QUESTION 4 Advantage Increased financing Disadvantages Cost of discounts foregone Possible deterioration of cred it rating Possible refusal of future supply/credit Fees/charges for late payment QUESTION 5 For the following reasons A fixed-term loan is likely to be for a specific purpose, whereas the overdraft allows for discretionary use(within reason) The overdraft may be used according to needs and interest is charged accord ing to use, ie the whole $100 000 need not be used. Note. however that fees are often charged on the unused portion of overdraft An overdraft may become a relatively long-term source of funds up to the limit, once established. It should be noted. however. that overdrafts are at call and not fixed term QUESTION 6 For a commercial bill, the acceptor, the discounter and any party which endorses the bi assume liability for repayment of the bill. This is referred to as a contingent liability For a promissory note, the borrower is the liable party, irrespective of how many times the note has been tradedSeptember 2003 QUESTION 4 Advantage: Increased financing. Disadvantages: Cost of discounts foregone. Possible deterioration of credit rating. Possible refusal of future supply/credit. Fees/charges for late payment. QUESTION 5 For the following reasons: • A fixed-term loan is likely to be for a specific purpose, whereas the overdraft allows for discretionary use (within reason). • The overdraft may be used according to needs and interest is charged according to use, ie the whole $100 000 need not be used. Note, however, that fees are often charged on the unused portion of overdrafts. • An overdraft may become a relatively long-term source of funds up to the limit, once established. It should be noted, however, that overdrafts are at call and not fixed term. QUESTION 6 For a commercial bill, the acceptor, the discounter and any party which endorses the bill assume liability for repayment of the bill. This is referred to as a contingent liability. For a promissory note, the borrower is the liable party, irrespective of how many times the note has been traded