Bills of exchange a Bank bill vs commercial(non-bank bill Financial intermediary. a usually 30. 60. 90 or 180 days Unsecured for large companies Drawer, acceptor, discounter CONTINGENT LIABILITY a Text pp. 562-4
Bills of Exchange ◼ Bank bill vs commercial (non-bank) bill. ◼ Financial intermediary. ◼ Usually 30, 60, 90 or 180 days. ◼ Unsecured for large companies. ◼ Drawer, acceptor, discounter. ◼ CONTINGENT LIABILITY. ◼ Text pp. 562-4
Contingent liabili If the acceptor is unable to pay(the holder on maturity), then anyone who has endorsed the bill may be obliged to pay a subsequent holder of the bill
Contingent Liability If the acceptor is unable to pay (the holder on maturity), then anyone who has endorsed the bill may be obliged to pay a subsequent holder of the bill
Promissory notes A promise to pay a stated sum of money on a stated future date Two parties-borrower and discounter Restricted market- unsecured ■ Fixed interest rate. 7 to 364 days a No contingent liability Text p. 564
Promissory Notes ◼ A promise to pay a stated sum of money on a stated future date. ◼ Two parties - borrower and discounter. ◼ Restricted market – unsecured. ◼ Fixed interest rate. ◼ 7 to 364 days. ◼ No contingent liability. ◼ Text p. 564
Factoring Companies sell their accounts receivables at a discount to a third party usually a finance company a Avoids need for, and cost of, following up receivables Expensive a Text pp. 567-9
Factoring ◼ Companies sell their accounts receivables at a discount to a third party, usually a finance company. ◼ Avoids need for, and cost of, following up receivables. ◼ Expensive. ◼ Text pp. 567-9