Q.Explain briefly the risk-bearing function performed by middlemen in a channel of distribution.

Merchant middlemen take ownership of goods and resell them at a profit; they are of two kinds — wholesalers and retailers — so the classification is into two categories.

Middlemen in distribution are broadly of two sorts: merchant middlemen and agent middlemen. Merchant middlemen are those who actually purchase the goods, take title (ownership) to them, and then resell them. They are classified into two categories:

• Wholesalers — buy in bulk from producers and sell in smaller lots to retailers. …

The answer is option (d) Two.

Merchant middlemen are those intermediaries who buy and take title (ownership) to the goods and then resell them at a profit, thereby bearing the risk of trade. They are classified into two categories:

1. Wholesalers — who buy goods in large quantities from producers and sell them in smaller lots to retailers.
2. Retailers — who buy from wholesalers and sell in small quantities to the final consumers. …

The correct answer is (b) Factor. A factor is a mercantile agent who takes physical possession of the principal's goods and sells them, without becoming their owner.

In the Tamil Nadu HSC Commerce syllabus, various mercantile agents (middlemen) are distinguished by whether they hold possession and whether they own the goods:

• Factor — is entrusted with the possession of goods by the principal and sells them in his own name, but ownership remains with the principal. This exactly matches the question, so (b) is correct.
• Broker — only brings the buyer and seller together to negotiate a deal; he does not take possession of the goods.
• Warehouse keeper — stores goods for a charge; he is not appointed to sell them. …