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 Commerce

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Form 2

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Innocent Musara
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Published by
Gramsol Books
46 Kwame Nkrumah Avenue,
Harare. 2020
[Link]
Tel. 0864 420 9124

pl © Gramsol Books
© Innocent Musara
The moral rights of the author have been asserted.
Publisher: Sandura Tafadzwa
Managing editor: Mbono Njabulo
Commissioning editor: Mbono Kudakwashe
Development editor: Chimhamhiwa Jesline
Typeset by Mlilo Nigel
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Cover by Mbono Njabulo
Printed by Gramsol Books

ISBN: 978-177929-903-3

Legal Notice
All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted in any form, or by
any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission from Gramsol
Books.
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You must not circulate this book in any other binding or cover and you must impose this same condition on any inquirer.

Acknowledgements
The publisher and author would like to acknowledge and thank the following for photographs and copyright material:

Pexels / Pixabay / Unsplash / Pics4learning / Getty Images / National Museum and Monuments / [Link] / [Link] / [Link] / [Link] / [Link] /
[Link] / [Link] / [Link] / [Link] / [Link] / [Link] / [Link]

Although we have tried to trace and contact all copyright holders before publication, this has not been possible in all cases. If notified the publisher will rectify any errors or omissions
at the earliest opportunity.
Contents
Book Features iv
National Anthem vi
Topic 1 Production 1
Unit 1.1 Forms of production 2
Unit 1.2 Division of labour and specialisation 7
Unit 1.3 Mass production 12
Unit 1.4 Chain of distribution 14
Topic 2 Trade 20
Unit 2.1 Retail trade 21

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Unit 2.2 Hire purchase and deferred payments 36
Unit 2.3 Discounts 42
Unit 2.4 Documents used in home trade 45
Topic 3 Consumer protection 58
Unit 3.1 Consumer protection boards 59
Topic 4
End of term 1 test
Topic 5 Enterprise

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Business organisations
Unit 4.1 Unincorporated business units

Unit 5.1 Management functions

Unit 5.2 Business ethics
Topic 6 Finance and banking
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Unit 6.1 Managing personal finances 93
Unit 6.2 Taxation 98
Unit 6.3 The banking system and financial institutions (commercial banks) 101
Topic 7 Insurance and assurance 120
Unit 7.1 Principles of insurance 121
Unit 7.2 Documents used in insurance and assurance 125
Unit 7.3 Insurance procedures 130
Topic 8 Business communication 136
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Unit 8.1 Postal services 137

Unit 8.2 Effective communication 148
End of term 2 test 157
Topic 9 Transport 163
Unit 9.1 Choice of transport 164
Unit 9.2 Documents used in transport 168
Unit 9.3 Port authorities 172
Topic 10 Warehousing 176
Unit 10.1 Importance of warehousing 177
Topic 11 Marketing 182
Unit 11.1 Market segmentation 183
Unit 11.2 Marketing approaches 188
End of term 3 test 194
Index 203
 Book Features

Catchy opening images

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to captivate learners.

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graphics summarise
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concepts discussed.
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 Glossary at the end of
each unit.

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In-text activities

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throughout the book to
keep learners busy.
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Revision exercise
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and summary in
each topic to help
with assessment.

Case studies
throughout the
book..
 TOPIC PRODUCTION

1 Units Covered
1.1: Forms of production
1.2: Division of labour and specialisation
1.3: Mass production
1.4: Chain of distribution

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Introduction
This topic looks at production, which is the process of transforming or manufacturing goods from
components or raw materials into finished outputs. It will explain the forms of production, division
of labour, specialisation and mass production as well as chain of distribution.
Commerce Form 2

1.1 Forms of production

Objectives
By the end of this unit, learners should be able to:
• explain direct and indirect production
• differentiate direct and indirect production.

Direct production

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Direct production is a process where raw materials are transformed
into finished outputs, mainly for family or own consumption. In
direct production, goods are manufactured on a small-scale and
services offered on a small scale. Sewing a personal dress, teaching

examples of direct production.

Characteristics of direct production

•
•
Mostly time consuming.
Labour intensive.
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your own child and making a cake for your own consumption are

Fig 1.1 Building your own house is an

example of direct production
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• Goods are produced on a small-scale and services offered on
a limited range.
• The manufacturing of goods and rendering of services on a
small-scale does not lead to trade.
• It does not lead to specialisation of tasks in firms or businesses.
• Due to a lack of variety of products or services, people
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experience poor standards of living.

• It makes use of simple tools (no automation) such as hoes,
hand operated sewing machines and needles. This lowers
productivity.
• It does not lead to division of labour, a process of breaking
down activities into individual tasks.
• Does not lead to mass production, the process of producing
products and offering of services on a large scale.
• Does not lead to specialisation.
• Can be individually conducted.
• Poor quality raw materials are usually used to produce poor
quality outputs.
• Usually requires few production resources to have outputs.

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Commerce Form 2

• Quality goods are produced and quality services rendered.

• Result in mass production.
• Leads to variety.
• Leads to trade.
• Serves a larger market.
• Usually quality inputs are used to produce quality outputs.
• Usually undertaken by experienced workers.
Advantages of indirect production
• There is a wide variety of goods and services produced to meet consumer needs and wants.

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Examples of services indirectly rendered include banking and insurance.
• It is less time consuming as a result of automated tools in the production processes.
• High-quality goods are produced. This is achieved through the use of machines which are
efficient in the production processes and also as a result of division of labour and specialisation.
• There is increased productivity as machinery can produce many products in a short space of time.
•
•
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Employees work together in the production of goods and provision of services.
Results in earnings for a business.
Results in the efficient allocation and use of scarce resources of a business.

Disadvantages of indirect production

• The use of automated machines increases costs to a business. Sophisticated machinery needs
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repair and maintenance costs for them to constantly operate efficiently.
• Production of goods in large quantities results in the ineffective allocation of resources among
specialising departments such as the production and finance departments.
• Production in large quantities tends to ignore consumer tastes and preferences in the market
resulting in failure to meet the individual needs.
• The use of multitasking machines can lead to increased unemployment.
• There is limited contact with the end-user in this production process.
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The differences between direct and indirect production

Direct Production Indirect Production
• Production is on a small scale, for example, • Production is for commercial purpose,
subsistence farming and manufacture of for example, commercial farming and
family clothes. manufacture of clothes for sale.
• Usually, poor quality inputs are used. • High-quality inputs are used to produce
outputs.
• Trade is not carried out. • Leads to trade.
• Usually serves family or individual. • Serves a larger market for profit.
• It is based on manual labour. • Leads to automation and mechanisation.
• There is little or no simplification. • Results in simplification of tasks.

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Commerce Form 2

1.3 Mass production

Objective
By the end of this unit, learners should be
able to describe mass production.

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Mass production
It is a system of manufacturing products in large quantities
through effective combinations of employees with specialised
skills, mechanisation and standardisation. It is used in large

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firms such as car assemblies where special purpose machines
and fixtures are used, for example, multiple spindle drill
presses which drill car engine blocks. Mass production leads
to trade, specialisation and division of labour, standardisation,
simplification and automation. Mass production is capital
intensive since it uses a high proportion of machinery in relation
to labour.
Fig 1.6 Mass production leads to
standardisation, simplification and automation
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Advantages of mass production
• Reduces the cost of production. The increased rate of
production enables a business to produce larger quantities
at a lower cost. This is referred to as economies of scale, the
reduction in the average cost per unit.
• Reduces wastage. The probability of human error and
variations is reduced as tasks are predominantly carried out
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using automated machines.

• Production is less time-consuming as workers spend little or
no time retrieving and or preparing materials and tools for
production. The time taken to manufacture a product using
mass production is shorter as compared to manual methods.
• High-quality goods are produced.
• Labour costs are reduced since most tasks are done by
machines.
• There is continuous availability of products since they are
produced in large quantities.
• There is accuracy in the assembling of products.

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Disadvantages of mass production
• Lacks variety. Products on one line of production are identical and introducing variety to satiate
individual tastes and preferences is difficult.
• If one part of the line breaks, the whole production process will have to stop until it is repaired.
• There are high set up costs when establishing an automated assembly line. In addition, if a design
error occurs, an extensive investment is needed to redesign and rebuild a mass production
process.
• It leads to labour turnover. There is repetition of tasks that reduces the morale of workers in the
workplace leading to labour turnover.

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Field trip
Visit the nearest production site to your school, where mass production is carried out. Observe
how the products are produced and ask questions about the benefits of mass production.

Glossary

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Assembly line manufacturing technique that carries the product on the conveyor system past
several workstations where workers perform specialised tasks.
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Labour turn over the rate at which workers leave a job.
Satiate is to satisfy business stakeholders, for example, employees, managers and customers.

Exercise 1.3
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Marks

1. Define the term mass production. (2)

2. State any two merits of mass production. (2)
3. Give three examples of mass-produced products in Zimbabwe. (3)
4. Name the manufacturing technique that carries the product on the conveyor system past
several workstations where workers perform specialised tasks. (2)

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 Glossary
Bulk buying is an act of purchasing goods in large quantities.
Consumer is the final user of the manufactured products.
Distribution channel refers to the route or pathway that a product follows from the manufacturer
to the final intended user (consumer).
Distribution refers to all activities that focus on making sure that the product is available to the
consumer at the right place, at the right time and in the right way.
Producer is the original inventor of a product or a service.

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Retailer is an intermediary between a wholesaler and a consumer.
Wholesaler is an intermediary between a producer and a retailer.
Middleman an intermediary or agent that a business uses to sell its products to the customers.
The middleman can be a retailer/wholesaler.

Exercise 1.4

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1. Define chain of distribution. (1)
2. List the four common distribution channels. (4)
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3. Explain two of the distribution channels listed above. (4)
4. Explain three factors to consider when selecting channels of distribution. (6)

Topic Summary
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• Indirect production is the making of goods and the provision of services for commercial
purposes.
• Direct production is the making of goods and provision of services for your own
consumption, own taste or for the family on a small-scale.
• Mass production is a form of indirect production in which goods are made in large
quantities and services offered on large-scale.
• Division of labour involves the breaking of tasks whereas specialisation involves the
performing of a task by a worker who is trained and talented in it.
• Chain of distribution refers to the channel or route a product passes to reach the final
user.
• Distribution occurs in different channels which can be direct or indirect.
• A number of factors are considered when selecting the channel to use which include the
nature of product, costs, size and type of market, legal issues, competitors and company
size.

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Commerce Form 2

End of topic revision exercise

Time allowed: 1 hour 30 minutes
Answer ALL questions from Sections A and B and TWO questions from Section C
Section A
Multiple Choice Questions [5]
Answer ALL questions
1. Which of the following is not an example of a direct service?

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A. Hairdressing B. Haircutting
C. teaching D. insurance

2. is the breaking down of complex tasks into smaller ones performed by

individuals.
A. Standardisation
C. Division of labour

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3. Mass production is also known as
A. job production
C. project production
B. Mass production
D. Specialisation

B. flow production
D. batch production
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4. Which of the following is not a form of specialisation?
A. Country B. Profession C. Firm D. Consumer
5. The following are factors to consider when choosing a distribution channel
except .
A. size of the market B. nature of the product
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C. distance D. estimate

Section B
Structured Questions
Answer ALL questions
1. a) Define the following terms
i. Direct production (2)
ii. Indirect production (2)
b) Explain the differences between direct and indirect production. (6)

2. a) Explain two advantages of direct production. (4)

b) Explain one disadvantage of indirect production. (2)

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Commerce Form 2

TOPIC TRADE

2 Units Covered
2.1 Retail trade
2.2 Hire purchase and deferred payments
2.3 Discounts
2.4 Documents used in home trade

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Introduction
In retail trade, the major role is played by a retailer in satisfying customer needs and wants by
curtailing or breaking bulk. A middleman bridges the gap between a wholesaler and a consumer
or between a manufacturer and a consumer. This topic will focus on the functions and types of
retailers, hire purchase and deferred payments, discounts as well as documents used in home
trade.

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Commerce Form 2

Opening for longer hours

Retail outlets open for longer hours to enable consumers
to purchase goods needed even in late hours and at their
convenience, for example, tuck-shops.
Delivery of services
Retailers use their own transport to ferry purchased goods
to consumer’s residence, for example, retailers can deliver
household products such as wardrobes to consumers using their
own vehicles. Fig 2.1 Tuck shops open very early
and close late
After sales-services

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These are services rendered by a retailer after the purchase of a product. After sales-services are
common to retailers who sell electrical appliances, for example, a retailer can install a satellite dish
for a customer.

Credit facilities

Convenient location

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Roadside retailers and door-to-door retailers sell goods on credit, especially to well-known
customers. Loyal customers are allowed to take goods now and pay later.

Retail outlets are situated at strategic positions where consumers can easily access goods.
In cities and towns, most retail outlets are confined in the Central Business District (CBD). In
residential areas, shopping malls and tuck shops are situated near to customers’ homes.
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Storing goods
Retailers store goods in their own warehouses, retailer’s warehouses for consumers to ensure a
regular supply of goods to satisfy their individual tastes and preferences.

Functions of retailers to manufacturers and wholesalers

Provide market
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Manufacturer’s products are bought by retailers who finally sell them to consumers. Retailers are
always waiting to buy highly demanded goods from manufacturers and sell them for profit.
Advertise
Retailers attract or lure customers into buying their products through advertising manufacturers’ or
wholesalers’ products.
Buy goods
Large scale retailers are able to buy goods in bulk from manufacturers or wholesalers thereby clearing
the manufacturers’ production lines.
Advice and information
Retailers are final product distributors who know more about the products on demand by customers.
As a result, retailers advise and inform manufacturers and wholesalers on the goods on demand.
Information on consumer tastes, preferences and complaints is passed on to the supplier by a
retailer.

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Commerce Form 2

•
Activity 2.4
1. List any two recent trends in retailing you witnessed in your area. (2)
2. What do you understand by the following terms?
i. Barcoding (2)
ii. Vending machine (2)
3. Explain the advantages of each trend named in (2) above. (4)

Self-selection
This is when customers move around the retail outlet selecting goods with the assistance of shop

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workers. The service is usually used in department stores and multiple shops. Payment is made
in specific departments or sections. It creates employment opportunities as more assistants are
required to help the customers.

Self-service

Advantages of self-service to customers

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This is when customers move around the retail outlet selecting goods individually using trollies or
baskets. Goods sold are pre-packed, rendered, individually priced, coded and arranged according
to use. Customers can pay for goods selected once at the electronic point of sale (EPOS).

Customers can inspect goods before buying.

Reminds customers of goods that might have been forgotten on the shopping list.
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• Customers can calculate the total purchase price before paying.
• Increases customer choice and satisfaction.

Advantages of self-service to a business

• Impulse buying results in increased sales and profits.
• It results in reduced costs by employing few shop workers.
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Disadvantages of self-service
• Self-service increases the cases of shoplifting and pilferage.
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Activity 2.5
Explain the differences between self-service and self-selection. (4)

E-commerce
E-commerce is the computerised buying and selling of goods and services on the internet. Due to
the internet, many companies can advertise and market their products through the use of pictures
which can be viewed by customers anywhere and anytime. Customers can place an order using the
same internet and payment can be done through electronic means.

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Commerce Form 2

• They allow credit especially to well-known customers and people of the surrounding than other
large-scale retail outlets which only require cash and carry basis of payment.
• Open for longer hours. Small-scale retail outlets such as grocery shops can be the last outlets to
close. This enables them to push volumes of sales closer to those of large-scale outlets.
• They locate their outlets at strategic positions such as in streets and busy residential areas.
• They also specialise in a range of highly demanded products such as eggs and bread.
• Most of the retailers break bulk for their customers. Products purchased in bulk from producers
or wholesalers are curtailed and sold in single units which are affordable by their customers, for
example, soap and sweets.
• They operate from low cost premises. Some small-scale retail outlets do not pay rentals as they
are situated in residential stands. Some of the retailers locate themselves on open spaces where

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they do not pay tax and rentals.

Case study
The Duo Ltd

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Dion and Tito ventured in a business to operate a Tuck-shop in Kuwadzana Extension. The
tuck-shop is situated at an open space where the city council has not occupied. The site at
which the business operates is very strategic. It is adjacent to a primary school which has many
learners, it is at a junction where buses and commuter omnibuses pick and drop people. This
has made the business open early in the morning at 6am and close late around 12 mid-night
which makes the business push sales volumes. This strategy has made the business thrive
despite competition from large-scale retail outlets such as R and S supermarket. In addition,
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the tuck-shop offers credit to well-known customers which has resulted in loyalty from people
in the environment in which it operates.
Questions
1. Name any two strategies from the passage which enabled the small scale retail outlet to
survive despite stiff competition from R and S. (2)
2. What advantages has the retail outlet derived from its strategies? (2)
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3. Advise the duo on other ways that can make them survive in a competitive environment.
(4)

Activity 2.6
Move around your locality observing the ways in which small-scale retailers keep
themselves sustained despite the existence of large-scale retail outlets. State the
ways. (4)

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 Topic Summary

• Retail trade is the business activity associated with the sale of goods to the final
consumer.
• Retailers are middlemen between a wholesaler and a consumer.
• Retailers are categorised in two main groups, small-scale and large-scale retailers.
• Small-scale retailers include pedlars, hawkers, independent retailers and flea markets
and these have common characteristics.
• Large-scale retailers include hypermarkets, supermarkets, multiple shops, department

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stores, retail co-operative shops and mail order shops and these have common
characteristics.
• Two main credit methods of buying goods by consumers are hire purchase and credit
sale.
• Hire purchase is used to purchase consumer durables such as stoves.
•
•

•
•
period.

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A credit sale is used for the purchase of consumer non-durables such as clothes.
Durable goods last longer in use by consumers whereas non-durables last for a short

Two main discounts are cash and trade discounts.

A cash discount is a conditional deduction from the normal price of a product given
only at the time of sale.
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• It is a conditional discount because it is granted when a customer meets the deadline.
• Trade discount is a deduction from the normal price of a good.
• In order to calculate cash discount, first subtract the trade discount.
• Home trade is the exchange of goods within the same country.
• Documents used in home trade include enquiry, order, delivery and adjustment
documents.
• These vary according to the stage at which the goods or services are in terms of being
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ordered, paid for, delivered and accepted.

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Commerce Form 2

TOPIC CONSUMER PROTECTION

3 Unit Covered

3.1: Consumer protection boards

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Introduction
Consumer protection is a form of government regulation that aims to safeguard the rights
of consumers. For example, a government may require businesses to disclose detailed
information about products, particularly in areas where safety or public health is an issue,
such as food. In this topic, different consumer protection boards and their roles are
explained.
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The Standards Association of Zimbabwe
The Standards Association of Zimbabwe (SAZ) is an independent body formed by producers who
subscribe to it to ensure they manufacture quality products. Producers willing to sell quality products
for local and international consumption join and subscribe to this independent association. The
association also receives financial support from the Zimbabwean government.

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Fig 3.3 SAZ logo

The functions of the Standards Association of Zimbabwe (SAZ)

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1. It tests products for quality and approves the use of registered trademarks on tested products.
Pure drop is a registered name for cooking oil which is tried and tested by (SAZ).
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Trade mark
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SAZ logo

Fig 3.4 Product with SAZ logo

2. It encourages the introduction and maintenance of standards throughout the industry and
commerce.
3. It provides laboratories in which products are tested for quality against pre-set standards. The 2kg
weight standard set by a producer might differ from the one set by SAZ.
4. It sets up standards of products and services that are expected from producers or retailers which
are globally accepted.
5. It encourages consistency in product quality and safety standards.

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End of topic revision exercise

Multiple choice
Answer all questions
1. Which of the following is not a function of Consumer Council of Zimbabwe?
A. Investigates consumer queries
B. Conducts spot checks
C. Educates people on unfair treatment

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D. Encourages hostility by consumers if they are not treated well

2. What does CCZ stand for?

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A. Communication Channel of Zimbabwe
B. Consumer Council of Zimbabwe
C. Customer Communication of Zimbabwe
D. Consumer Company of Zimbabwe

3. A person who makes a claim after being ill-treated is called a .

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A. Defendant
B. Plaintiff
C. Affidavit
D. Claim

4. What does SAZ stand for?

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A. Standards Association of Zimbabwe

B. Social Academy of Zimbabwe
C. Society Administration of Zimbabwe
D. Standard Academy of Zimbawe

5. Which of the following is not a function of SAZ?

A. Prepares standards of products to be followed by all producers
B. Tests goods for quality
C. Provides laboratories testing facilities
D. It investigates consumer complaints

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 TOPIC BUSINESS ORGANISATIONS

4 Unit Covered
4.1: Unincorporated business
units

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Introduction
Unincorporated business units are enterprises which do not have separate legal existence
from their owners. These units vary in size depending on the number of entrepreneurs who
own and control each unit. They are found in the private sector whose main objective is profit
maximisation. Essential needs, which include food, clothing and services, are offered for profit
earning. Two common forms exist, mainly the sole trader and partnership. Legal consultancy
business, plumbing, hairdressing, welding, tyre fixing, shoe repair and haircutting are common
under sole trader and partnership businesses.

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Ownership
Entrepreneurs who start an unincorporated business unit own either a sole trader or a partnership
business. A sole trader business is initiated by a sole proprietor who is the owner of the enterprise.
A partnership is founded by partners who collectively own it.

Control
A sole trader is responsible for controlling a few employees within the business. He or she is
responsible for controlling activities such as hiring, development, training and stock control in a
business. In a partnership enterprise, active partners are responsible for controlling day-to-day
activities of a partnership. All partners are responsible for the overall control of a partnership.

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Activity 4.1
Design a leaflet or poster for a sole proprietor business about to open a haircutting enterprise in your
area. Include the opening times of the barbershop, price to be charged and a colourful picture of once
served clients to lure customers into trying a new service. (10)

Activity 4.2

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Explain the characteristics of unincorporated business units under the following:

• Control (3)
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• Ownership (3)

• Liability (3)

Sole trader/sole proprietorship

A sole trader/sole proprietorship is an unincorporated business unit owned and controlled by a sole
owner, for example a plumber. It is the easiest and most common form of business unit in the private
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sector whose objective is profit maximisation for the benefit of the sole owner. The owner performs
all the activities helped by a few family members or a few employees, but control and ownership
rest in their hands. Photocopying and general shop dealers are also good examples of sole trader
businesses.

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Commerce Form 2

Activity 4.7
Fill in the gaps using appropriate business organisation terminology.
1. A sole trader is a business owned and controlled by . (1)
2. is an agreement between two or more business people. (1)
3. A legal document required to start a sole trader business is a . (1)
4. is a document that binds business partners. (1)
5. Two forms of unincorporated business units are and (2)

Case study

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Read the following case study and answer the questions that follow.
Furniture suppliers

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The furniture manufacturing firm was founded by Simba on 3 July 2012. He operated for years
but remained small as a result of limited capital investment into the business. The sole owner
could not get huge funds from financial institutions such as commercial banks as a result of
lack of collateral security. Few chairs, wardrobes and tables were manufactured because he
could not afford to purchase raw materials such as timber, glue and nails in bulk and enjoy
economies of scale. The main source of funding was borrowing from friends who would attach
finished manufactured furniture in the event that he was bankrupt to return borrowed funds.
Poor decision making by a sole owner resulted in the manufacture of poor-quality furniture.
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Good works furniture
On 7 August 2017, a business advisor, Leeroy decided that the two sole traders, Simba and
Nelson merge and the name was changed to GOODWORKS FURNITURE.
Large capital investment resulted in the purchase of raw materials in bulk. Sharing of ideas
ensured the business made better decisions and resulted in improved quality.
Questions
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(a) Define the following terms as used in the passage.

i. Sole trader (1)
ii. Merger (1)
(b) Explain the difficulties Simba faced under the name FURNITURE SUPPLIERS. (4)
(c) State the type of unincorporated business unit under the name GOODWORK FURNITURE. (1)
(d) Explain the benefits of the agreement between the sole traders. (4)

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Commerce Form 2

End of topic revision exercise

Multiple choice
Answer all questions
All questions carry equal marks
1. Which of the following is not found in the private sector?
A. Partnership
B. Sole trader
C. Private Limited Company

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D. Public utility
2. Which one is a characteristic of a sole trader business?
A. Entrepreneurs share profits or losses
B. Entrepreneurs contribute capital and earn interest
C. Has unlimited liability

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D. Responsibilities are shared
3. Which one is a binding document between partners?
A. Memorandum of Association.
B. Articles of Association
C. Partnership Deed
D. Trading licence
4. Which document is required to start an unincorporated unit?
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A. Trading licence
B. Prospectus
C. Articles of Association
D. Memorandum of Association
5. The advantage of a sole trader over a partnership is that .
A. only one person enjoys all profits
B. limited capital is raised by a sole trader
C. there is lack of continuity
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D. few legal formalities are required to start

Structured Questions
Answer all questions
1. (a) What is meant by the following terms:
i. Unlimited liability (2) ii. Partnership (2) iii. Sole trader (2)
(b) What is the disadvantage of having unlimited liability in a business? (2)
2. Explain one advantage of operating as a plumber. (2)
3. List any three businesses in Zimbabwe which operate as sole traders. (3)
4. List any three disadvantages of a one-person business. (3)
5. Give any two advantages of being a sleeping partner. (2)

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 6. Who links the producer and the consumer in the production chain?
A. Wholesaler
B. Retailer
C. Producer
D. Agent
7. Which chain is most likely to be used in the distribution of cooking oil?
A. Producer to retailer to consumer
B. Producer to consumer
C. Producer to wholesaler to retailer to consumer
D. Producer to wholesaler to consumer
8. Which function is not performed by a retailer?

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A. Br
B. Storage of goods
C. Providing after-sale services
D. Stabilising the prices of goods

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9. Why do small-scale retailers continue to survive when there is so much competition from
large scale retailers?
A. They advertise on large scale
B. They employ skilled labour
C. They offer personalised services to customers and open for longer hours
D. They order stock directly from manufacturers
10. Which one is an example of after-sales service?
A. Breaking bulk
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B. Credit to customers
C. Installation of goods
D. Pre-packaging
11. Which of the following is an advantage of an independent retailer joining a voluntary chain?
A. The chain chooses city centre locations for such activities
B. The retailer buys directly from the manufacturer
C. The retailer is assisted with finance to advertise and buy goods
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D. The retailer purchases goods in bulk

12. Which type of retail outlet does the following statement describe? Similar shops, selling
similar goods at similar prices.
A. Chain store
B. Department store
C. Hypermarket
D. Supermarket
13. Which of the following is a feature of a supermarket?
A. Competitive prices
B. Delivery of purchases
C. Luxurious shopping facilities
D. Pre-packaging

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Commerce Form 2

TOPIC ENTERPRISE

5 Units Covered
5.1: Management functions
5.2: Business ethics

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Introduction
Managers play different roles such as controlling, directing, motivating, selecting, organising and
coordinating. There are five management roles explained in this topic which include planning,
organising, leading, directing and controlling.
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Commerce Form 2

5.2 Business ethics

Objectives
By the end of this unit, learners should be able to:
• identify ethical considerations in business
• explain the role of ethics in business and society
• describe the importance of ethics in business.

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Business ethics
Business ethics are the moral principles governing or influencing conduct in a business organisation.
They are a set of rules or principles that guide an enterprise, employees and other stakeholders
on how to behave. The application of ethical values by an organisation and employees collectively

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ensures customers` loyalty and other benefits. The principles or ethical values businesses should
have include honesty, integrity and respect. Acts such as cheating, accepting a bribe and stealing
are bad practices at the workplace.
Businesses should have a code of ethics, a document that outlines ethical considerations for all
employees, stakeholders and the organisation to know what is good or bad.
The following are some of the ethical principles:

Honesty
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Businesses should be honest in all communications and actions. Ethical businesses are honest. They
are not only truthful but sincere and straight forward. Ethical executives do not deliberately mislead
or deceive others by misrepresentations, overstatements, partial truths, selective omissions or any
other means and when trust requires it, they supply relevant information and correct facts.

Caring
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Ethical executives should demonstrate compassion and a genuine concern for the well-being of
others. Ethical businesses are caring, compassionate, generous and kind. They understand the
concept of stakeholders (those who have a stake in a decision because they are affected by it)
and they always consider the business, financial and emotional consequences of their actions on
all stakeholders. Ethical executives seek to accomplish their business objectives in a manner that
causes the least harm.

Law-abiding
Ethical executives abide by laws, rules and regulations relating to their business activities.
Organisations should abide by the laws that govern the land in which it is operating. For example,
some laws to do with the environment, laws on minimum wage payments, bribes and fraud.

Trust
Employees should have a sense of trust that their employer will act as agreed, for example, pay
wages and salaries at agreed dates. The employer should trust their employees on good conduct

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 7. Transfer funds within the same bank.
8. Operate the machine themselves with little or no assistance.
9. Transfer funds from one account to the other.

Activity 6.18
1. What is an ATM machine? (1)

2. The abbreviation ATM in finance and banking means . (4)

3. List any six characteristics of an ATM. (6)

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4. What are the advantages of operating an ATM to the account holder? (4)

Loans and overdrafts

Commercial banks also offer loans and overdrafts to clients as a service to facilitate the smooth

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running of businesses. Loans usually require an application and collateral security to be granted.

Bank loan
This is a formal way of borrowing large sums of funds that are repaid over a long period of time
and for high investments such as building a shopping mall. This is an external source of finance for
any enterprise. However, it is granted after collateral security has been provided. Upon approval
of the loan, the client is required to open the loan account in which the client will repay borrowed
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funds. The bank charges and interest are fixed on the time the loan is approved, usually payable on
a monthly basis.

Activity 6.19
Visit the nearest commercial bank and get information on the following:

i. Procedures to obtain a bank loan.

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ii. How it works when one is granted, then.

Write notes on the information given in your notebook. (10)

Bank overdraft
This is an informal way of borrowing a small sum of money repaid over a short period of time and
for small transactions such as purchasing stock (inventory). It is similar to a bank loan such that it is
an external source of finance. An overdraft is when funds are given to current account holders when
they take more than what is in their accounts. Interest is charged on a daily basis depending on the
amount overdrawn. The account holder can repay the amount any time; hence the period is not
fixed. There is no collateral security required, but the client should be the account holder.

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Commerce Form 2

TOPIC INSURANCE AND ASSURANCE

7 Units Covered
7.1: Principles of insurance
7.2: Documents used in
insurance and assurance
7.3: Insurance procedures

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Introduction
Risks such as fire and theft are uncertain, but if they do happen, they result in great loss which
can be avoided by seeking cover from insurance companies. After studying this topic, you have
to inform people in your community about the significance of insurance. You have to tell them
on the principles they need to follow, such as the principle of utmost good faith and Proxima
causa. Before disseminating information, you have to learn on the documents they need to sign
in order for them to hedge against uncertain risks. These documents include cover note and a
proposal form. It is also important to tell them that insurance companies work with middlemen
such as assessors, brokers and many more you will learn.

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Commerce Form 2

Activity 7.1
Nendanga insured his house for $60 000 against fire on 2 January 2017. On 2 February 2019, it was
burnt down and found that the cost of $20 000 will restore it to its original condition.

a) How much will the insurance company pay him? (1)

The principle of indemnity is a doctrine which includes the following:

1. Contribution
The doctrine applies to insurance which is in a contract of indemnity. It includes a case where risk
is insured with two or more companies. In the event of a loss occurring, insurance companies share

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the burden of payment in proportion to the amount incurred by each. The companies contribute
towards the compensation if a loss of fire occurs. In the event that one of the insurers pays the whole
loss, the contribution is entitled from other insurers. For example, if some property is insured by two
or more insurance companies against loss from fire to the sum of $100 000, the insurance companies
will cover the loss proportionally to the sum of the loss, that is, $100 000.
2. Subrogation

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The doctrine gives all rights over the damaged property to the company settling the claim, thus
insured damaged goods belong to the insurer. The insured is not allowed by the doctrine to sell the
damaged property because they should not make a profit out of loss. Mr Magombedze insured his
car against an accident. He later got involved in a car accident and the car got damaged beyond
repair. The insurance company compensated the value of the car at the time of the accident and
kept the wracked car. This is an example of a principle of subrogation. BTD, the insurer Pvt Ltd took
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ownership of the scrap to prevent Mr Magombedze from getting profit by selling scrap.
3. Average clause
The doctrine prevents the insured from making a profit by under-insuring or over-insuring.
i. Under-insuring: This is when something is insured for less than its true value, meaning that you
have inadequate insurance coverage. In the event of loss, the insurer will not cover or indemnify the
full value of the loss. The insured will become his own insurer for the remaining loss. For example,
household contents valued at $30 million were insured for $20 million against the risk of fire and
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when the fire occurred, the contents valued at $18 million were burnt.
Calculate how much was paid as compensation.
Average Clause =(false value)/(Actual value ) × loss/damage
Average Clause =$20/$30×$18
=$12 million is the compensation
The insured becomes own insurer for $(18-12) = $6 million
ii. Over-insuring: This is when the insured insures property for more than its actual value. In the event
of loss, the insured is restored to the former position in accordance with the principle of indemnity.
The insured is not allowed to make profit, but the insurer can make profit.
Example
A television set valued at $18 million was insured for $21 million against the risk of theft. The
television set was later stolen.

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 • Niche marketing is differentiated or concentrated marketing approach whereas mass
marketing is an undifferentiated marketing approach.
• Mass marketing results in stiff competition and failure to identify smaller niches in the entire
market.

END OF TERM 3 TEST

PAPER 1
MULTIPLE CHOICE

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ANSWER ALL QUESTIONS
1. Which of the following is not a postal agent?
A. FedEx

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B. TNT
C. DHL
D. MNC

2. is not a postal service.

A. Business reply service
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B. Mobile phone
C. Poste restante
D. Free post

3. Which one is a disadvantage of business reply?

A. Businesses advertise their goods
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B. Encourages prospective clients to respond

C. The sender has to make payment for the client’s response
D. The client does not pay for postage

4. is a suitable postal service for sending important documents

A. Registered mail
B. Business reply
C. Free post
D. Poste restante

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22. Which one would you use to send copies of documents urgently from Harare to Capetown?
A. Expedited mail service
B. Registered mail
C. Facsimile
D. Recorded delivery

23. Which of the following is not an advantage of an ATM?

A. It provides 24-hour service

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B. It saves labour
C. It dispenses cash quickly
D. Can be used by anyone as long as they have one`s pin number

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24. Which of the following is a reason for warehousing goods?
A. To prevent price fluctuations
B. To avoid tiring of cash in stock
C. To prepare for a predicted increase in price
D. To prevent destruction of goods by fire
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25. Which one is not part of sending and receiving payments by commercial banks?
A. Stop order
B. Credit transfer
C. Direct debit
D. Controlling all banks
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26. Which of the following is not suitable for storage in cold rooms?
A. Meat
B. Milk
C. Vegetables
D. Wine

27. Which one is not an advantage of barcoding in warehousing?

A. Reduces clerical costs
B. Improves efficiency
C. Increases theft

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 Index

A insurance 4, 37, 94, 96, 104, 120-25, 127, 128, 129,

130-135, 137, 138, 144, 146, 159, 160, 161,
actuaries 132 162, 168
assembly line 13 inter-dependence 9, 11
assessor 131, 161
automation 2, 4, 5, 11, 12, 31, 104 L
B labour turnover 13, 88, 90
liquidity 97

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bankruptcy 99, 114, 118
barrier 151, 152, 155, 156, 201 M
broker 134, 161
market analysis 183, 193
business ethics 82, 86, 88, 89
mass production 1, 3, 5, 7, 10, 12, 13, 16, 19, 80, 188,
C 190
message 137, 145, 148-150, 152-155

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channel 14, 15, 17, 18, 19, 80, 136, 148, 152, 153,
154, 155 N
cheque 104-113, 118, 119, 159, 162
niche market 193
cohesive 154
niche marketing 182, 188, 190, 192, 193, 200, 201
collateral security 23, 24, 96, 113, 114
consignee 168, 171, 191 P
coordinating 82
credit transfer 104, 118, 159, 198 partnership deed 70, 73
perpetual existence 66, 68, 69, 73
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personal finance iii, 92, 93, 157
planning 82-85, 89, 90, 93, 94, 96, 105, 106, 113
debts 37, 42, 68, 71, 73, 93, 96, 99, 101, 103, 111,
port 169, 172-175, 200
146, 195
port authority 175, 200
decoding 154
postman 139, 146
deficit 94, 95, 117, 119, 184
price discrimination 186, 191
direct distribution 14, 15
producer 3, 14, 15, 17, 57, 61, 76, 178, 181, 189, 199
direct production 2, 17, 18, 75
production 1
disclaimer clause 62
proposal form 121, 125, 129, 130-132, 135, 160, 162
distribution channel 15, 18, 19, 80
proximate cause 121, 123, 124, 130, 133-135, 160
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E Q
economies of scale 188, 190
quasi negotiable 169
effective communication 136, 148-150, 152, 154-156,
161, 200, 201, 202 R
encoding 154
exploitation 9, 11, 62 remuneration 88, 132, 133
externalities 99
S
F
seasonal demand 179, 181
feedback 31, 136, 152-155, 161 seasonal goods 179
segmentation 182-187, 191-193, 199, 201
I shareholders 97
simplification 3, 4, 5, 12
income 30, 40, 68, 93- 95, 98, 117-119, 158, 183, 184,
specialisation iii, 1-5, 7, 9, 10, 12, 17-19, 71, 75, 80
186, 189, 190, 193
standardisation 5, 12, 18
indemnity 121, 122, 133, 134, 160, 162
stop order 103, 105, 106, 118, 159, 198
indirect production 2-5, 17, 18, 19, 80
surplus 95, 96, 97

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