,
between a genuine product and an imitation. water etc.
Illiteracy and ignorance - some customers can - Consumers can be exploited by being charged
neither read nor write and might not know and exorbitant prices.
understand their rights.
- Govemment protects the interests of
Environmental pollution - entails living and consumers by subsidising prices to make the
working in a healthy environment which does goods and services affordable to consumers.
not endanger the people's lives. For example,
air pollultion, noise. and odour.
fiii) The Citizens Advice Bureatr (CAB1 t3l
- Gives free confidential informatron to
Incorrect quantity or weight - a supplier may
consumers.
show false quantities or weight on packages
of goods. For example, 4 kg of mealie-meal
- Provides advice to help people with their
financial. iegal, consumer and other matters.
being shown as 5kg on a package, thus short
weighting of goods. - Improves the policies and principles that affect
people's lives.
Improper labelling this occurs when
packages of goods have a lot of information - Has trained advisers who represent clients at
such as prices, instructions, quantity, etc. and tribunals and courls.
some of the information provided may be - Influences policy makers on issues that
false. concerrr the consumers.
Credit sale agreement - goods bought through (b) Explain.five consumer rights. t l0l
credit sale agreement belong to the buyer as - The right to basic needs: Consumers must
soon as the agreement is signed. The goods have access to adequate basic needs such as
can therefore not be repossessed in the same food, shelter, clothing and education.
way as those bought through hire-purchase - The right to redress: The consumer has to
agreement.
l receive just claims that arise when complaints
(a) How are consumers protected by thefollowing are made against suppliers. For example,
o rga n is ations or ass oc iations ? compensation for giving false inforntation,
(i) Local authorities. t4l
inferior goods or unsatisfactory services.
l

These include municipalities, rural and district - The right to safety: This protects consumers
councils. against injuries caused by the consumption of
a commodity. For example, some goods may
ll
They ensure that standards of hygiene are met
'i
have been contaminated during the production
I
by organisations within their area.
I process. Such products may be poisonous il
i
For example, provide disposal of waste, consumed.
storage and refrigeration facilities, and ensure
i

that processing areas are clean and free from

- The right to be informed: This right empowers
consumers to be provided r.vith appropriate
flies.
information so as to enable them to make
They also offer hawkers' licences to permit informed and intelligent decisions when
vendors to sell within certain municipal, rural buying products. The information can be on
and district areas. prices, quantities, ingredients or instructiotrs.
These help to prevent the sale offood and other - The right to choose: The consumers should
products everyr.l.here by unlicensed vendors. be provided with a variety of goods and
(i, Public corporations. t4l services from different suppliers so as to
Parastatals (public corporations) have been set exercise choice. Protects customers against
up by government to provide essential goods monopolistic tendencies.
and services. - The right to be heard: This right stresses the
These cannot be left under the control of the need for the consumer to voice complaints
private sector. about a product or service. For example,
against pollution of the environment.

Answers
9. Business orgonisotions (iii) Distribution ol'pro-fits. t4l
- Shareholders get a dividend per share when
distributable profi ts are declared.
Multiple choice 2. (a) Explain the .features o.f multinetional
1. B 2. B 3,B 4, C 5,8 corporations.
ra7
Lol
- These are companies rvith branches in two or
Structured quesfions more countries.

1. (a) Whot are the contents of an articles of - Own and control business operations outside
the country in which they are based, for
association? tBl
example, Bata Shoe Company (Canada based).
- Rights of shareholders.
- Variation of these rights.
- Are holding companies with shares in many
overseas subsidiaries.
- Payment of commission.
- Very large companies with limited liability.
- Share certificates.
- Headquarters are in one parent countr,v
- Calls on shares. which centrally controls the activities of its
- Transmission of shares. subsidiaries.
- Forfeiture of shares. - Are involved in large scale production of
- Alteration of capital. goods and sen ices.
- General rneetings and proceedings thereat. - Usually give licences to their subsidianes to
- Voting rights of shareholders. manufacture abroad at a profit and produce
goods to its original design.
- Appointment of directors, their remuneration,
qualiflcation, powers and duties. - Also design and produce goods on a large
scale to suit the local market.
- Dividends and reserves.
- Winding up. - Able to provide large scale production due to
the large amounts of capital that the,v have.
- Names and addresses of company.
(b) Outline the characteristics of a private limited
- A royalty is paid by the subsidiary compan)'
for the use of the design.
compan-v- in respecl of:
(, Raising capital. t4l
- Royalty is determined by the volume of saies.

- Shareholders contribute to capital through - Profits are sent to the headquarters in the
parent country.
purchase of shares.
- Shares are traded through private placing.
(b) State the contents o-/' a rt{eruoranclum oJ
Association !51
- Promoters approach potential shareholders
individually and these are people known to - Gives the company's name which must end
them (family and friends). with the word "Limited."
- Additional capital is raised by approaching - Names of members (shareholders).
the existing shareholders, new investors and - Types ofshares issued.
banks for loans. - Number of shares held by the shareholders.
(ii) Control t4l - Location of the company's registered office.
- Shareholders control the company through - The objects (objective) of companv.
their vote in A.G.Ms.
- Amount of authorized share capital.
- Each share has one vote and the shareholder
with more shares has greater say in how the - Whether liability of its members is limited.
company must be run. - Name of directors and or company secretary.

t 1581
Answets
w
 3. ,*o,"andpubliclimitedcompaniesundertheJbllowingheadings..

PUBTIC LIMITED COMPANIES

(i) Formation.
t4l Formed by 2-20 people who
Formedbyutl.uttffi
mutually agree to form a busi_
of shareholders. Formation is through
ness. Agreement can be formal
many formal procedures that involve
or informal. Easy to form. tile
drafting of legal documents.
Owned by the partners who
Owned jointly by all .hu..hold"[
contribute to the capital.
(iii) Management All partners are free to take part Managed.by
hired p.or..iio*t
who usually have no part in theffi
and control. in the management and conirol
t4l of the business, activities. Some ership of the own_
partners choose to be inactive business. It is however
controlled
or dormant they do not take termine by the shareholders who de_
the company,s policies through
parr in the day to day running
their vote in the Annual Generai
of the. business. The partnership fvf"Jt_
ings.
may hire professional manas_
ers ro handle certain frc.t,
Jf r

the business.
(iv) Liabitir-v-.
t4l All partners are equally re_ Liabiliry is limited
for the liabilities of holder has investedto what th. ,h"*_
sponsible
the business unless there is a in the
through the purchase of shares.'Th;
"ornfuny
special irrovision for a limited
shareholder does not stand to
partner. Partners will pay tor" uny
in the of their privately owned
case that the business fails
to unsettled business debts.
properfy d;;;
settle its dues to creditors.
(v) Distribution of Profits are shared according
Profits. A dividend
t4l to an agreed profit sharing ral end of the ir O""tur"O i, th. -iaAt. *
financial year. This will be
tio. This is usually based on given
for every share held, for .*r_pf.
the capital contribured by the
20 cents per share. The shareholder
partners. If there is no written who
has a greater number of shares
agreement, profit are shared will have
a.greater share of the profits
declared lor
orstnbutron.

lO. Finonce ond bonking

Un iformity/homo geneou s
Acceptability/legal tender
Multiple choice
Identifiable
D A 3.D 4.D 5.A Portable
B B.D
B 9.A 10. c Relatively scarce
Divisibiliry without Iosing value
Structured guestions - Durable
a. @) State the.functions of monel;. 5. Exlllin the importance of
t5l people.
banking to business
Means/medium of exchange
[20]
Unit of account - Safe custody ofvaluables
Standard/unit of deferred payments - Safe custody of monev in different types of,
Store of wealth/value accounts

Measure of value - Gives interest to the business

people
(b) State the characteristics - Receives payments
of good monev.
tsl - Assists in making payments

@ Answers
*
 - Finances business by provision of loans and (b) Distinguish between shares and debentures.
overdrafts [12]
- Provides banker's reference Debentures Shores
- Advices business on flnancial issues - borrowed capital equity capital
- Provides night safe facilities
- holders are creditors shareholders are
- Provides bank cards owners
6. How do banks assist a business in making and - gets fixed interest get dividends from
receiving payments? [20] profits
- Stop/standing orders
interest paid is an expense - dividend is an
- Direct debits appropriation of
- Credit transfers income
- Bank drafts carry no voting rights carry voting rights
- Cheques
- redeemable irredeemable
- Provides debit and ATM cards
- has greater security i.e. highly risky
7. Give reasons w'h1'cheqttes mav be dishonoured. [6] less risky investment investment
- The drawer is insane/dead
- The drawer is declared insolvent,&ankrupt (c) Explain internal and external sources of
- Alterations which are not signed for finances. t4l
Internal sources of finance
- Missing details on the cheque e.g. signature of
drawer - This is the financing that comes from the
owners of the business and from the re-
- Drawer's signature different from the
investment of profits from the operations of
specimen signature kept at the bank
the business.
- A post-dated cheque presented before the
- Examples are savings and retained profits.
future date
External sources of finance
- The cheque is soiled or torn
- This is funding that is obtained from lenders
- The cheque is stale and creditors who do not own the company.
- Difference of amount in words and in figures - Examples are loans and mortgages.
- The cheque was stopped by the drawer 2. (a) Explain thefollowing types of capital:
(i) Debt capital. t2l
- Refers to all forms of borrowed funds.
ll. Finonce of the business units - Entitled to fixed interest and repayment.
- Holders have no voting rights.
Multiple choice (ii) Equiqv* capital. t2l
I. D 2, B 3.A 4, C 5.D - Owner provided capital.
- Confers ownership and voting rights on the
holder.
Structured questions
- Earns dividend from profits.
t . (a) State reasons why firms need financing. t4l (b) l(hat are the functions of the Stock
- Start-up operations Exchange? il21
- Buy premises and machines - Transfers shares (business interest) in a public
- Expand operations limited company from one investor to another.
- Meet daily operational exPenses - Valuation of companies on the basis sf share

- To pay fixed regular costs

performance.

Answers

r'
 Quotes and publishes the prices of shares. (iv) Speculator - an investor who anticipates profit
Enforces a strict code of conduct on companies in the fluctuation of share prices.
with the aim of protecting investors. (v) Blue chip - the shares of highly performing
Helps firms get financing for their operations listed public companies.
and expansion. (a) Whqt is the role of the Zimbabwe Stock
Markets government stocks to raise capital for Exchange? il0l
government supported projects and statutory Regulates the admission of new members.
bodies.
Sets code of conduct fbr members.
Publishes information that is useful to investors
Disciplines members through fines and
when making decisions on buying and selling
expulsion.
shares.
Administers the fund that is used in redressing
Educates the public on how to invest in shares.
investors.
Lists and delists companies.
Presides over disputes between stockbrokers.
Markets Ioan stock capital such as debentures
Ensures the prices of shares are influenced
for profitable, reputable and quoted companies.
only by forces of supply and demand -
Compensates investors who may be defrauded. prevents insider trading where parties could
(c) Explain the dffirences behueen ordinaryt and use privileged information for personal
preference shares enrichment.
; t4l
I Ordinory shores Preference shores Determines the type of securities to be traded.
(b) Describe the foIlowing concepts:
Owners'capital Debt capital
(i) Gilt-edged securities
b Dividend varv - Fixed dividend
t4l
> - Securities issued by the Government.
T irredeemable redeemable - Entitles the holder to fixed interest over a
voting right No voting rights period of time.
- Redeemable on maturity.
(a) What are the.functions of stockbrokers? [l0J - Examples are treasury bills and government
Buy and sell shares on behalfofinvestors. bonds.
Advise investors on the prospects and (ii) Debr factoring t6l
performance of certain shares.
- A creditor sells book/invoiced debtors to a
Provide quotations of shares. factoring company at a discount.
Assist investors in achieving their investment - Factoring company recovers the debts from
objectives. the debtors at a future date.
Ensure that selling clients receive their - Creditor gets immediate cash.
payment.
- Creditor foregoes part of the value of debtors
Offer investment and planning services to and concentrates on core business.
clients.
May register, hold and manage a client,s

(b)
investments.
Explain the.follo*-ing terms;
\2, lnsuronce ond qssuronce
tl0l
(i) Stag - a speculator who buys new shares with
the hope of selling them at a profit. Multiple choice
(ii) Bull- a speculator who buys low priced shares l.B 2. B 3. D 4. C 5.C
anticipating that their price will increase in the
future.
Structured questions
(ii i) Beqr - a speculator who sells high priced
shares anticipating a fall in their price in the 1. (") "Insurance is an essential service to atobacco
near future. farmer." Support the statement. il01

Answers
 - Covers raw materials, equipment, premises, - It prevents the insured from making a proflt
motor vehicles out ofa loss
- Covers tobacco in transit against flre and theft. - It helps the insurance company to determine
- Covers against bad debts whether or not an applicant is entitled to any
cover.
- Compensates/indemnifies employees and the
public in case of injury on the form. - One cannot ensure someone else property e.g.
rented house.
- Provides fidelity guarantee and consequential
loss
(iii) IndemniQ tBl
- Instills confldence in the farmer It applies to properly insurance.

&) Explain the follov,ing insurance terms: It restores the insured to his/her original
financial position before the risk occurred.
(i) Public Liabiliry t5l It does not apply to life assurance because no
- Taken by a trader amount of money can adequately compensate
- To cover the business against claims by someone's life.
members of the public; Amount of compensation is paid to the insured
- lnjured within the firm's premises by, for after a loss has occurred.
example slippery floor, falling bricks/shelves. The insured must not gain out of a loss.
- Injured by use of manufacturer's product due Comes rvith subrogation - once the insured
to the company's negligence. person has been compensated adequately and
(ii) Actuaries tsl precisely, the insured item damaged in the
- accident belongs to the insurance company:
Employed by insurance companies
(i) The insured cannot sell it.
- Collect statistics of risks
(ii) The insured may be given cash equivalent to
- Analyse the statistics
the value of the item damaged in an accident.
- Calculate probabilities of risks in mortality, (iii) The insurance company may buy the insured
fire, theft, sickness
an item whose value is the same as that of the
- Fix fair premium to be paid damaged item.
- Calculate premiums based on degree of risk (iv) If the insured person is taken to court, the
Explain the.following in relation to insurance: insurance company will represent him or stand
(i) Utmost good faith (Uberrima Fides) t5l in his/her place.

- Insured should be honest/ tell the truth

(v) Prevents the insured person from making a
profit out of a loss according to the principle
- Must show all relevant details on the proposal
of indemnity.
and on the claim form
- Comes with contribution - if an item is insured
- Failure to provide truthful information makes with two or more insurance companies, when
the policy void
loss occurs, each insurance company pays
- The insurance company must also explain all part of the compensation in proportion to the
the terms and conditions accurately premiums paid:
- Allows assessment of risks (i) Aims to prevent insured from making a prolit
- Accurate information helps to fix fair - Comes with average clause ensures that the
premiums and lair compensation insured does not gain from under - insurance:
(ii) Insttrable Interest t5l (i) When loss occurs the insurer will not
- One can only insure one's property compensate the fulIvalue of the loss.

- The insured must be the one to suffer a

(ii) The insured will become his/her own insurer
financial loss if the risk occurs for the remaining loss

- ifone insures someone's property one may be

(iii) Average clause formula:
tempted to cause the risk to occur deliberately False value x Loss or damage
so as to gain out of someone else's misfortune Actual value 1

A;,nswets @
*
 (iv) Proximate Cause pl (iv) Actuary
- The insurer considers the immediate not
the -
l5l
Calculates statistics of risks.
E remote cause of a loss to pay compensation
1, that is the insured risk. - Analyses these risks.
- Compensation is not paid if loss results - Assesses the risks.
from
an uninsured risk e.g. a shop insured
against
- Calculates probabilities of risks in morrality/
fire is struck by lighting and then catches theft. fire.
fire.
no compensation will be paid. - Fixes fair premiurn to be paid.
J. Describe the work of thefollowing; - Calculates premium based on degree
of risk.
(i) (Jnderwriter 4. (a) What steps qre taken to mqke a claim./i"om an
Fl
- Insurers who usually cover marine risks, for insurance company?
tl 0l
I example then found at Lloyds of London. - Insured contacts the insurance company or
- May form syndicates to cover big risks. insurance broker to complete a claim fbrm
ri

:l- - Pays compensation when a loss occurs. honestly giving details of ioss.
,n, Ji

- Sells policies to merchants via brokers. - Insurer checks on the provisions of

the
- Signs or accepts risks. if there is no breach of
agreement to ensure
the contract.
- Fixes premiums.
I - Insurer considers if the loss is a result of the
- Can reinsure big risks to spread the risks.
l - Pays commission to brokers/ primary
risk covered.
I insurers. - Insurer assesses the loss, calculates
the amount
- Assesses risks. of compensation to be paid and indemnifies
May specialise in certain risks. the insured according to the principle of
(ii) Insurance broker indemnity.
tsl (b) Explain eqch of the
Acts as a link between members of the public .foilowing insurance
and insurance companies policies:
Gathers information on tnsurance companies. (, Consequentictl loss 6t
Gives expert advice to prospective policy
- Taken by the employer in conjunction
with
L_J

holders. fire or theft insurance policy.

Obtains several quotations from different - Ensures that a flrm continues to receive
rnsurance companies. reasonable payments in lieu of profits.

Chooses the best policy for the client. - Assists business to pay rent or rates
whilst
business is closed.
Assists the client with the completion
of - Covers loss resulting from an insured
proposal forms. loss: risk
resulting from temporary closure of
Elfects a policy for client. business;
loss of revenue; income from rents;
Assists the client in claiming compensation. costs of
salaries payable to employees; cost
of leasing
(ii, Assessor the building and interest on debentures.
t5l
Assesses details on the claim form. (ii) Employer is tiabilirv
tsl
Examines the damaged item. - Taken out by the employer to cover
employees,
Ascertains the exact cause claims against injury or death at work
of the loss/ or
proximate cause. disease caused by employment.
Calculates the cost of the damage. - Covers injury due to negligence of the
Determines what has been damaged. employer.

Calculates and recommends the amount

- Compensates the employee.
of -
compensation to be paid. A legal requirement under the workman,s
Negotiates amount compensation e.g. National Social
to be paid out against a
Security
claim. Authority (NASSA)

Answers

I
 13. Businesscommunicotion It is used by mail order firms.
Addressee must have a licence and
number.
Multiple choice Addressee pays and only postage on
I.B 2,8 3,B 4,C 5.C mailreturned.
Respondent sends in replies free of charge.
Structured questions It encourages responses from customers.
l. (a) l4thy is communication important to a trader? All mail is written business reply services.
t8l It is used mostly in market research.
Enables speedy contact with buyers and (b) Free post t4l
suppliers, employers and employees. It is a variation of business reply service.
Enables obtaining and giving information or The user should have a licence.
messages over any distance and at any time of
A deposit is paid,
day.
'Freepost' envelopes are provided.
Allows the sending and receiving of orders or
documents. Respondent does not pay for postage.

Allows making and receiving payments. Recipient/trader pays a surcharge on usual

postage.
Allows lodging of complaints and settlement
of queries. Encourages customers to reply.

Allows dialogue to take place through User needs to seek for approval from the post
telephone, cellphone or skype. office.
Can arrange contracts. k) Radio paging t4l
Can make enquiries. Is a public address system.
(b) Distinguish betv,een surface mail and Provides a one way communication system.
airmail. t9l It provides a beeper
Message sent is of limited number of words/
Surfoce moil Airmoil
for sending brief messages.
- Letters are sent to - Mail is sent by air.
Used by people in the organisation.
destinations by land.
It is fast in transmitting messages.
- Takes a long time to - Fast means of delivery.
It is cheap and easy to use.
deliver mail.
(d) Fascimile t4l
Postage rates are low Postage rates are high.
Machine consists of a photocopier and a
Uses ordinary Mail carries airmail telephone circuit.
envelopes. sticker. To send and receive information on document.

(c) Produces information as it is (exact copies)

l,lthat are the disadvantages of using a
telephone? t4l Ideal for detailed information, such as plans
- No written record. and diagrams.

- No privacy. Provides a written record.

- lnformation may be wrongly interpreted. Message is received even if office is

unattended.
- Cannot be left unattended.
Can produce multiple copies.
2. Stote and explain the importance of the following
commu n i ca I io n se rv i ces :
Subscribers have fax numbers.

(o) Business reply service It is fast.

[4J
- A facility provided by the post office. k) Electronic mail (e-mail). ,t4l
- Self-addressedprintedreply cards/envelopes Sending and receiving information using a
are provided. computer via a cell/ telephone circuit.

Answers rca
-=-
F t;
L.
- The information is sent from one computer With the words "POSTE RESTANTE",i "TO
to another or from one computer to several BE CALLED FOR''
computers at the same time.
Mail is kept at the post office and collected
- Information received can be stored, printed by addressee on production of positive
and retrieved. identification
- Message can be typed and corrected before (d) Tblephone. t4l
sending.
When dialogue is required,
- There is quick transmission of messages.
When immediate contact and reply is required.
- It uses modems. When sending and receiving information.
- Each subscriber has an e-mail address.
For local and international calls.
- Each subscriber has a secret code or password
Can be used with an answering machine.
for security.
Offers free phone, time calls and reverse
- Can send fiIes with attachments.
charge calls.
- A cheap means of sending information. Direct calls can be made using STD or IDD.
- It shows time when message was sent or (e) Cash on delivery (C.O.D)
received. t4l
For the post office collect payment for goods
Under what circumstqnces would a trader use;
being delivered before they are handed over.
(a) Datel? t4l Sender ofgoods pays for the service.
- To send and receive business information When he/she does not want money tied up in
using a computer via a telephone circuit.
bad debts
- To store data and display information on a When he/she does not want to send reminders
computer.
to debtors.
- To retrieve information and print (written When a customer does not have to send money
records).
in advance.
- To send and received information anytime.
When operating a mail order firm.
- To transmit information accurately.
Sender reveals money to be collected by the
- To edit / correct information before sending. post office.
- In banking or forex markets. Parcels are written C.O.D.
- To conserye privacy. 4. (a) Define a computer
t4l
- For fast sending of information. A digital electronic device that accepts data as
(b) Franking machine. t4l input; processes and stores it, then it provides
- When sending large volumes of mail regularly. output as useful information.
- The machine prints postage paid on each
A device thatenhances productivity reduces
envelope. drudgery (labour) and speeds responses to
problems.
The machine has a meter for recording total
postage. (b) Outl ine eight advantages and six disadvantages
of c o mptr ter co mmuni c al ions. u4l
It is rented from the post office.
The hirer pays a deposit before using the
machine. Advantages

k) Poste restqnte - It accepts input data.

t4l
When they are away from their base and do - It processes the data.
not have fixed/ permanent address. It stores processed data (huge volumes).
When in rural areas where there are no mail It executes instructions at great speed.
deliveries. Itprocesses a large number of instructions
Authority to use service is sought from the accurately.
post office. It is cost effective.
Mail is addressed to the nearest post office. It produces quality reports.

116,51
Answers
s,}
 - It can do repetitive work rapidly and accurately. (iii) Hero-worship
- lt does text processing. Using popular people in adverts in order to
- It manipulates characters and symbols. reach their fans and admirers.
- It does mathematical operations (calculation is (iv) Safety
done in numeric values). Ensure customers that the use of a product is
- It does logical and comparison operations (can safe or helps them to be secure.
compare two values. (b) List four disadvantages of advertising to a
consumer. t4l
Disadvantages - Brainwashes them.
- It does recovery processing (can recall or - Forces prices up.
recover data at a later stage). Rely on steady - Stereotypes people.
ffow of electricity. - Exploits by instilling materialistic views.
- Are highly technical. - Causes impulse buying.
- Cannot decide how it should be programmed. @ Explain lhe importance of advertising in
- Cannot create own data. business. tSl
- Cannot implement decisions. - Increases demand.

- Cannot think (can only perform instructed - Boosts sales and profits.
commands). - Revives demand.
- Computer actions must be activated by - Improves company image.
humans. - Reduces unit costs of production.
- Can be hacked. - Introduces new products.
- Fight competition.
(c) What is Prestel? t2l - Educating the public.
- A system that enables information to be - Creating brand loyalty.
extracted from a computer through a telephone 5. (a) What factors infittence the selection of a
network. suitable advertising medium? [10]
- The information is displayed on an adapted Cost - Effectiveness
television set. Target group - Accessibility
- It is used to check prices and interest rates. - Market size
(b) Explain hoty advertising benefits producers.
t4l
14. Morketing ond odvertising Cost reduction - Boosting sales
Increasing demand - Reviving demand
(c) Explain hov, the code of advertising conduct
Multiple Choice
protects consumers. t6l
1. C 2. D 3.D 4. B 5.A Ensuring truthfulness in adverts.
6. B 7. C 8.D 9. B 10. D Protecting children from obscene, immoral
I
i
and dangerous adverts.
i Siructured questions Prohibiting false claims about products.
4. k) State andexplainanyfourforms ofadvertising Prohibiting destructive product comparison.
appeal. t8l 6. (a,) Irsl six advantages of advertising on the
(i) Romance internet. t6l
- Featuring beautiful women and masculine Wide coverage
I men in an advert to appeal to potential buyers. Selective
I

i (ii) Family love Economical

- Associating products with the livelihood of a Provides quick feedback
t
huppy family. More details can be given

Answers fim
.L
frt
F
 - lmpact of adverl is easily measurable Disadvantages
(b) Distingtrish between generic and competitive - Distractive to drivers
advertising. t\l - Use up a lot of energy.
- Light pollution.
Competitive Advertisi ng Generic Advertising
- Available only in electrified areas'
Done by individual Done by several
- Expensive to install.
companies companies

Mentions speciflc Does not mention

products/brands brands
15. Tronsport
- One flrm meets all costs Shared costs of
advertising
- Multiple Choice
Purpose is to comPete - Purpose is to inform
1. D 2. C 3.A 1. C 5.8.
(c) Explain hov'aclvertising can be a disadvantage 6' D 1 'C
to manufacturers. t6l
- High opportunity cost Structured guestions
- Expensive l. (a) Explain the irnportance oJ' lronsporl sen'ices
- Financial loss il'it attracts price wars to a ntarufactttrer of clothes. t\l
7. (a) Explain tlte .ftillotying as thq) are knot+'n in - To carry raw materials e.g. cloth.
advertising: - To distribute finished clothes to the market.
(i) Genericadvertising t4l - To carry machinery and spare parts.
- Two or more flnns advertising together. - To transpor-t employees to the work place.
- Firms share costs of advertising. - To carry customers and documents.
- Promotes use of common Products. - Advertising can be done on the vehicles.
- Adverls do not mention brand names. (b) What are the advontages of road lransport?
(i, Romance/ser appeal tll t6l
- Arouse interest through beauty or masculinity. - Door to door delivery of goods.
- Make customers believe that they will become - Cheap over short distances.
attractive by using the Product. - Faster over short distances.
- Usually used to adverlise beauty care products - Less damage to goods
like perfumes and body lotions. - Less pilferage to goods.
(iii) Flyers t4l - Vide variety of vehicles to carry different
- Small paper rvith graphical presentations. types ofgoods.
- Can be distributed on the street or dropped in - Timetables and routes can be flexible.
letter boxes. - Wide road netu'orks ensure wide distribution.
- Often carry images and are colourful. - Return loads are possible.
(b) State the advantages and disadvantages of - Can reach rural districts and places that are not
digital billboards. t9l accessible using other means of transporl.
(c) Explain the disodvantages of owning afieet of
Advantages vehicles t6l
- Message easy to uPdate. - High capital outlay required.
- Repeat exposure. - Difficult to get return loads.
- High message recall rate. - Full use may not be made of the vehicles - too
- Create impact. much idle time w'hich is a cost.
- Flexible geographic coverage. - Vehicles prone to abuse by workers.
- Colourful and attractive. - Extra administrative work in managing fleet.

@, Answers
&
 3. (a) What factors does a trader consider when
transport? Corgo liners Tromp ships
choosing a mode of t8l
- Nafure of goods being carried - fragile, bulky, - Have fixed timetables. - No fixed timetables.
perishable, liquid, valuable, live cargo. - Follow strict routes. No flxed routes.
- Distance to be covered.
- Fixed freight charges. - Charges fluctuate, are
- Cost of transporting. negotiated and are very
- Urgency with which the goods are required. lor.v.

- Accessibility of the destination using that Not for hiring. Ideal for hiring.
means of transport. Freight charges Charges negotiated.
- Availability of the mode. are determined at a
- Availability of facilities for that mode, conference.
for example rail line, airport, loading and (b) What are the advantages to a trader of having
unloading facilities.
their ownfleet of vehicles? t8l
- Safety of the mode.
- Goods can be moved at any time.
- Possibilit-v of retum loads.
- Movement of goods is safer and faster.
(b) Give reasons to explain the increase in the - Adverts can be placed on the vehicle.
volume of goods transported b), oi, t\l - Proper planning of carriage and handling of
- Air transport is quick. goods can be done.
- Greater safety. - Drivers and handling staff can be trained so
- Lower insurance costs. that they can demonstrate how the products
- Less risk oftheft ofgoods. are used to customers on delivery.

- Less packaging material needed. - Public transport strikes will not affect
operations.
- Increase in the number of air planes and
airports.
- Staff can be ferried to and from work.

- Increase in the volume of international trade. k) Under what circtnnstance is a delivery n67s
used? t4l
- Competitive freight charges.
- It is issued by the supplier when goods are
- The planes can be specialised, for example to being transported using own transport.
carry goods needing refrigeration.
- The goods are described on the document
- Use of containers. which is written in duplicate.
I
@ l|'hat are the disadvantages of rail - It is not a contract of carriage but used to
transport? t4l verif,, that proper goods have been carried and
- It is inflexible due to fixed routes and schedules. delivered.
- It needs other forms of transport to complete 5. (a) Describe the contents of the .following
the process - it is not a direct form of transport. documents:
- Slow over short distances. (, Air **ay bill t7l
I

I - Very costly to set up a rail system. - A description ofthe goods.

-
I

-
I

Not ideal for small loads. Address of origin and destination.

i

L
- Limited access rail links are not so - Freight charges.
i

widespread. - Name of airline.

4. (a) Distinguish befiyeen cargo liners and tramp - Obligations of all the parties involved
ships. t9l

Answers UlgJ
pJ-
 (ii) Bill of lading t\l 2. (") Outline the importance of warehouse to a
Details of the goods like quantities and quality. poultryproducer. [10]
Port of loading and port of unloading. - Provides storage for stock feeds.
Condition of the goods: it can either be a clean - Secure storage of chernicals.
bill or an unclean bill (a clean bill is issued - Safe keeping of equipment/spare parts/
when the goods are in good condition and an machinery.
unclean bill is issued when some of the goods - Stocking dressed chickens in fieezers.
are damaged). - Safe keeping ofeggs.
(b) Explain the advantages of sea transport. -
t5l Prevents shortages ofchickens and eggs.
Can carry bulky goods cheaply. - Allows grading. packaging and branding to
There are a variety of vessels to suit take place.
transportation needs. - Reduces theft.
Can carry goods in containers. - Stabilises prices ofchickens and eggs.
Vessels can be specialised for example - Chickens and eggs can be produce ahead of
refrigerated to carry perishables. demand.
Some ships have flexible timetables and (b) State thefac:tors to be considered w,hen siting
routes. a warehou,se t6l
- Availability of transport services
- Availability of communication network
'16. Worehousing - Neamess to suppliers.
- Nearness to customers.
- Availability of land.
Multiple Choice
- Cost of building/renting the warehouse,
..c2. A 3.D 4.C 5.8 - Safety of the area.
- Availability of electricity.
Structured questions - Availability of labour.
Describe the importance of a bonded warehouse. (c) Describe v,ine cellars t4l
il0l - Located near vineyards.
- Keeps goods on which duty has not been paid. - Large underground rooms.
- Stores goods in entreport trade. - Used for storing wine fbr long periods.
- Enables blending, bottling, branding, - Enable wine to rnature.
packaging, sampling, tinning, canning, and - Enable bottling/packaging, branding, and
grading to take place. grading of wine to take place.
Enables goods to be sold whilst in bond. Protects wine from bad weather conditions.
. Goods can be removed in small lots. Reduce the risk of theft of wine.
Goods can be transferred from one bonded
r.varehouse to another by bonded carmen.

Answers
 Fopffin

Exominotion I Exominotion 4
1.8 2.D 3.C 4.A 5.C 1. D 2.D 3.D 4.D 5.C
6.C 7. A 8.D 9.D 10. A 6.A 7. D 8.C 9.B 10. c
11. D 12. c 13. c t4. D 15. D 11. C 12. D 13. C 14. D 15. D

16. c t7. c 18. A t9. c 20. B 16. B t7. A 18. A 19. A 20.8
21. A 22. C 23. A 24. A 25. C 21.A 22. A 23. B 24. B 25. A

26. A 27. B 28. A 29. D 30. B 26.D 27. C 28. B 29.D 30. c
31. D 32. B 33. B 34. A 35. B 31. B 32. A 33. B 34. A 35. B

36. B 37. B 38. C 39. A 40. A 36. C 37. C 38. A 39. B 40. B

Exominotion 2 Exominotion 5
l.A 2.D 3.A 4.A 5.C l.B 2.B 3.A 4, D 5.C
6.B 7. D 8.C 9,C 10. A 6.D 7, C 8.D 9. C 10.C
11. B 12.B 13. c 14. B 15. D 11. B 12.D 13. C 14. B 15. A
16. A 11. C 18. B 19. A 20. A 16. D t7. c 18. B 19. A 20.C
2t. A 22.D 23. A 24. C 25. C 21. A 22. C 23. A 24.8 25. A
26.8 27.8 28. B 29. B 30. A 26. C 27.A 28. D 29.A 30. B

31. D 32. A 33. B 34.8 35. A 31. A 32.8 33. D 34.C 35. C

36. C 37. A 38. C 39. C 40. D 36. B 37.8 38. C 39. D 40. C

Exominotion 3 Exominotion 6
1.D 2.A 3.A 4.C 5.D l.D 2.D 3.A 4. A 5.B
6.B 7. B 8.D 9.A 10. c 6.A 7. A 8.A 9. C l0.D
11. A 12. A 13. B 14. A 15. c 11. C 12.B 13. c 14.C 15. B

16. B t7.D 18.A 19. B 20.D 16. B 17. A 18. D 19.A 20.C
21. D 22.D 23.8 24. B 25.D 2t. A 22. A 23. C 24.D 25. A
26. A 27.8 28. C 29. C 30. D 26. A 27.8 28. C 29.A 30.A
31. D 32. A 33. B 34. C 3s. D 31. C 32.8 33. D 34.8 35. A

36. C 31. A 38. D 39. C 40. D 36. B 37.D 38. A 39. C 40. B

Aaswerc tI0_l
Ji
fl)
 .;. " *B55SHffE$HB
mpcra .
: r,f'€,*s5g;*g5&.6
o ,,rfH**$*g$tfrF
' t;rii*eg*xg*,"x;
*. ri ,' :-'"-
:-.r ., s: c:.:
9ri::1.
1ir

Exominotion 2
1. (a) Dffirentiate between Commerce and Industry.
[12]
lndustry Commerce
It includes : I It involves :
- The extraction of raw materials e.g. mining,
I

The.distribution and exchange of goods and

fishing etc.(primary ) II Servlces.
- Manufacturing or changing raw materials to
I

- It is trade and aids to trade.

finished and semi-finished products, e.g. mak-
ing shoes (secondary).
- Aids to trade include, banking, advertising,
warehousing, insurance, transport, communi-
- Construction of roads dams. houses etc. cation.
- Trade is buying and selling goods and services.
- Trade also encompasses home trade and inter-
national trade.
- Home trade is made up of retail and wholesale
trade.

- Foreign trade includes; import, export and re-

export trade. [12]
(b) LVhctt role is played by w,arehousing in trqde?
Located near customers.
tBl
- Stores raw materials, semi-finished and
Has close personal touch with the customers.
finished goods. Offer variety and is open for long hours.
- Clears production line. Give informal credit to customers.
- Used to keep spares, equipment, and Break bulk (buy in large quantities and sell in
machinery. small quantities).
- Goods can be kept while in transit. Cater for individual tastes of customers.
- Abonded warehouse can be used. Provide delivery services.
- Evens out supply. @) State thefeatures ofdiscount stores. t7l
- Allows further processing or grading of goods. Usually located in busy shopping areas.
':,

Steadies prices. Buy goods in large quantities (bulk) at low

]i
lil Reduces theft. prices.

t They therefore sell goods cheaply to customers.

$
.tl
(a) Outline the reasons that have ted to They are cash and carrSz stores.
the survival of small scale retailers Normally sell household goods.
#
$ despite competition from large scqle retailers. Offer self-service.
& t7l Do not have expensive displays.
*I
t
fl
T mi]
\<J
Answer,s
t
(
t
*
F il
 2. (c) Identifi' the importance of pre-packaging in It is also the difference between current assets
business. t6l and current liabilities.
Goods are easy to identifu and handle. It must cover the purchases of raw materials,
Enables goods to be ofstandard sizes. stock and pay wages.

Allows branding and individual pricing. 4. (r) Distinguish bet**een :

Prevents soiling of goods and presen'es goods. (i) An open cheque and a crossed cheque t4l
Facilitates self- service and advertising. Open chegue Crossed cheque
Enables instructions to be rvritten. - Does not have parallel Has two parallel drawn
3. (a) State and explain the characteristics o"f public lines on its face. diagonally on its face.
limited companies. [10] Not safe. - It is safe.
Or.l,ned by at least one member and has no
maximum. Can be cashed over the Cannot be cashed over
counter. the counter.
- Separate legal entiry lcan sue and be sued in
its own name).
(i, A bank draft and a bank certified cheque. [4J
- Owned by shareholders.
- Issue a prospectus. Bonk droft Bonk certified cheque
- Board of directors is elected at the AGM. Bank's own cheque. - Customer's cheque.
- Managing director controls the day-to-day - It is drawn by bank on It is drawn by customer
business of the company. itself. and certified by bank.
- Need a trading certiflcate to start operations.
- Can be used in - Used only in home
- Publishes their accounts. Intemational trade. trade.
- Shareholders have limited liability.
( b) The table belou' shov's the .financial records (b) Explain the follov,ing terms:
.for Kundai stores as at 3l December 2013. O Directdebit t4l
- Used to pay varying amounts where interval
Fixed Assets $200 000 between payments varies.

Current Assets s120 000 - Also used when the creditor wants to initiate
payment.
Cunent liability s40 000
- It therefore minimises bad debts
Long term liability s90 000 - Suppliers do not have to send reminders to
customers.
Facilitates quick payment.
Calculate Kundai stores s :
t)l (ii) Credit transfer t4l
O Capital L-f
It is one cheque used to pay several accounts.
Capital Assets - Liabilities.
Enables payments to be made at any branch in
= 5320 000 - Sl30 000
the country.
$190 000
It is suitable for making many payments at one
(iit Working Cupiral t3l time (multiple transfer form to be competed)
currentAssets

: ;ffiffiI;fiT, such as paying salaries, wages or dividends.

k) Outline the .functions of the People s tt*Nn
Savings Bank (POSB). t4l
Accepts deposits from individuals and
(c) Define working capital and explain why it is organisations.
important to a trader t1l It invests the money, for example, in trehsury
- This is circulating capital. bills or municipal stocks.
I
I
- Used to meet the day to day running expenses Offers savings accounts and stop order
ofthe business. facilities.

Answers @
*
il - It also provides fixed deposit accounts whose 6. P. Mapurisa insured her stock valued at $12 000
interest earned is tax free.
for $8 000 against the risk of theft. Later the stock
5. (a) List and explain eight consumer rights. tl6l was stolen.
(i) Right to basic needs (a) Explain why P.Mapurisa was able to cover her
- Consumers must have adequate food. clothing, stock against the risk of theft but not against
shelter, health care and education. bad management.
t7l
(ii) Right to sden
- Consumers are protected against harmful Risk of theft
products. - It is an insurable risk.
(iii) Right to be informed - It can be assessed or calculated since it has
- Consumers must be given all information or past records.
facts that can enable them to make informed - A fair premium can be fixed to cover most
choices or decisions. claims and enable insurer to make profit.
(iv1 Right to choose
- Consumers must be provided with a variety of Bad management
products and services by different suppliers. - It is a non-insurable risk.
- Products and services are provided at - Risk cannot be assessed since there are no past
competitive prrces and customers are able to records.
choose.
- A fair premium cannot be fixed.
(iv) Right to be heard
(b) Describe the steps p.Mapurisa takes to moke
- Customers must express themselves (their an insurance c'laim.
voices must be heard). t6l
- She should obtain a police report.
- Customers to be represented in government - P. Mapurisa contacts her insurance company
and other policy making bodies.
through an insurance broker.
(v) Right to redress
- She completes a claim form truthfully (utmost
- Consumers should receive compensation for good faith).
shoddy goods or services.
- This enables the insurer to make enquiries and
- Consumers to also receive a fair settlement of assess the loss to effect compensation.
just claims.
(vi) Right to consumer
@ State with reasons, how much p.Mapurisa
education received from the insurance company ,.f
- Consumers need to acquire knowledge and the cost of replacing the stock was $ I 2 000.
skills to be an informed consumer about their
t7l
rights. - She received 38 000.
(vii) Right to a healthy environment - She under-insured her stock and therefore paid
- Consumers should be protected from rncorrect premiums.
environmental dangers such as air pollution. Average clause applies under the principle of
(b) Srarc any four functions of the Standards indemnity.
Association of Zimbabwe (SAZ).
t4l P.Mapurisa should not make profit of $4
Adopts and modifies international standards 000 so she becomes own insurer for that
of quality, safety and performance. amount.
Prepares/sets standards of products. 7. (a) (i) Explain the term 'containerisation,. t4l
Authorises firms to use their seal of approval if - This is the use of standard size, huge containers
their products meet the acceptable standards. or boxes.
Tests products for quality. - These boxes are filled with goods ready for
Encourages standardisation or uniformity of transportation.
products. - The containers are sealed before delivery
Ensures quality of products is maintained. (dispatch).

ra Answers
*
 (ii) State the advontttges of'contairterisation. t7l (b) Give reasons whv countries.fbrm trctding
- It reduces theft and damage of goods. blocs. t4l
- Allows convenient storage of goods. - To promote peace within the region.

- Can be easrly transf'erred fiom one mode of - To encourage trade between member countries.

transport to another. - To reduce economic dependence from outside

region.
- Use of machines (cranes) saves labour and
time. - To mobiiise resources more efflciently'
- It therefore reduces handling costs for loading - To have more bargaining power when
and off'-loading. negotiating as a grouP.
It also eases customs checks at border entry (c) Explain the intportance of the .following
and allows groupage. documents in /breign trade :

Insurance is cheaper. fi) Airuavbill t4l

(b) State, v'ith t'nto reasrtns in each case, lhe h'pe Used rvhen goods are carried bY air.
of'transport y'otr tt'otrld use .for sending: - It is a contract of carriage and accompanies
(il Mealie-rneal.fi'om d ntillet' to a locol shop. [3J goods.

M - It is also a receipt for goods and shows the

flight number.
- Cheaper and f-aster oler short distances.
- It has flexible delir,ery sen'ices.
- It contains a full description of goods, their
origin and destination.
- There is less handling of mealie-meal and thus
(ii1
reduces the risk of theft'
Consular int'oice t4l
(iil Fresh flott'ers.ft'ortt Bulqwtn'o to China. t3l
- It is a document used in internationals trade.
.4 ir - Certified by a representative (consul) of the
imporling country that prices are correct.
- Flowers are light. perishable and l'aluable.
- It helps in the calculating of duty when duty is
- Need a fast mode of transPort.
based on value.
- Less damage or theft.
- It therefore speeds clearance ofgoods.
- .
Safe and less insltrance charges'
- It also prevents fiaud in duty.
(iii) One thousend tonne.\ o/'bricks .froru Gweru to
9. (a) State and explain the features of monel'. Il2J
Ilarare. t3l
- Acceptability - people should be free to accept
Bsb1gt (take it as a means of PaYrnent')
- Bulk goods (bricks). - Divisibility - it tnust be available in different
- Cheap for bulk. denominations fbr changes.
- Fast over long distances. - Durability - must not quickly deteriorate.
8. b) Why is international tracle imporlont to a - Portability - must be easy to carry around.
countrv? t\l - Recognisability notes and coins of different
- It can get goods it cannot produce. sizes are easily identifled.
- It can also supplement shortages for example - Scarcity - must be limited in supply but not
in case ofa drought. too scarce.
- A country is able to sPecialise. - Stability - must have a fairly consistent value
- lncreases the al'ailability of a
variety of over a time to avoid inflation.
products in a country and the standard of - Uniformity notes and coins of the
living. same denomination must be identical
- A collntry is able to u'iden its market. (1ook aiike).
- A collntry can also obtain foreign cuffency to ft) What is the importance of Automated. Teller
import goods. Machines GTMsl? t9l
- Encourages interdependence and exchange of - Fast in dispensing money.
technology. - Money can be w'ithdrawn any time.
- Quality goods can also be obtained.

Answers @ .**
 - Can show the balance available. - Sells a wide range of goods.
- Saves on labour and wage bill (less tellers - Sells at cornpetitive/low prices/employs
employed). SPQR.
- Issues mini statements. - Has mirrorsiemploysisecurity guards/closed
- Uses personal identification number (PIN) for television circuits'
offunds.
security - Provides parcel bays, trollies shopping
- The PIN can be changed. baskets'

_ Customer can use Zim_Srvitch. - Provides off pick shopping hours/open after
working hours and on public holidays'
- Money can be transferred from one account to
another. - Situated on the outskirls of torvns, where
rentals are 1o*'.

Exominqtion 3 - Provides large car parks, playgrounds and

toilets.
| (a) E.rpluin the benefits of trade to ct cotuttry.[l0J _ There are many checkout points.
- Enables the exchange ofgoods and sen'ices There are satellite shops such as banks and
- Enables the disposal of surplus products. fllling stations.
- Prevents shortages There are communication links.
- Enables goods to be produced in large - There are good transport links.
quantities' - Goods are sold on cash and carry basis.
- Satisfies human needs and $'ants. _ Sells groceries and household goods.
- The country can obtain what it cannot produce. Goods are:
- The country gets foreign currency. - individually priced.
- A wide variety of goods is available. _ branded and pre_packaged.
- Improved standards of living. - well displayed.
- Raises revenue for the govemment usually fresh.
(b) How "' "-" to a
is w'arehotrsing an essential service (b)
ntctn,racturer'? i;ol Yl;,l: t':,!i,',i,i; ";:;;:',7:,,"";::;'f,,';
- Keeping raw materialsiinputs. scqle retailers? t6l
- Storage of semi-finished goods. - Sell at low prices
- Safe keeping of tools/equipmentlmachinery. - Carter for individual customers' taste/offer
- Stocking spare parts. personal sen'ice
- Keeping goods in transit. - Situated near customers
- Keeping goods awaiting demand. - Provide specialised services or goods
- Storing goods aw.aitrng delivery. - Offer long shopping hours
- Evening out supply of goods thus preventing - Sell a variety of goods
shorlages. - Sell in very small units
- Stabilising prices/reducing price flucruations - Have low overhead costs
- Clearing production lines. - Can buy in bulk cheaply by joining voluntary
- Protecting goods from bad weather conditions. chains
- Reducing the risk of theft. k) Describe Do lt Yourself products (D.f .Y) t4l
- Allowing goods to be graded, packagedi - Semi-assembled goods/kits.
bottled/tinnedicanned, branded and blended Have instructions on how,to use them.
2. (a) Whqt are the characteristics of a hyper- - The consumer assembles the parts or mixes
market'? [10] the components to make finished productS.
- Is a large scale retail outlet/occupies 4000 - - Few skills are required to use the products.
5000 square metres' - consumer saves money by cloing own work
- Provides self service. and feels satisfled.

L1r!l Answers
t,,:i
 4. Explain the.following terms used in insurance:
- lmproves the standards of living of consumers'
- Usually sold by large scale retailers such as
(a) Pooling of risks t5l
supetmarkets, hypennarkets and hardware - Is about the fortunate helping the unfortunate
stores. - Many people take out similar policy offered
3. Why are the Jbllow'ing documents important to a by the insurer/insurance company
trader? - The insured pay premiums into a common
(a) t\l pool/fund
Qtrotatiort
- ls a replY to an inquirY - When the loss occurs the insurer draws money
- Detailed description of goods in stock out of the Pool of Premiums

- Prices ofgoods - The money is used to compensate the

unfortunate
- Terms of PaYment
The burden of the loss is shared
- Date of issue
Some proflt is left for the insurer
- Enables the buyer to compare quotations
The remainder is invested by the insurer
- The buyer can choose sellers with favourable
terms (b) Average clause t5l
(b) Pro-;fbrma invoice tsl A doctrine of insurance'
- May be used as a rePlY to an the inquiry/maY Falls under the principle of indemnity
serve as a quotation Prevents the under-insured from getting fulI
May be used where payment is required before value of loss amount from the insurer in the
goods are desPatched event ofpartial loss.
May also be used where goods are sent on Insured becomes own insurer for the remainder
approval of the loss
- may also be used where goods are sent on Prevents the insured from making a profit out
consignment of the loss
- lt is used to apply for foreign culrency - Compensation is calculated by the formula:
(c) Credit note tsl False value/amount insured x total loss
- Used to correct an overcharge True value of item insured.
- Used rn'here unsatisfactory goods are returned
NB: Actual flgures are accePtable'
- Used where empty containers on which t5l
(c) Insurable interest L-J
deposit had been charged are retumed to the
supPlier - Is a princiPle of insurance
- Used u'here an allowance for breakages or - One can only insure own propefiy/one cannot
substandard goods is given where the customer insure another Person's ProPertY
decides to keeP the goods - Because one may cause the loss deliberately
- Shows a reduction on the amount owing - Ensures that the insured does not make profit
- Used to cancel a wrongly sent invoice out ofanother Person's loss
- Can be used where gift vouchers are given to - Enables the insurer to determine whether the
customers applicant is entitled to cover.
kil Advice note t5l (O Consequential loss tsl
- Informs customer that goods are on their way' - Covers loss which results from another loss'

- Enables the customer to make arrangements - Covers loss resulting from temporary closure
to receive goods for example preparation of of business after the occuffence of the insured
warehouse risk.
- Describes goods to be delivered - Ensures that business continues to receive
- Gives date of desPatch of goods payments to cover up for profits lost'due to
temporary closure.
- Method of despatclr./transpoft to be used
- Shows terms of desPatch
- Enables business to pay its running expenses
while business is closed.
- Quantity of goods

Answers
tlzgl
.-ir
 - The policy should contain a clause to this - Accounts are published.
effect.
- Must have a statutory declaration.
5. Explain the mainfeatures oJ'the following business
- Founders/promoters should present a
organisations:
memorandum and an articles of association to
(a) Public corporation tl 0l the registrar of companies to be registered.
- Government owned on behalf of the public. - Must appoint an extemal auditor.
- Established by an act of parliament. 6. (a) Outline the importance of containerisation.
- Is a public sector enterprise. tt0l
- Managed by a board of management appointed - Ensures safety ofgoods
by the government - Containers are sealed before departure
- Can sell stocks or bonds financed by the - Are opened when they reach the consignee
government through grants - Enables easy handling of goods/can be
- Government pays some of the costs mechanically handled
- A minister is accountable for its the flnancial - Reduces delays at border posts
performance - Reduces the need for warehousing/can be
- Do not have the profit motive/aim to provide stacked outside
essential goods or services at reasonable prices - They can be specialised containers for special
- Surplus is ploughed back into the business cargo for example tankers for liquids and
- Accounts are published gases

(b) Public limited cornpany It0]

- Can be transferred from one mode of transport
to another
- Is a private sector enterprise.
- Shareholders/ownersreceivedividends.
- Increases the speed with which goods are
transported
- Is a separate legal entity.
- Reduces theft and breakage ofgoods
- There is continuity even after death of a
shareholder.
- Protects goods from bad weather conditions

- Should be registered with the registrar of

- Allows groupage for less than container load
companies. - Leads to low insurance cost
- Must have a cerlificate of incorporation. - Reduces labour and freight charges

- Sell shares to the public through the stock - Can be hired where there is insufficient capital
exchange. to buy them
- [t is controlled by a board of directors elected - Collapsible containers saves space on return
by the shareholders ar the AGM. joumey/routes
- The day to day running of the company - Can be marked/labelled for easy identification
business is by controlled by the managing - Can be traced if lost
r director. (b) State yyith reasons the mo,\t appropriate
- Issues debentures to raise more capital. m et hod of transp ort in g ;

- Owners have limited liability/business debts do (i.) Fuelfrom Port Beira to Mutqre ISI
not extend to personal assets ofshareholders. Pipeline
- Shares are transferable/listed on the stock - Safe/
exchange.
- Reduces the danger offire
- Advertise for shares by issuing a prospectus.
- Reduces theft
- The name ends with the word ,limited,. - Enables bulk carriage of fuel/fluids
- Has large capiral.
- Fast on conveyance of fuel/instant ffow of
- Must receive a certificate of trading to staft fuel/continuous flow of fuel
operating.
- Cheap to maintain
- Is formed by at least seven to infinite - No transhipment is required/direct form of
shareholders.
transport

,4,nswers
 (ii) Bread from IJukers Inn, Harare, to a shopping
Stop/sionding order Direct debit
cenlre in Mttzarlbani tsl
Roadidelivery van Used to pay fixed/regular - Used for paying
amounts irregular/varying
- Fast over short distances
amounts
- Cheap over short distances
- At regular intervals/ payment intervals vary,
- Provides direct link/door to door delivery
payment intervals are irregular intervals
- Ideal for perishable goods like bread fixed
- Road transport is flexible on time tables
- E.g. instalments, - E.g. electricity bills,
- There is a wide road network insurance premiums water bills
7. (a) Descrihe the main .functions of the Reser ,^e
Debtor initiates payment - Creditor initiates
Bank of Zimbahwe. [1 2] payment
- Bank to other banks/offers banking senrices to
- Creditor completes stop/
other banks Debtor completes direct

- Lender of last resoft

standing order fbrm. debit authorisation
form.
- Offers loans and overdrafts to other banks
- Operates current accounts for other banks (a) Distingttish behreen home trade and .fctreign
- Provides clearing house serr,'ices
trede. [ 14]

- Settles interbank indebtedness Home trode Foreign trode

- Withdraws and destroys wom out notes and Between citizens of the - Betrveen citizens of
coins different countries
same country
- Controls lending rates
Different units of
Same units of
- Issues notes and coins
measurement are used measurement are used
- Replaces worn out notes and coins
-
Relatively short Long distances are
- Is a banker to the government
distances are involved involved
- Is an advisor to the government on monetary
Less state interference More state interference
issues
- Carries out the country's monetary policy Low risk is involved - More risk is involved
- Keeps state department's accounts/banker to - Low insurance cost High insurance cost
state departments
- Local language is used Different/foreign
- Manages the nationai debt currencies are used
- Keeps the country's gold Sarne currency is used - Foreign languages are
- Manages foreign currency reserves used
- Assists the state in borrorving funds from the
- Involves rvholesaling Involves importrng and
public
and retailing exporting
- Regulates money supply
Fewer documents are - More documents used
(b) Di/ferentiate betu,een a stop/standing order
used
ancl direct debit. t8l

Answers tl]s r

e
 (b) Describe the private bag postal service. t6l - They need to be protected against unlawful
- Is a postal service provided by the post office repossession ofgoods bought on hire purchase
- A canvas lockable bag - They need to be protected because some goods
- Is rented from the post office are complex and consumers require more
- Each bag has a number information.
- Is used to collect ordinary and registered mail - Sellers of goods may refuse to honour their
guarantees and warrantees.
- Mail is delivered and collected from the post
office during working hours - They need to be protected from overcharging
and profiteering.
- Used by people with no street addresses
- Ideal for rural areas
- They need to be protected from conditional
selling.
- The canvas bag has a name tag
(b) Wat are the benefits of advertising to the
- The bag is portable advertiser?
- tl 0]
The post office keeps a spare key - Informs customers of the availability of goods
- Positive identiflcation is required when - Enables the company to give information on:
collecting the mail from the post office Prices; Where to buy from; Types of goods;
9. (a) Why do consumers need to be protected. [I0J How to use the goods; Forthcoming events.
- Some advefts may lead to impulse buying by - Enables recruitment of labour
customers. - Make/increase sales
- Some goods may be of substandard. - Increased profits
- Some advertised goods may be unhygienic. - Creates loyalty/improves the company,s
- Adverts may give false descriptions of goods. image to the public
- Some adverts may be unethical. - To launch new products
- Some goods may be dangerous to the
- Reminds customers of existing products/
consumer. maintain sales
- They need to be protected from disclaimer - To locate suppliers
clauses. - Encourages customers to buy
- Consumers need to be protected against - To fight competition
hoarding. - To fight negative publicity
- Consumers may enter into contracts they do - To broaden the market
not undemtand/consumers can be gullible.
- They need to be protected from buying expired
goods/out ofdate goods Exominotion 4
- Consumers need to be protected against high
1. (a) Distinguish betw,een clirect procluction ancl
pressure salesmen.
indirectproduction. tl2l

Answers

r
 - Local authority regulations
Direct production lndirect production
- Consider cost of building, buying and renting.
Making goods or Making goods or (b) a wholesaler
What are the functions of to
services for own use e.g. sen ices for others retailers'? tBl
subsistence farming.
Receives orders
Need for variety of skills - People cooperate to
Provides variety of goods
to produce goods. produce goods in
commercial farming Sells goods to retailers
Provides information
Low production Leads to specialisation
May advertise
- Poor quality goods are Leads to mass
Breaks bulk
produced production
Stores goods
Poor standard of living - High quality goods /
Delivers goods
services produced
Receives complaints
Lack of variety Avariety ofgoods are
Offers credit/finance
available
Gives advice
- Independence in - Leads to high standard
Evens out flow ofgoods
production of living
Risk bearing
People cannot obtain all Many needs/wants are
Steadies prices
goods/services satisfled
Grades/brands/packagesiblends/bottles/sorts
- Leads to
Conveniently located near retailers
interdependency
k) Explain the importance of bonded warehouses
to traders. t4l
(b) What is the importance o.f advertising to a - Stores dutiable goods

trader? t9l - Goods can only be released when duty has

been paid
- Provides information on goods available,
change in the product/ where to buy/types of - Goods can be transferred by bonded Carmen
goods/horv to use/events/Prices - Goods can be sold while in bond
- For employers to recruit labour - Stores goods for re- export
- Increases sales and proflts - Stores goods until they mature, for example
- Improves the company's image wine, tobacco
- Launches new products/fashion - Goods can be removed from bond in small lots

- Reminds customers to maintain sales - Goods can be packed, branded, sampled,

bottled and graded
- Alloivs company to locate suppliers
- Persuades customers to buy
3. Explctin the following terms vvhich are associated
with linited companies :
- Fights competition and bad publiciry
(a) Prospectus t4l
- Widens the market.
- An invitation to members of the public to buy
2. (a) Describe the.factors to consider in setting up shares
a Y,arehouse. t8l - Issued by public limited company only
- Transport ancl communication facilities
- by company promoters / issuing
Prepared
- Sources of power and water
houses after registration of a public limited
- Nearness to labour company
- Security of the area - Sent to registrar of companies before inviting
- Nearness to supplies of goods members of the public to subscribe for shares
- Nearness to customers - Useful to investors who want to assess risk in
- Availability of land making an application for shares

Answers I
 :
(b) Private
- Usually family owned business
t4l - Drawer is dead /insane

- Membership is by invitation
- Signature differs from specimen
in bank
_ If stopp edby drawer
- Shares cannot be so.ld or transferre
d publicly _ Unsign ed alterations

['ffi:', #;xf;. -' not available for incomprere derails, for example

@ Board of directors - no date

tBl -
- Elected at an Annual General Meeting(AGM) Account is closed
- Control the business - Insufficient money in the drawer's
account
- Run business on a daily basis through a - Drawer is declared insolvent/ bankrupt
/
managing director or chief executive specified.
officer
- Must hold ordinary shares @ Explain direct clebit
- Draws up policy of the company - Method of making/ receiving payment t4l
- Powers and limitations are stated - When debtor wishes to initiate payment
in the articles
of association To make payments of varying amounts
and
- Board chooses the managing director where intervals between payrients
vary for
- Headed by chairperson example electricity bills.

The managing director reports to

- Payment is prompt
the board
(iv) Annuctl General Meeting (AGM) - No need for reminders to reduce
bad debts
t4l - When creditor and debtor have
Held once a year bank accounts
- A legal requirement for limited companies 5. Explain the importance o.f the Jbltow,ing
under the Companies Act commun ication s erv ices ;

i
- Must be attended by all shareholders (a) Fax
-' bv
or "J _ tsl
proxy Machine consists of a photocopier and
- Where decisions are made telephone circuit.
- Where Board of Directors are elected - To send and receive information
on document.
4. (a) Describe the ser,-ices of the people - Produces information as it is (exact
copies)
s Own
Savings Bank. rcl
- Ideal for detailed information, such
as plans
- Provides money orders and postal
orders
and diagrams.
- Lends money to large organisations such as - Provides a written record.
discount houses - Message is received even if office is
- Operates stop order facilities unattended.
- Accepts deposits from individuals - Can produce multiple copies.
and
companies - Subscribers have fax numbers.
- Operates savings accounts w,hich
earn tax free - It is fast_
interest (b) Telephone
- Invests money in treasury bills
and municipal - tsl
Subscribers are allocated members.
stocks
- Allows dialogue.
- Provides Automated Teller Machines(ATM)
- Issues cheques on request - Offers immediate contact.

(b) Why would a cheque be dishonoured? - Sends and receives information.

- No funds in drawer,s account tBl - Reply is immediate if attended.

- Amount in words and figures differ - Can be used locally and internationally.

- Cheque is stale - Can be used with an answering

machine.
- Cheque is post dated - Offers free phone, time calls and
reverse
charge calls.
- Cheque is tom /dirry /mutilated
- Direct calls can be made using
STD or IDD.

Answers
 (c) Datel t1l - Amount of compensation is paid to the insured
Send and receive business information using after loss has occurred.
computer via a telephone circuit. - The insured must not gain out of a loss.
- Stores data and displays information on (c) Subrogation t|l
computer. - Once the insured person has been compensated
- Information can be retrieved and printed adequately and precisely, the insured item
(rvritten records). damaged in the accident belongs to the
- Uses modems. insurance company.
- Information can be sent and received anvtime. - The insured cannot sell it.
- Can transmit information accurately. - The insured may be given cash equivalent to
the value of the item damaged in an accident.
- Information can be edited / corrected before
sending. - The insurance company may buy an item
whose value is the same as that of the damaged
- Used in banking or foreign cunency markets.
item.
- Consenes privacy
- If the insured person is taken to court, the
- Fast to send information.
insurance company will represent him or stand
(d) Teler t5l in his/ her place.
- Subscriber has a number. - Prevents the insured person from making a
- Messages are sent and received via a tele- profit out of a loss according to the principle
printer and a telephone circuit. of indemnity.
- Message is produced simultaneously. (d) Average clattse t|l
- Quick transmission of message. - Ensures that the insured does not gain from
- Message can be corrected before transmission. under-insurance.
- Provides written record. - When a loss occurs the insurer will not
compensate the full value of the loss.
- Can operate unattended.
- Can produce multiple copies.
- The insured will become own insurer for the
remaining loss
- Can provide an immediate reply.
- Average clause formula;
- Cheap and enables immediate contact.
Show hov,these principles will be important to an
False value x loss or damage

insured person v,hen making a claim. Actual value I

(a) Lttmost good faith. tll Example
- Insured should be honest/ tell the truth. Value ofgoods s6000
- Must show all relevant details on the proposal Insured at $3000
and on the claim form. Goods worth $600 destroyed
- Failure to provide truthful information makes Therefore insured is entitled to S3000 x $600
the policy void. s6000 1

The insurance company must also explain all $300

the terms and conditions accurately.
- The insured becomes own insurer for $300
Allows assessment of risks. (s600 - $300)
Accurate information helps to flx fair 7. (a) State the advantages of air and pipeline
premiums and fair compensation.
transport? F2l
(b) Indemnity t5l Air transport
It applies to property insurance.
- Suitable for high value low volume goods
It restores the insured to his/her original - Less packaging
flnancial position before the risk occurred. i

- Less documentation
It does not apply to life assurance because no
amount of money can adequately compensate
- Low social costs tl
ri

someone's life. - Operate on fixed routes and fixed timetables I

#
I

@
1l

.lt:

Answers
tr*
r
 - Fast over long distances - Complex goods and disclaimer clauses
- Less transit risks /safe - Indecent and immoral advertisements which
- Low insurance costs undermine social standards
(b) Explain the dangers oJ'advertising t6l
Pipeline transport - Selling price tncreases

- Ideal for fluids (liquids and gas). - Mislead by false claims

- A direct mode of transport - Difficulty in choosing the brand

- A fast mode - Produclion costs per unit increases

- Cheap to maintain
- Incur financial losses

- Provides a continuous flow of fluids - Expenditure may not be justifiable

- Moves large volumes of fluids - Goods advertised may be harmful

- Prevent fluids from freezing - Leads to overspending

- Safe and saves on labour

(c) Describe the work oJ'the Constrmer Council of
- Protects fluids from heat, rust, pollution and
Zimbabwe. t\l
contamination - Carries out market research

(b) What are tramps? t8l - Educates consumers on consumer rights

Are ships meant for hire - Advises consumers to buy wisely

For a specific journey(voyage charter) - Receives and investigates consumer

complaints
For a speciflc time (time charter)
- Offer shipping space
- Arbitrates on behalf of consumers

- Travel anywhere in the world searching for

- Takes up cases with law enforcement agents
such as the small claims court
business
- Have no fixed routes; and
- May conduct spot checks on prices and
standards ofhygiene
- No fixed timetables
- Promotesmanufacturingstandards
- Do not normally carry specialised cargo/carry
- Recommends testing of products
generalised or mixed cargo which does not
need careful handling, for example timber - Recommends reputable shops to consumers

- Freight charges are negotiable - Promotes ethical advertising

- Have no perrnanent home Ports - Recommends legislation for protection of

consumers
- Freight charges are bargained/ not fixed
B. (a) Why do consumers need protection when 9. (a) How may a country reduce a bolance o/'
payment deficit'? t6l
buying goods'? [8]
- Overcharging by traders - Increase exports to increase inflou' of foreign
cuffency.
- Misleading advertisements - Reduce imports to reduce outflow of foreign
- Sale ofpoor quality goods (shoddy goods) curTency.
- Incomect labeling of goods - Devalue local currency to make imporls dearer
- Lack of adherence to standard weights and and exports cheaper.
measures - Reduce foreign currency allocation to
- False price cutting importers.
- Unfair and unlawful repossession of goods - Negotiate for debt cancellation with the
bought on hire purchase International Monetary fund.
- Conditional selling of goods - Sell own assets in foreign countries.
- Consumers are gullible - Sell gold reserves.
- Unhygienic premises and food - Control the issue of import licenses to reduce
- Hoarding of goods resulting in artificial the number of importers.
shortages - Substitute imports with home-made goods.

Answers
 - Introduce or increase excise duty on - Provides a library of information services on
ceftain goods so as to discourage domestic standards
consumption and make more goods available - Provides laboratory facilities to producers
for export. for testing of manufactured goods and raw
- Increase customs duty to discourage materials.
consumption of imports.
- Impose quotas to limit quantities of goods Exominotion 5
imported.
1. @ State six advantages and six disadvantages oJ'
- Subsidise exports. specialisation. t12l
- Give tax concessions to exports to encourage Advantages
exports.
- Allows concentration
- Borrow from the International Monetary Fund - Increased employee skills
(I.M.F) or any foreign financial institution
like the World Bank or African Development
- Assists training of labour

Bank. - Makes jobs transfers easy

- Establish export promotion to attract foreign

- Allows mechanisation or automation
buyers by participating in trade fairs and - improves standards of living
exhibitions. - Lowers the cost of production
(b) Explain the importance of trade to a countty. - Reduces production time
t8l - Increases productivity
- To get what a country cannot manufacture, - Facilitates standardisation
- To obtain what it does not possess, for example
oil, raw materials. Disadvantages
- To sell surplus. - Creates interdependence
- To access high quality goods thereby - Eliminates craftsmanship
improving the standard of living of people - Results in boredom and monotony
- To access a variety ofgoods. - Redundancy of workers
- It enables countries to specialise. - Unemployment
- To obtain goods at competitive prices. - Employee inflexibility
- Foreign currency is obtained to pay for foreign (b) What are the dffirences beh+,een primaryt qnj
goods. secondary production? tBl
- To widen markets and create employment.
- It improves relations. Primory production Secondory production
- To make profit or even revenue.
First stage of production Second stage of
- To supplement shortages / seasonal goods. production
- Enables transfer of technology / business
Extraction of natural Processing ofraw
skills.
resources materials
- To beneflt from comparative advantage.
(c) What is the role of the Standards Association Examples include farming, Exampies include baking,
of Zimbabu,e? (SAZ)
mining, oil drilling, rubber milling. weaving andiron
t6l trapping, forestry smelting
Prepares standards of products
Tests products for quality
Monitors, adopts and modiflrs international 2. (a) Outline the characteristics
'
of a hire purchase
standards of quality, safety and performance contract U0l
Gives authority to firms to use their seal of Written agreement of credit sale between
approval buyer and seller.
Ensures quality of products is maintained Govemed by the Hire Purchase Act.
I

Issues copies of standards speciflcations Buyer pays deposit when they take goods.

Answers u91.j
.fit
&
 Remaining balance is paid in instalments. (ii) Airwaybill t7l
Buyer can only become the owner upon paying - Acknowledgement by airliner of receipt of
the final instalment. goods
If buyer fails to pay instalments the goods can - Agreement of carriage between air liner and
be repossessed by the seller. consignor
Repossession ofgoods is done through a court - Advice note to consignee
order where a buyer has paid up two-thirds of - Bill of freight charges
the purchase price.
It shows:
Buyer can cancel the agreement if he/she is - Description and amount of goods
not satisfied
- Name of despatching airport
Buyer can sell the goods to a third parry but
cannot pass ownership ofgoods
- Consignor and consignees names

Suits the sale of goods that have a re-sale

- Proof of payment of air charges
value such as cars, refrigerators, and consumer b) For w,hat reasons would the government of
durables Zimbabw,e impose trade restrictions? tSl
(b) In what wa1,s do businesses benefit from the
- Protect infant industries
services oJ'a wholesaler? t l0l
- Protect declining industries
Supplying information on market trends - Prevent dumping
Storage ofgoods - Solve BOP deflcits
Financing the producers - Protect employment
Selling goods on behalf of manufacturers - Preserve national culture

Risk bearing 4. (a) Ontline the importance of the lbllowing in

connec t ion tL' i t h I i mited c ompan ie.s :
Stabilising market prices
(i) Prospectus t5l
Linking producers to retailers
- Invitation by public limited company to
Allow seasoning and maturity of goods such
investors to buy its shares
as wine, spirits and wood
- Details company's present and future prospects
Enables blending, packaging and bottling
- Provides information on the company's future
- Bulk-breaking potential
3. (") Describe the contents and explain the - Provides the finn a chance to market itself
importance of the follov,ing documents used in
- Private limited companies do not issue
foreign trade: prospectus
(, Indent t8l (ii) Memorandum o.fAssociation t5l
Importers' order for goods - Regulates a limited liability company,s
Specifles required goods relationship with other institutions in the
Gives packing and shipping instructions outside world.

Open indent gives agent freedom to choose - States the company's name and purpose of
goods existence.

Closed indent does not give agent room to - Shows official address of company.
choose goods. - Reveals the fact that liability of the company
It shows: is limited.
- Description of goods - Shows the company's authorised share capital.
Catalogue numbers
(iii) Certificate of rrading t5l
Quoted prices
- Issued by Registrar of Companies.
Place of delivery - Permits a public limited company to start
business trading operations.
Addressed of parties
Packing and shipping instructions
- Private limited company can do business
without a certificate of trading.

@
&
,4nswets
 (b) State the disadvantages o,f a partnership Advising clients on risks to insure and policies
.fir*. t|l to take
- No limited liability Providing insurance quotations
- Conflicts and disputes Selling insurance policies
- Limited capital resources Drawing up cover notes
- Slow decision making Assists the insurer in getting reinsurance
- Actions of a partner are binding on all Assists clients in getting compensation
- Terminates by any change in membership 6. (q) Whl,dofirms need efficient communication? [B]
i. (a) Differentiate between insurable risks and non- To send and receive messages over any
insurable risks. t8l distance
lnsuroble risks Non-lnsuroble risks To clari[z misunderstandings
To effect instructions quickly
Coverable by taking Cannot be covered
insurance because no insurance To receive inquiries
company has policy for To send and receive orders
the risk To discuss and conclude business deals
Regularly occurs and is Irregular occurrence and To share knowledge and information
predictable unpredictable To advertise vacancies
Measurable and accessible Neither measurable nor To receive job applications
accessible (b) Describe and explain the importance of:
Reasonable premium can No reasonable premium (, Electronicmail t6l
be flxed can be flxed Means of
sending and receiving digital
Statistical ly calculable Statistically incalculable messages from a sender to several receivers

Examples are motor Facilitated by a network of computers and the

Examples are loss of
vehicle accident internet
properfy by war or an
earthquake Messages can be accepted, forwarded or
delivered by a computer serr,zer
5. (b) Explain whlt a person has a right to insure his Errors can be corrected before the messages
proper|' against fire'? t10l can be sent
- The person is in danger of losing their property Messages can be printed on paper if a written
- Person will suffer financial loss if property is record is required
destroyed by fire Messages can be sent and received at any time
- A person has insurable interest in his property over any distance
- Insurable interest is applied to all contracts of It is fast in transmitting messages
insurance (ii) Mobilephone [6J
- Insurable interest must be legitimate A hand held device used in making and
- No one can insure the properfy of another receiving calls over a wide geographical area
- Insurable interest must exist at the beginning linked by radio waves
of non-indemnity policies - Receiver has access to the internet
- lnterest must be disclosed upon entering - Can be used in making banking transactions in
contract ofinsurance what is called 'e-banking'
- Insurable interest can be waived or set aside if - Some have built in cameras that are used to
fake items are insured capture or display colourful images
(c) Whqt are the functions of an insurance - Receive and store messages which can be
broker? tsl viewed later
- Agent of insurer in negotiating insurance - Informs the subscriber of any missed calls
contracts thereby allowing some follow-up

Answers @
*
7. (a) Distinguish between a bank overdraft and a - Large carrying capacity
bank loan. It0] - Low social costs as they reduce pollution and
Bonk loon Bonk overdroft congestion

Formal borrowing Informal borrowing

- Eliminates pilferages and theft
- Single pipeline can transport alternative fluids
Bomower need not have a Borrower must have a
current account current account
Drawbacks
Loan agreement is usually Customer access bank
written [unds without giving - High installation costs
notice - Limited to transporting gases and fluids only
Separate loan account is Current account is used
- High pumping costs where there is high
opened
gradient
as usual
Loans are extended for Overdrafts are allowed
- Inflexible as they cannot be re-routed
long periods for short periods
- Some fluids freeze in low temperatures

Fixed amount borrowed Amount changes from

- Pipelines are enemy targets in times of war

over specified time period time to time

(b) Outline the factors considered in choosing a
mode of transport. tBl
Interest charged is Interest in calculated on - Distance
calculated annually the daily balance
- Quantity of goods
Lower rate of interest is Higher rate of interest
charged
is - Nature of goods
charged
- Urgency of delivery
(b) Mr Chapwanya banlLs w,ith CBZ Bank, Harare. - Value of goods
He paid Mr Dikfto $5 000 by cheque. Mr - Risk of damage
Dikito deposits the cheque into his Kingdom - Cost of transport
Bank, Mutare Branch accoltnt. Explain how
such a cheque will be cleared.
- Convenience
[10] - Availability of mode of transport
- It will be cleared through inter-bank clearing
9. (a) What is the importance qf :
- Drawer (Chapwanya) hands the cheque to
payee (Dikito)
(i) Advertising agency t6l
- Payee (Dikito) deposits cheque into Kingdom - Advising clients
Bank Mutare, Branch - Market research
- Kingdom Mutare Branch submits the cheque - Creating advertisements
to Head office, in Harare - Production of advertisements
- Kingdom Head Office sorts cheque together - Booking advertising space
with all other CBZ cheques ready for clearing - Placing advertisements in media
- Bundle of CBZ cheques is sent to Reserve (iii) Code of advertising practice
Bank ofZimbabwe which is the clearing house
t6l
- Ensuring truthfulness in advertisements
- CBZ Head office picks up the cheque and
- Preventingunjustifiableproductcomparisons
bundles it up with all CBZ cheques drawn on
CBZ Bank, Harare Branch - Preventing immoral and offensive
advertisements
- Drawer's (Chapwanya's) account is debited
completing the clearing of the cheque - Protecting children from dangerous
advertisements
B. (q) What are the advantages and drawbacks of
using pipeline transport ? [ 12]
- protecting consumers against misleading
declarations
Advantages
- Safe in sending inflammable substances
- prohibiting false claims in the curing certain
diseases
- Low maintenance costs
(b) How does the Consumer Council of Zimbabwe
- Reduced labour costs protect consumers'? t9l
trait
Ys Answets
 Receiving and investigating consumer - Examples of companies in secondary
complaints production are Willowvale Mazda Motor
- Settling disputes between traders and Industries, National Foods, Delta Beverages,
consumers Dairiboard Zimbabwe Limited, Costain
- Providing advice Construction
- Promotes the production of quality goods 2. (a) What are thefunctions of a retailer? t10l
- Educating consumers on their rights - Breaks bulk selling in small quantities to
consumers.
- Recommending reputable shops from which
to buy - Operating during convenient times.
- Market research and survey on issues affecting - Selling daily required goods like bread and
consumers milk.
- Lobbying for legislation that protects the
- Advertising on behalf of manufacturers and
consumer wholesalers.
- Giving advice and information to
manufacturers and wholesalers on goods
required by customers.
Exqminotion 6
- Advising consumers on goods available.
1. Explain the follow,ing terms: - Providing delivery services.
(a) Goods t6l - Providing storage facilities.
- Goods are tangible, that is they can be touched - Buying goods in bulk from manufacturers.
and seen.
- Clearing manufacturers production lines.
- Examples include beds, bread, exercise books
(b) Describe the reasons for the elimination o.f a
and rubbers.
wholesaler. I l0]
- They can either be producer or consumers
- Emergence of manufacturers own retail
goods.
outlets, for example Bata
- Producer goods are used to produce other
- Emergence of mail order businesses
goods.
- Examples are combine harvesters, welding
- Selling of technical goods
machines and lorries. - Selling of high valued goods
- Consumer goods are the goods used by flnal - Where perishables are sold
consumers to satisfr their needs and wants. - Increase of large scale retailers who have
- Examples of consumer goods are sugar, milk large capital to buy in bulk straight from
and clothes. manufacturers
(b) Needs t4l
- Development of voluntary chains
Needs are basic things - Retailers having own transport and warehouse
facilities
A person cannot do without needs
Examples are fbod, water, shelter, clothing
3. (a) Describe thefunctions of the Grain Marketing
and healthcare
Board. tSl
Needs are consumed to sustain life.
- Buys grain from farmers e.g. maize, sorghum

production - Stores grain in Silos

k) Secondary [10]
Second stage of production
- Sells grain to milling companies e.g. Blue
Ribbon
Includes manufacturing, processing,
- Fumigates grain to prevent effect of pests
assembl ing and construction
Raw materials are converted to usable goods
- Processes grain to come up with products like
Silo rice
(semi-finished and finished goods)
For example, timber is converted to furniture;
- Delivers grain to areas of need e.g. during
droughts
milk is processed into yoghurt; roads and
bridges are constructed; vehicles are assembled - Prevents grain shortages by importing grain

Answers u99J
#r
fttr
 - Evens out suPPlY of grain Devaluation of local currency
- Collects grain from farmers Subsidising exports
- Provides grain bags to farmers 5. (") Distinguish between shares and debentures
- Grades and reweighs grain
[12]
(b) (i) Distinguish between trade discount and Shores Debenfures
cash discount t8l Unit of value owned by an Unit of value loaned
Trode discount individual in a business to a company by an
Cosh discount
individual
Amount deducted after Amount deducted from
trade discount the total price on invoice Eams dividends Attracts interest
(gross invoice) Interest is fixed for
Dividends fluctuate for
Allowance by a trader to Allowance by one trade ordinary shareholders debenture holders
any customer to another Ordinary shareholders Debenture holders do
Allowance to customer to Allowance to a customer vote at the Annual General not vote at the Annual
pay early to help him realise profits Meeting General Meeting

Increases rate ofstock tum Encourages bulk Shares for public limited Debentures can be
purchases companies are traded on provided by individuals,
the Stock Exchange corporates or venture
capitalists
(b) (ii)llh1, trader allow a trade discount
"1'srr14,
to another trader? t4l Shares are permanent Debentures are long term
To encourage the trader to buy in bulk capital and shareholders loans and will be repaid
can transfer ownershiP to by the expiry date
Encourage the trader to buy from the speciflc
supplier
willing buyers
To attract other traders
To increase sales (b) Outline the contents of'partnership deed. [BJ
Help the trader realise profits Legal document that states the rights of
4. (a) Explain the benefits of foreign trade to a partners in the event of a disagreement
countryb economy. It0] Amount of capital contributed by each partner
- Country gets goods it does not produce States how profits/losses will be shared among

- Increases choice ofgoods partners

- Obtain goods of high qualitY Procedure for ending partnershiP

- Gets goods at a cheaper Price States how much control each partner has

- Acquires new technologies such as in Rules for admission of new partners

telecommunication, food processing Name of partnership
- Force country's industries to align business to Outlines how disputes will be resolved
international standards 6. (a) Explain to Mrs Sibanda, a ne\N current account
- Earns foreign culrency holder w,hy her cheque may be dishonoured.
- Creates employment tt0l
- Fosters friendship and alliances Amount in lvords differs from amount in
figures.
(b) How may Zimbabwe reduce a balance of
pqyments deficit'? t6l If the post-dated cheque is presented before
the future date.
- Control foreign currency expenditure
- Restrict imports through quotas and customs
It the cheque is six months after the date of
issue.
duty
It is tom. diny or mutilated.
- Ask for debt pardon from international
institutions The signature on the cheque differs from the
specimen signature at the bank.
- Substitution of imports with local products

r1!9_J
; Answers
w
 - There are insufficient funds in her account to - She is given a claim form by national Insurance
cover the cheque amount. Company.
- She has instructed her bank to stop payment - She completes the claim form in utmost good
- A cheque presented to the bank after her faith.
account is closed. - Submits the form together with a police report
When she is dead or insane/mad. to the insurance company.
There is incomplete/missing detail on the - Insurance company goes through the claim
cheque for example no date. form and also goes to assess the damage.
Alterations on the cheque are not signed for. - When satisfied that no breach of contract
She is bankrupt/insolvent/specifl ed.
was done, insurer then calculates amount of
compensation.
There are no funds in her account.
(b) Describe the contents and explain the
- Ms Lister then receives compensation.
importance of a bill o.f lading. [10] - She will receive an amount equivalent to the
loss incured [principle of indemnity].
Contents
- Details of the vessel used, freight charges,
(b) Outline thefunctions of assessors t4l
rnarkings on crates. - Assess details on the claim form.

- Names and addresses of importer/exporter. - Examine the damaged item.

- Condition of goods (diry or clean bill). - Ascertain the exact cause of the loss/proximate
- Description of goods (nature/quality). cause.

- Quantity of goods.
- Calculate the cost of the damage.
- Port of loading/origin and off-loading/ - Determine what has been damaged.
destination. - Calculate and recommend the amount of
compensation to be paid.
Importance - Negotiate amount to be paid out against a
- A contract ofcarriage ofgoods by sea. claim.
- Is an acknowledgement of the receipt of goods kl Wy is insurqnce important to Mrs Pfuka, a
on board. tobacco farmer?
- A document of title (proves ownership of B. (a) What factors does a company consider in
goods). choosing a mode o-f transport? []01
- Acts as an advice note speciffing the cargo Cost
sent by a named vessel.
Speed
- Aids in negotiating documentary credit from
Type/ nature ofgoods
banks. I
- Assists customs authorities in veriffing the
Infrastructure
origins and quantities of the goods. Flexibility of transporl
- A quasi-negotiable instrument (transferable by Availability of other modes of transport
endorsements to third party). (b) Desc ri be the .foI I ov' i ng se rv ices :
- It specifles who pays for insurance and freight o Dqtel t5l
charges.
- Computerisedsystemofpresentingaccounting
7. (a) Describe the steps taken by Ms Lister to make data/information
a claim w*ilh I'lational Insurance Company.
- Fast method that uses computers and internet
t8l based computer networks to transport
- When a risk occurs she should report to the accounting data
police and get a police report.
- Mainly used by banks in the transmission of
- Ms Lister should notify National Insurance information on exchange rates
Company of the occurence of the risk within
twenty four (24) hours [clause of notiflcation].
- Also stock markets make use of this system

Answers UggJ
*3
 (ii) Internet [5J Forces producers to improve the quality of
goods because of competition.
- Source of information that uses computers,
modem, server and telecommunication Customers beneflt from lower prices as firms
seruices compete.
- Used for sending and receiving messages in Reminds customers of existing brands.
realtime Customers get to know what is on the market
- Messages can be displayed on screen while in the comfort of their homes.
(c) Whot is the role of the Standards Association
- Uses the world wide web (www)
of Zimbabwe'? t6l
- Access protected by password
Preparing and publishing Zimbabwe national
- Users must have an email address standards.
- Can be used for online shopping Offering standard based training to promote
9. a) How is Mr Lincoln, ct consumer, protected by an understanding of standards requirement.
the Hire Purchase Act? t6l Providing technical services for the testing of
Mr Lincoln is protected by the Hire Purchase goods as well as calibration of equipment.
Act as it makes him an informed buyer. The Operating cerliflcation marking schemes to
Act requires that: encourage the use of Zimbabwe standards,
- The customer must clearly see the cash price for example, goods may be licenced as being
of the goods and the full hire purchase price. in accordance with the appropriate standard
bearing the Association's certificate mark.
- The required deposit must be clearly stated.
Making available to producers and consumers
- The full finance charges must be disclosed to
laboratory facilities for testing of raw materials
the customer (in this case Mr Lincoln).
and finished products.
- The instalments payable per month must be Operatinga registration scheme for companies
disclosed. complying with international standards ISO
- The duration of the repayment should be made 9000 on quality system.
known. Putting quality management mark on tested
- The terms of repossession must be spelt out. products.
(b) State the bene.fits of advertising to consumers. Providing a laboratory and information service
t8l which has copies of all international standards
- Gives customers information about new (rso).
products, prices of goods and places to buy To adopt and modif, intemational standards
from. of quality, performance and safety.

Answets
 l'i\
-fiidsy Revision Commerce makes the stpdy and preparation fqr'O'Level
\Cemmerce examinations easy. It is suitdble for the current eommerce
\yUrbut

_Thebook:
. covers all the syllabus topics;

. s{grts each chapte,r with clear objectives as a guide to teachers and

candidates;

. gives brief study ng',;g?* foleach syllabus topic,

lvhich helps candidates
understand and rernr,mber facts; I

. is written in point form sui[able for quick revision; i:

. gives current and real-life, examples to enhance the understanding of
conceptg; t

. gives common effors that candidatds need to avoid; ii.'

t-v
. has hints and tips on how to answer structured/ essay questions; f;.

. has a'TestYourself exercise at the end ofeach topic;

. has Paper 1 .and Paper 2 questions for examination practi ce;, '
. includes an e-marking specimen examinatigiforPaper2;

. provides possibl. um*..r to Test Yourself and Examination Practice

questions;

. reinforces key concepts through repetition; and

. is also suitable forcandidates studying ontheirown.

a** ,

.r! '&
ISBN : 978 0 7p74 593&0 ,t
+
i. a', t .,.
IS BN 0?1?r+ 5t3B-3
GODE i 2$0072 .r'.). .i.
"

illilt#
4s938
[imhahu o Publishing llor$e ro'r r,u,
... bey o nd Pu Hililing Axa@Li{$'

_.:r__,
Re-<irder contact details. Head OfficJAddr"rr, f8g Rrcturus Road, Kamfinsa Shopping Centre, Harare
Email;[email protected] CellNumber 0712 431 832, 0733 414J-39,_Direct Line: 263-4-497007,
Otfie)"liies: 263-a-497S[5/8, 495335. Fax: O4;4975i54. Webaite: www.zphpublishers.com
r Use any of thes$[oqet a Beyond p{b_lishing orcellence-response.
.T
':'d