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Difficulty: MediumWholesale Trade and Functions of Wholesalers

A major beverage manufacturing company in Ogun State requires constant liquid capital to purchase raw materials and sustain continuous factory operations. To prevent production delays, merchant wholesalers buy the finished beverages in bulk and pay cash upfront, while subsequently extending credit terms to retail stockists. Which function does the merchant wholesaler perform directly for the manufacturer in this scenario?

  1. Financing production operations by making prompt bulk cash paymentsAnswer
  2. B
    Breaking bulk into smaller quantities to match the purchasing capacity of retailers
  3. C
    Granting credit sales and flexible payment terms to retail stockists
  4. D
    Issuing credit notes to correct overcharges recorded on sales invoices

Answer

The correct answer is financing production operations by making prompt bulk cash payments, as paying cash upfront for large orders supplies the manufacturer with working capital for continuous production.
The correct answer highlights how the wholesaler finances production by paying cash upfront for large consignments. This provides manufacturers with immediate working capital needed to purchase raw materials and pay operational costs without experiencing capital lock-up.

Step-by-Step Solution

1
Identify the recipient of the service described in the scenario stem.
The scenario focuses on assistance given directly to the beverage manufacturing firm in Ogun State.
Wholesalers perform distinct sets of functions: some serve producers/manufacturers, while others serve retailers.
2
Analyze the specific action performed by the wholesaler for the manufacturer.
The wholesaler buys in bulk and pays cash upfront, providing immediate liquidity.
Manufacturers need immediate working capital to buy raw materials and maintain operations without waiting for end consumers to buy the finished goods.
3
Match this action to the appropriate wholesale function classification.
Financing production operations by making prompt bulk cash payments.
This directly relieves the manufacturer of financial burden and inventory storage capital lock-up.

Key Concept

Functions of Wholesalers to Manufacturers
Estimated Time:1m 0s
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Topics

Wholesale Trade and Functions of Wholesalers

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