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Soru

Zorluk: OrtaBanking: Functions and Services to Trade

A textile merchant in Aba receives a 90-day bill of exchange from a buyer in Onitsha for goods delivered on credit. Wanting immediate funds to replenish inventory before the bill matures, the merchant presents the document to a commercial bank for immediate cash settlement at a slight deduction. Which banking service has the merchant utilized?

  1. Discounting a bill of exchangeCevap
  2. B
    Opening a letter of credit
  3. C
    Executing a standing order
  4. D
    Obtaining a bank overdraft

Cevap

Discounting a bill of exchange is the banking service that enables a seller to obtain immediate liquidity by selling an un-matured bill of exchange to a commercial bank at a discount.
Discounting a bill of exchange allows a trader to convert a debt owed to them into cash before the bill's maturity date. The bank pays the trader the face value minus a discount fee for early settlement.

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1
Analyze the merchant's financial scenario and requirement
The merchant holds a 90-day trade credit instrument (bill of exchange) but requires cash before the 90-day maturity period ends.
Identifying the specific financial need helps distinguish between credit facilities and negotiable instrument services.
2
Evaluate the commercial bank functions that provide early cash settlement for trade credit instruments
Commercial banks purchase un-matured bills of exchange from traders at a value lower than the face value, deducting a discount fee to cover interest.
Discounting bills of exchange acts as a short-term working capital solution for trade debts.

Anahtar Kavram

Discounting Bills of Exchange in Commercial Banking Services to Trade
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Konular

Banking: Functions and Services to Trade

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