Credit Instruments

Credit Instruments explanation with example.

1. Credit Instruments Advantages of Credit Disadvantages of Credit Role of Credit in Economy Concept of Credit Management Outline: Zeshan Arshad Credit Instruments

2. Credit Instruments A credit is a instrument is term used in he banking and finance world to describe an time agreed upon that can be used as a currency . Classification: Cheque Bank Draft Bill of Exchange Promissory Note Government Bond Treasury Bills Traveler's Cheque

3. A cheque should be in writing and properly signed by the drawer. A cheque contains an unconditional order. A cheque issued on a specified banker only. The amount specified is always certain and should be clearly mentioned both in figures and words Bank Draft Drawn on another office of the same bank; It is payable on demand; and Its payment has to be made to the person whose name is mentioned therein or according to his order. Cheque

4. Bill of Exchange A bill of exchange to be valid must fulfill the following requirements: The instrument must be in written and must be signed by the drawer. The amount of money to be paid must be certain contain an order to pay. The payment must be in the legal tender currency of country. Money must be paid to a definite person and properly stamped.

5. Promissory Note The promissory note must be in writing. It must contain an express promise. The payee must be certain. It should be signed by the maker. The amount must be certain.

6. Set Maturity Dates  Interest Payments. Issue Price Liquidity Government Bond

7. Treasury Bills Maturity time Period less than 1 year High Liquidity Low Risk

8. Uses peoples on vocation in foreign countries instead of cash. Used o avoid risk of having cash . Traveler's Cheque

9. Advantages and Disadvantages of Credit Advantages Disadvantages Exchange of Ownership. Employment Encouragement Increase Consumption Saving Encouragement Capital Formation Easy Payment Development of Entrepreneurs Encouragement of Expenditure Encourage weakness Danger beyond limit Encourage Inefficient Economic Crises

10. Large Scale Production Shifting Of Capital To Productive Purposes Provision Of Working Capital Emergency Of New Businessman International Payments  Increases In Saving Rate Purchase Of Goods Role of Credit in Economy and Credit Management