Principles of Business for CSEC®

2nd edition

Answers to Chapter 8: Business finance

1. The correct answer is (B). Commercial banks make a living from holding customer accounts,
making payments on behalf of customers and lending money to customers, as well as
carrying out other roles.
2. The correct answer is (A). A building society or commercial bank will often hold the deeds of
the property or land for which it grants a mortgage. It will hand over these deeds once the
mortgage has been fully paid off.
3. The correct answer is (C). The income statement illustrates the revenues, costs and profits of
a business.
4. The correct answer is (D). In double-entry bookkeeping, entries are made twice, once as a
credit and once as a debit.
5. (a) (i) Answers could include any two of the following:
• Credit unions
• Insurance companies
• Building societies
• Micro-lending agencies
• Government agencies

Mark Scheme
Answers should include any two of the above.

(ii) Answers could include any three of the following:

• Online banking
• Credit and debit cards
• Deposit boxes
• ATM/ABM services
• Advisory services
• Remittance services
• E-trade

Mark Scheme
Answers should include any three of the above.

1 Principles of Business for CSEC®, 2nd edition © Oxford University Press 2019
Chapter 8: Business finance
(iii) Answers could include the following points:
• Adjusting the bank rate means adjusting the interest rate at which commercial
banks borrow from the central bank
• It is adjusted depending on whether the central bank wants to discourage or
encourage loans

Mark Scheme
Answers should gain 1 mark for stating what the bank rate is/what it means to adjust
the bank rate, and 1 mark for explaining how this is a regulatory tool.

(b) Income Statement for Bridgefield Supplies for the period ending 31 January 2019

Sales 756 000
Less:
Opening inventory 25 000
Purchases 400 000
Cost of goods available (1) 425 000
Ending inventory (2) 49 020
Cost of goods sold (375 980)
Gross profit (3) 380 020
Less expenses
Motor vehicle insurance 8 000
Wages and salaries 140 000
Interest on loan 8 000
(4) Net profit (5) 224 020

Mark Scheme
Marks should be awarded as follows:
• Calculating the cost of goods available correctly: 1 mark
• Calculating the ending inventory correctly: 2 marks
• Calculating the gross profit correctly: 1 mark
• Indicating that net profit is missing: 1 mark
• Calculating the net profit correctly: 1 mark

2 Principles of Business for CSEC®, 2nd edition © Oxford University Press 2019
Chapter 8: Business finance

(c) (i) Answers could include the following points:

• Crowd funding refers to the contribution of many small sums of capital by a large
number of people to fund a new venture
• It uses the Internet and social media to inform potential investors about projects
that need support
• Contributions are then made online to get projects started

Mark Scheme
Answers giving a limited description gain 1 mark; answers giving a good description
gain 2 marks.

(ii) Answers could include the following points:

• Any disposable income that is not spent is called personal savings
• These savings can be accumulated in formal accounts at commercial banks or credit
unions, or in informal institutions such as sou-sou

Mark Scheme
Answers giving a limited description gain 1 mark; answers giving a good description
gain 2 marks.

(d) Answers could include the following points:

• Mutual funds are not seen as savings because there is a risk involved when money is
deposited into the account
• The money will be pooled and invested into a range of instruments including shares,
bonds and property
• Mutual funds will be less liquid and less accessible than savings

Mark Scheme
Answers should gain 1 mark for indicating the involvement of risk, 1 mark for
indicating how pooled resources are used, and 1 mark for indicating a lack of
accessibility/lack of liquidity.

3 Principles of Business for CSEC®, 2nd edition © Oxford University Press 2019