Distinguish between the following:
(a) Broker and Jobber.
(b) Gross profit and net profit
(c) Fixed capital and liquid capital.
(d) Factors and del credere agents.
(e) F. 0. B. and C. I. F.
Explanation
(a) Broker; is an agent who links the principal with the third parties. He does not have possession of the goods and he cannot sell in his own name. He receives a commission, termed brokerage while Jobber is an agent that buys and sells on his own behalf for a profit. The jobber normally deals in stocks and shares. He will buy at a price and hopes to sell at a higher price. His profit is called jobber’s turn.
(b) The Gross profit; is the excess of the selling price over the cost of goods. This is the overall profit before the deduction of expenses. This is ascertained in the trading account while Net profit is the profit arrived at after deducting expenses from the gross profit. This is the actual profit of the business. This is ascertained in the profit and loss account
(c) Fixed capital; are the durable assets of a business that can last for a long period of time. These are motor van, machinery, land and building etc. which are used for further production while Liquid capital is the current assets of a business. They are used to meet the day-to-day financial needs of the business. e.g. stock of goods, cash.
(d) A factor; is defined as an agent who is employed to sell goods delivered to him by the principal for compensation. He has possession of the goods and can sell the goods in his own name while Del credere Agent is one who usually in return for extra remuneration, undertakes to indemnify his principal against any loss arising from the failure of persons with whom he contracts on his principal behalf to carry out their parts of the contract. He receives a higher commission than other agents.
(e) FOB (Free on board); is a price quotation that covers all costs up to the ship including the cost of loading the goods into the ship. The buyer is responsible for the cost of unloading the goods while CIF (Cost Insurance and Freight) means that the price quoted includes the cost of the goods. the freight and insurance to the port of destination. The buyer is responsible for other charges thereafter.