Sole Trader
Definition: A business owned by one person.
Advantages
Easy to start.
Keeps all profits.
Makes decisions quickly.
Close contact with customers.
Disadvantages
Unlimited liability (owner can lose personal property if the business owes money).
Limited capital.
Long working hours.
Business may end if the owner dies.
Exam Tip: If asked which business suits a small shop, sole trader is often a good answer
because it is easy and inexpensive to start.
Partnership
Definition: A business owned by 2–20 people.
Advantages
More capital.
Shared workload.
More skills and ideas.
Risks are shared.
Disadvantages
Profits are shared.
Partners may disagree.
Unlimited liability (unless it's a limited liability partnership where applicable).
One partner's mistakes affect everyone.
Private Limited Company (Ltd)
Definition: A company owned by shareholders. Shares cannot be sold to the public.
Advantages
Limited liability.
Continues even if an owner leaves.
Easier to raise capital than a sole trader.
Disadvantages
More legal requirements.
More expensive to set up.
Shares cannot be sold publicly.
2. Factors of Production
Land
Natural resources.
Examples:
Minerals
Water
Forests
Reward = Rent
Labour
Human effort.
Reward = Wages
Capital
Man-made goods used to produce other goods.
Examples:
Machines
Buildings
Tools
Reward = Interest
Enterprise
Organises the other factors and takes risks.
Reward = Profit
Easy Memory Trick
Land → Rent
Labour → Wages
Capital → Interest
Enterprise → Profit
3. Division of Labour
Meaning
Workers specialise in one task.
Advantages
Faster production.
Better quality.
Workers become skilled.
Lower production costs.
Disadvantages
Boring work.
Workers become dependent on one job.
Production stops if one worker is absent.
4. Retailing
Retailers sell goods to the final consumer.
Examples
Supermarkets
Grocery stores
Pharmacies
Services of Retailers
Break bulk.
Give advice.
Provide after-sales service.
Offer credit.
Display goods.
5. Wholesalers
Sell goods to retailers.
Functions
Buy in bulk.
Store goods.
Break bulk.
Deliver goods.
Give credit.
Provide market information.
6. Marketing Mix (The 4 Ps)
Product
The goods or services sold.
Examples
Brand
Quality
Packaging
Price
How much customers pay.
Pricing methods
High price
Low price
Discounts
Place
Where goods are sold.
Examples
Shops
Online
Wholesalers
Promotion
Making customers aware of products.
Examples
Advertising
Sales promotion
Personal selling
7. Advertising
Purpose
Increase sales.
Inform customers.
Remind customers.
Introduce new products.
Advantages
More customers.
Higher sales.
Creates awareness.
Disadvantages
Expensive.
May mislead customers.
Can increase product prices.
8. Consumer Rights
Consumers have the right to:
Safety.
Information.
Choice.
Be heard.
Compensation.
Consumer education.
9. Banking
Functions of Commercial Banks
Keep money safely.
Give loans.
Provide overdrafts.
Transfer money.
Exchange foreign currency.
Types of Accounts
Current Account
Mainly for businesses.
Uses cheques.
No interest.
Savings Account
Earns interest.
Mainly for saving.
Fixed Deposit
Money kept for a fixed period.
Higher interest.
10. Sources of Finance
Internal Sources
Owner's savings.
Retained profits.
Sale of assets.
External Sources
Bank loans.
Overdraft.
Hire purchase.
Leasing.
Shares.
Debentures.
11. Insurance
Purpose
Protects people against financial loss.
Principles
Utmost Good Faith
Tell the truth.
Insurable Interest
You must suffer a loss if the item is damaged.
Indemnity
Compensation should restore you to your previous financial position, not make you profit.
Contribution
Two insurers share the compensation.
Subrogation
The insurer takes over the insured's rights after paying a claim.
Proximate Cause
The main cause of the loss determines whether the claim is paid.
12. Transport
Road
Advantages
Door-to-door service.
Fast for short distances.
Flexible routes.
Disadvantages
Traffic congestion.
Accidents.
Expensive for long distances.
Rail
Advantages
Cheap for heavy goods.
Carries large loads.
Disadvantages
Fixed routes.
Not door-to-door.
Air
Advantages
Fastest.
Best for emergencies.
Good for valuable goods.
Disadvantages
Expensive.
Weather delays.
Limited capacity.
Water
Advantages
Cheapest for bulky goods.
Large carrying capacity.
Disadvantages
Slow.
Depends on ports.
13. Warehousing
Functions
Store goods.
Protect goods.
Stabilise prices.
Break bulk.
Hold seasonal goods.
14. Communication
Methods
Letter
Email
Telephone
SMS
Video conferencing
Good communication should be:
Clear.
Accurate.
Complete.
Polite.
15. Business Documents
Document Purpose
Enquiry Ask about goods
Document Purpose
Quotation Gives prices
Order Form Orders goods
Invoice Requests payment
Delivery Note Lists delivered goods
Receipt Confirms payment
Credit Note Reduces amount owed
Debit Note Increases amount owed
Statement Shows account balance
16. Exam Answer Tips
2 Marks
Give 2 correct points.
4 Marks
Give 2–4 explained points.
6 Marks
Give 3 well-explained points.
8 Marks
Give 4 well-explained points.
10 Marks
Discuss advantages and disadvantages, then give a conclusion if asked to evaluate or
recommend.
Easy Memory Tricks
Business Ownership
One = Sole Trader
Two or more = Partnership
Shareholders = Company
Factors of Production
Land = Rent
Labour = Wages
Capital = Interest
Enterprise = Profit
Marketing Mix
4 Ps
Product
Price
Place
Promotion
Insurance
UGICP
Utmost Good Faith
Insurable Interest
Contribution
Indemnity
Proximate Cause
These notes cover the core topics commonly examined in ZIMSEC O Level Commerce Paper
2. After reviewing each section, try answering a few past-paper questions to practise applying
the ideas, since Paper 2 rewards explanation as much as factual knowledge.