Kolo will need money to finance the stock of parts used in car repairs. Consider the
advantages and disadvantages of the following options for raising finance.
Recommend which option he should choose. Justify your choice. [12]
Content:
Trade credit is interest free borrowing but may be difficult to obtain.
Owner’s savings do not require any interest payment and accessible straight away but
limited funds.
Bank overdraft is quite easy to arrange but has interest payments and is repayable on
demand.
Level 1 Trade credit is interest free. 1 mark for each statement.
Level 2 E.g. Trade credit is interest free as suppliers provide the car parts and then receive
payment at a later date. This means the business can obtain the parts, fit these
parts on customers’ cars and receive customer payment before they have to pay for
the parts and so cash flow can be improved.
5 marks for a level 2 answer plus 1 application mark for mentioning customers’ cars.
5 marks for the first level 2 answer. Plus 1–2 marks for each additional level 2
answer, i.e. two level two answers = 6 marks, 3 level 2 answers = 7 marks, 4 level 2
answers = 8 marks. However, if the level 2 answer is very well explained then 6
marks can be awarded for the first level 2 answer. If the second level 2 answer was
also well very explained then 8 marks in total can be awarded.
Level 3 Detailed discussion of at least two level 2 answers plus consideration of which
option to choose and justification in comparison to the other two alternatives.
Possible application marks:
cars; car repairs; stock of car parts; mechanic; car servicing; sole trader; unlimited liability; new business; garage; workshops; reference to figures in the case or Appendix 1 or 3.
There may be other examples in context which have not been included here.
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Application
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Knowledge/Analysis/Evaluation
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Level 3
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9–10 marks
At least 2 options explained at Level 2 + good judgement shown as to which source of finance to choose and why it is better than the other two sources (comparison made).
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Level 2
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2 marks
Well applied to case. At least two examples of, references to, or uses of, the case.
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5–8 marks
Good discussion of the advantage/disadvantage of any of the sources of finance listed OR balanced argument (even if listed).
Some limited judgement shown about which one they should choose.
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Level 1
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1 mark
Limited application to the case. At least one example of, reference to,or use of,the case.
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1–4 marks
Description of type of finance. Advantage or disadvantage of any of the sources of finance listed.
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