Explanation

(i) Differences Between Trade Discount / Cash Discount.

Trade discount is a reduction in price of goods given to a customer so as to encourage him to continue to buy more from the seller, or to make some profit. It is a reduction in the catalogue price while cash discount is a reduction in the price given to a customer to encourage him to pay promptly. It reduces the incidence of bad debts.

(ii)Branding/Packaging: Branding is the act of attaching a trade name to a product so as to distinguish it from products of other firms. Branding allows for standardization of goods while packaging is the act of introducing good container for a product so as to make it look attractive. It is also for protecting the product and aids its handling.

(iii) Indemnity/Compensation:Indemnity is an arrangement where an insured is returned to his former position just before the risk insured against occurred e.g. fire insurance while compensation means paying money to the insured based on estimates because indemnity is not possible. A typical example is life policy, where life cannot be restored.

(iv) Cash Receipt/Invoice:Cash receipt is issued to a customer once he pays for the goods purchased wither by cash or cheque while invoice is an evidence of credit sale stating terms of payment and details of goods sold.

(v)Credit Sale/Hire Purchase:A credit sale is an arrangement where goods are sold to a consumer with a promise to pay at a later date. The ownership passes to the buyer immediately while hire purchase is a sales agreement where the buyer pays a deposit and then agrees to pay the balance on installment basis. The ownership remains with the seller until the last installment is paid.

Correct Answer: C. certificate of incorporation

Explanation

(a) Five channels of distribution for consumer goods are:

(i) Manufacturer --->agent---> wholesaler---->Retailer--> Consumer.

(ii) Manufacturer ---> Wholesaler ---> Retailer ---> Consumer.

(iii) Manufacturer ---> Retailer ---> Consumer

(iv) Manufacturer ---> Consumer.

(v) Manufacturer ---> Agent ---> Consumer.

(b) Factors to be considered in choosing a channel of distribution are:

(i). Nature of the product: The more expensive the product, the shorter the channel. Also the more technical and complex the product is , the shorter the channel.

(ii) Location of customers: When customers are concentrated, the producer can use the short channel, but when they are scattered, the longer channel can be used.

(iii) Size of the order: When the buyers demand for large quantity, the producer can by pass the middlemen.

(iv) The channels used by the other competitors: These should be taken into consideration before choosing a particular channel.

(v) A financially buoyant producer can employ salesmen to sell directly to the consumers

(vi) Number of buyers: The number of buyers will determine the channel to be chosen. If the number is small, then it is preferable to use shorter channel but if the number is large, it is better to use longer channel.

Correct Answer: A. RAM

Correct Answer: B. Agent

Correct Answer: D. Provision of credit facilities to customers

Correct Answer: D. market orientation

Correct Answer: A. entrepreneur

Correct Answer: C. a specialist enforces his directives

Correct Answer: C. surrender value