Jonathon is a sole trader. He owns a shop selling office equipment including printers. To encourage sales Jonathon allows customers 4 weeks to pay for the office equipment. Jonathon thinks his business is likely to remain small. He knows managing cash flow is important for his business and he has prepared a cash flow forecast. An extract is shown in Table 2.1. Do you think the advantages of operating as a sole trader business are greater than the disadvantages? Justify your answer. .......................................................................................................................................

Award up to 2 marks for identification of relevant points. Award up to 2 marks for relevant development of points. Award up to 2 marks for a justified decision as to whether the advantages of operating as a sole trader business are greater than the disadvantages.

Points might include:
Advantages:
- Keeps all the profit [k] so has an incentive to work hard [an]
- Makes all the decisions / no need to consult with anyone / complete control / own boss [k] so can take decisions more quickly / so less/no chance of disagreements [an]
- Freedom to choose own holidays / when work [k] so can choose time off when the business is less busy so does not miss out on sales [an]
- Can keep (financial) information private / no need to produce annual accounts [k] so competitors cannot use this information [an]
- Has close contact with customers / able to offer a more personal service \([\mathrm{k}]\) which can help encourage customer loyalty [an]
- Few legal regulations [k]
Disadvantages:
- Unlimited liability [k] so may lose personal assets to repay business debts [an]
- Limited sources of finance [k] which could create cash flow problems / difficult to fund expansion [an]
- No one to cover if owner is ill [k] so business may lose sales [an]
- Only has own skills [k] so less able to compete / may not be able to do all jobs properly [an]
- Must work long hours / difficult to take holidays / high workload [k] which could lead to mistakes [an]
- No one to share risks / losses with [k]
- Has all the responsibility / no one to help with decisionmaking [k]
- No separate legal identity [k]
- No continuity [k]

Other appropriate responses should be credited.
Justification might include:
One advantage is there is no need to consult with anyone [k] so decisions can be taken more quickly [an]. A disadvantage is unlimited liability [k] so personal assets are at risk if unable to repay business debts [an]. The advantages are greater because being able to act quickly could mean they can gain from opportunities which otherwise they might miss [eval] and this could generate sufficient revenue to repay its debts anyway [eval].