Credit Instruments explanation with example.

1. 1) Credit Instruments
2) Advantages of Credit
3) Disadvantages of Credit
4) Role of Credit in Economy
5) Concept of Credit Management

2. 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:
1. Cheque
2. Bank Draft
3. Bill of Exchange
4. Promissory Note
5. Government Bond
6. Treasury Bills
7. 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.

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

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 .

9. 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