3. The role of negotiable instruments in business transactions are ?
1. Facilitating payment: Negotiable instruments such as checks, promissory notes, and bills of exchange allow businesses to make payments in a convenient and efficient manner. They provide a secure and traceable way to transfer funds between parties.
2. Providing security: Negotiable instruments offer a level of security for both the payer and the payee. By using these instruments, businesses can avoid the risks associated with carrying large amounts of cash or making payments through less secure methods.
3. Enabling credit transactions: Negotiable instruments, such as promissory notes, allow businesses to extend credit to customers or suppliers. This can help facilitate business transactions by providing flexibility in payment terms and allowing parties to buy or sell goods/services on credit.
4. Establishing proof of payment: Negotiable instruments serve as a legal proof of payment in business transactions. They provide a written record of the transaction and help resolve disputes in case of any disagreements between parties.
5. Enhancing liquidity: Negotiable instruments can be easily transferred from one party to another, making them a liquid asset that can be readily converted into cash if needed. This liquidity can be beneficial for businesses to manage their cash flow effectively.