Cambridge IGCSE Commerce: Aids to Trade that Support Commerce — Revision Notes

Aids to trade are the services that make buying and selling possible: advertising, banking, insurance and finance. Topic 5 of Cambridge IGCSE Commerce (0715, 2028) is the largest topic, with four sections: 5.1 Advertising, 5.2 Banking, 5.3 Insurance and 5.4 Sources of finance and commercial performance. It also contains the six commercial calculations you must be able to carry out, so practise the formulas until they are automatic.

For full explanations see the aids to trade study guide, then try the aids to trade practice questions.

Syllabus coverage (0715, 2028)

Section	Content
5.1 Advertising	Purposes and types; traditional and digital media; choosing media; methods of appeal; sales promotion
5.2 Banking	Accounts, customer services, payment methods, sources of finance; internet and mobile banking and their impact
5.3 Insurance	Purposes; types of risk; pooling; premiums; proposal form, cover note, policy; brokers
5.4 Finance and performance	Entrepreneurship; short- and long-term finance; financial terms; six calculations; improving performance

5.1 Advertising

Types of advertising

Type	Aim	Example
Informative	Gives facts: price, features, location	A new clinic’s opening hours
Persuasive	Convinces people to buy	“The only phone you’ll ever need”
Collective (generic)	Promotes a product type for a whole industry	“Drink more milk” by dairy farmers
Competitive	Compares with rival brands	“Twice as fast as Brand X”

Media - traditional: TV, radio, cinema, local and national newspapers, magazines and trade journals, leaflets, packaging, direct mail, sponsorship, catalogues, posters, transport vehicles, window and point of sale displays, signboards, word of mouth. Digital: social media and other internet advertising (websites, search engines), display and video adverts, email marketing, digital billboards, social media influencers.

Choosing media - eight factors: audience; cost; cultural and legal considerations; flexibility to change; local and international coverage; multi-channel advertising; timing; type of product.

Methods of appeal: emotion, fear, humour, rational, ambition, social acceptance, romantic, adventure, music, celebrity and influencer endorsement.

Sales promotion = short-term incentives to boost sales. Methods: point of sale, special offers, sponsorship, displays, competitions, coupons, sales periods, loss leaders, free gifts, free samples. Choice depends on business type, competitors, cost, nature of product, new or old product, and timing.

5.2 Banking

Category	Services
Accounts	Current (daily payments, overdraft possible); deposit/savings (earn interest)
Customer services	ATM, night safe, foreign currency, financial advice, telephone banking
Payments	Cash, cheque, credit card, debit card, store card, credit transfer, standing order (fixed amount), direct debit (variable amount, set by payee), electronic transfer, documentary credit (letter of credit)
Finance	Loan, overdraft, mortgage, hire purchase

Digital banking (internet and mobile): 24-hour access, quick transfers and lower costs, but risk of fraud and hacking, need for devices and internet, and exclusion of some older or rural customers. Impact: bank branch closures; more digital-only banks; less use of cash (a move towards a cashless society).

5.3 Insurance

• Purposes: risk reduction; compensation; financial protection; business confidence; investment.
• Risks insured: consequential loss; employer’s liability; fire; motor; premises; public liability; theft.
• Pooling of risk: many policyholders pay premiums into a common fund; the few who suffer losses are compensated from it.
• Documents: proposal form (application, with all material facts) → cover note (temporary cover) → policy (the full contract).
• Insurance broker: an independent adviser who finds the best policy and cover for a client.

Premium calculation. Premium = value insured x rate. A shop insures stock worth $80 000 at $1.50 per $100: 80 000 / 100 x 1.50 = $1 200 a year.

5.4 Finance and commercial performance

Entrepreneurship = setting up and running a business, taking risks in the hope of profit.

Short-term finance	Long-term finance
Trade credit, debt factoring, hire purchase, leasing, sale and leaseback, overdraft, selling assets, owner’s savings, retained profit	Ordinary and preference shares, loans, debentures, venture capital, crowdfunding

Financial terms: sales, revenue, profit, working capital, assets, liabilities, interest, capital, cash discount (for prompt payment), trade discount (to traders buying for resale).

The six calculations

Measure	Formula
Revenue	Selling price per unit x units sold
Gross profit	Revenue - cost of sales
Gross profit margin (%)	Gross profit / revenue x 100
Profit for the year (net profit)	Gross profit - expenses
Working capital	Current assets - current liabilities
Mark-up (%)	(Average selling price - unit cost) / unit cost x 100

Worked example. A trader buys 500 bags at $8 and sells them all at $12. Expenses are $900. Revenue = $6 000. Cost of sales = $4 000. Gross profit = $2 000. Gross profit margin = 33.3%. Net profit = $1 100. Mark-up = (12 - 8) / 8 x 100 = 50%.

Improving performance: reduce expenses; increase mark-up; change prices; improve advertising; introduce new products.

Common mistakes and exam traps

• Confusing standing order (fixed amount, set by payer) with direct debit (variable, collected by payee).
• Mixing up mark-up (on cost) and gross profit margin (on revenue).
• Calling a cover note the full policy.
• Treating debentures as shares - they are long-term loans.
• Choosing an expensive TV advert for a small local business without justifying it.

Frequently asked questions

What is the difference between advertising and sales promotion? Advertising communicates with customers through media to inform or persuade. Sales promotion uses short-term incentives, such as coupons or free samples, to boost sales quickly.

How is mark-up different from gross profit margin? Mark-up compares profit with cost price; gross profit margin compares gross profit with revenue. The same sale gives a higher mark-up than margin.

Why does pooling of risk work? Many people pay small premiums, but only a few suffer losses in any year, so the fund can pay their claims.

Official syllabus

Cambridge IGCSE Commerce (0715) syllabus for 2028 - official syllabus PDF, Topic 5.