Question
State any two advantages between a bill of exchange and a draft.
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Answer
The advantages of Bill of Exchange are:
- Facilitates Purchase and Sale of Goods on Credit: It facilitates credit purchase and sale of goods because Bill of Exchange is an unconditional promise to pay.
- Serves as a Source of Finance: Bills of Exchange can be discounted with a bank or NBFC so that the enterprise allowing credit can receive the amount immediately without the debtor having to pay before time.
- Easy to Recover the Amount: If a Bill of Exchange is dishonoured, it is easier to recover the amount legally than in the case of an ordinary debt.
- Endorsement: A Bill of Exchange can be endorsed to other parties; thus it serves almost the same purpose as cash.
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