(a) List six credit instruments used in business transactions (b) Mr. Sylva is considering hire...

Explanation

(a) Credit instruments used in business transactions:

1. Promissory note
2. Bill of exchange
3. Cheque
4. Letter of credit
5. Bond
6. Bank draft
7. Trade bill
8. Accommodation Dill.

(b)The advantages of hire purchase as a source of finance for Mr. Sylva's business operations are:

i. Promotion of durable goods: It facilitates the promotion of durable goods.

ii. Increase in profit: The profit will increase as a result of the availability of hire purchase.

iii. Increase in turnover: It increases the rate of turnover.

iv. Large-scale production: It leads to large-scale production as a result of an increase in demand.

v. Opportunity to acquire expensive goods: It presents the opportunity to acquire expensive goods which he or she could not have been able to buy by cash

vi. Access to credit: He has access to credit which he could otherwise not have obtained from banks.

The disadvantages of hire purchase as a source of finance for Mr. Sylva's business operations are:

i. Additional costs: It usually brings additional costs as a result of court action for recovery of den

ii. Court action: It can lead to court action.

iii. Paying more than necessary: He will pay more than he Would pay under cash transactions.

iv. Payment of a high interest rate: He will be paying a high rate of interest

v. Inability to negotiate for better deals: He may not be able to negotiate for a better deal