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Difficulty: MediumWholesale Trade and Functions of Wholesalers

A large-scale food processing enterprise in Benue State disposes of its seasonal harvest by selling entire outputs directly to a single commercial intermediary. This intermediary pays immediately upon collection, stores the produce in regional warehouses, and gradually sells to small retail shops across the country. Which of the following functions is performed by the intermediary specifically for the benefit of the manufacturer?

  1. Providing working capital through prompt payment and bearing inventory holding riskAnswer
  2. B
    Breaking bulk into small convenient quantities to suit the purchasing capacity of retailers
  3. C
    Granting hire purchase credit terms directly to final household consumers
  4. D
    Issuing a debit note to correct undercharges detected on trade invoices

Answer

Providing working capital through prompt payment and bearing inventory holding risk
The correct answer highlights that by purchasing in bulk and paying promptly, the wholesaler supplies the manufacturer with steady cash flow (working capital) while absorbing risks associated with storing large quantities of stock.

Step-by-Step Solution

1
Analyze the relationship described in the scenario between the manufacturer and the intermediary.
The manufacturer sells bulk goods to the intermediary and receives prompt cash payment before goods are distributed to retailers.
Wholesalers perform distinct sets of functions for manufacturers versus retailers.
2
Distinguish functions rendered to manufacturers from functions rendered to retailers.
Functions to manufacturers include financing production, risk bearing, providing market feedback, and clearing bulk stock. Functions to retailers include breaking bulk, granting credit, and offering variety.
Prompt bulk payment frees up manufacturer working capital and transfers warehousing risks.

Key Concept

Wholesaler Functions to Manufacturers
Estimated Time:1m 15s
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Topics

Wholesale Trade and Functions of Wholesalers

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