What is a Bill of Exchange? Why is it used?
Answer Posted / nicholas
A bill of exchange is a document that is sometimes used in
home trade, but it is most commonly used in foreign trade.
it is particularly used in the settlement of international
debts. the bill of exchange is made out by the
seller/exporter (the creditor) of goods requiring that the
buyer/importer (the debtor) pays a sum of money on demand,
or on n agreed future date (usually after three months).
both the buyer and the seller benefit from the use of bill
of exchange. the buyer obtains credit on the transaction,
and the seller benefits because instead of waiting for
payment he can either sell the bill at a 'discount',
'negotiate' it by using it to pay off his own debts, or use
it as collateral against a bank loan.
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