Prelim Flashcards
The direct exchange of one commodity for another
Barter
Limitations in Barter
- Double coincidence of wants
- Lack of standard unit of value
- Indivisibility of goods
- Storage and perishability issues
Types of Commodity money
- Animal products
- Agricultural goods
- Natural objects
- Metal objects
- Electronic banking
It comes from he word “credere” and is a product of necessity
Credit
A transfer of goods, services, or funds giving rise to the obligation that must be discharged in the future
Credit
The direct exchange of one commodity for another
Barter
Limitations of Barter
- Double coincidence of wants 2. Lack of standard unit of value
- Indivisibility of goods
- Storage and perishability issues
Factors of Credit
- There is a transfer of goods, services or funds
- Giving rise to the obligation
- That obligation must be discharged in the future
Cost of using credit
- Interest
- Operating expenses
- Risk
Foundations of Credit
- Trust
- Proper facilities and information
- Stability of money
- Stability of government
Credit as a medium of Exchange
- Credit of general acceptability
- Credit of limited acceptability
This is where People are willing to accept in payment of goods delivered or services rendered.
1. Must be issued by a promisor trusted by people
2. Must be in convenient denominations
3. Easily recognizable
4. Difficult to counterfeit
Credit of general acceptability
This is when issued under the conditions that make them acceptable only within a restricted field.
– Promissory note
– Bill of exchange
– Bank credit
Credit of limited acceptability
According to form
- Direct loan
- Discount
- Overdraft
Most common type of loan
Direct loan
The lender collects the interest in advance and gives the balance to the borrower.
Discount
Amount withdrawn is in excess of the net balance in the bank.
Overdraft
According to type of users
- Consumer or personal credit
- Retail credit
- Installment credit
- Mercantile or commercial Credit
- Bank credit
- Investment credit
Credit for personal needs
Consumer or personal credit
extended to those customer of good credit standing
Retail credit
Small downpayment followed by equal monthly installments
Installment credit
usually extended to commercial and trade investors, and is used to finance the purchase of inventories
Mercantile or commercial Credit
short-term credit extended to businessmen for working capital purposes
Bank credit
long-term credit usually for the purpose of obtaining fixed asset
Investment credit
According to maturity
- Short-term credit
- Intermediate or medium-term credit
- Long-term credit
According to security
- Secured loans
- Unsecured loans
based solely on the credit standing of the borrower
Unsecured loan
guaranteed by some property or collateral
Secured loans
According to purpose
- Agricultural credit
- Commercial Credit
- Industrial credit
- Consumer credit
Its purpose is to finance the cultivation, development and improvement of agricultural land.
Agricultural credit
Types of agricultural credit
- Time loan
- Crop loan
- Commodity loan
used to finance the development and improvement of the land.
Time loan
utilized for the production of crops.
Crop loan
used to finance the marketing and distribution of harvested crops.
Commodity loan
used to finance the production and distribution of goods
Commercial Credit
used to finance the manufacture of goods, construction of plant buildings or acquisition and installation of equipment or machinery.
Industrial credit
used to finance immediate consumption such as purchase of goods or services, small investment purposes, tax payments, and other short-term obligations.
Consumer credit
