question_answer

    Consider the following information A shoe manufacturer, M Salim has to make a payment to the leather supplier and writes a cheque for a specific amount. This means that the shoe manufacturer instructs his bank to pay this amount to the leather supplier. The leather supplier takes this cheque and deposits it in his own account in the bank. The money is transferred from one bank account to another bank account in a couple of days. The transaction is complete without any payment of cash Now answer the following questions (a) M Salim wants to withdraw Rs. 20,000 in cash for making payments. How would he write a cheque to withdraw money? (b) Tick the correct answer. After the transaction between Salim and Prem, (i) Salmi's balance in his bank account increases, and Prem's balance increases. (ii) Salim's balance in his bank account decreases and Prem's balance increases. (iii) Salim's balance in his bank account increases and Prem's balance decreases. (c) Suppose Salim continues to get order from traders. What would be his position after six years?

Answer:

                    (a) (b) (ii) (c) If Salim continues to get orders form traders for the next six years, he can use the profits from the sales of shoes to finance his future business. Then he will not have to borrow money from any soruce of credit.