ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Commercial bills, also a money market instrument, works more like the bill of exchange. Businesses issue them to meet their short-term money requirements.

Detailed explanation-2: -A commercial bill is essentially a bill of exchange. In a credit sale, the seller will draw a bill of exchange. The buyer of the goods will accept such bill, and the bill becomes a trade bill which is a marketable financial instrument. The seller can then go to his bank and get the bill discounted.

Detailed explanation-3: -The money market is a part of the larger financial market and consists of numerous smaller sub-markets like bill market, acceptance market, call money market, etc. Money market deals are not carried out in money / cash, but other instruments like trade bills, government papers, promissory notes, etc.

Detailed explanation-4: -Commercial Bills may be of the following types. Demand and usance bills. Clean and documentary bills. Accommodation and Supply Bills.

Detailed explanation-5: -Commercial bills are also called “bills of exchange, ” which are used by firms for financing their working capital. In addition, it is used as a short-term negotiable and self-liquidating tool for funding credit sales. Commercial bills are used when the selling of goods takes place on credit.