Theory question 102
BankingCommerce 2 (answer five questions)
(a) Explain the following terms: (i) bearer cheque (ii) open cheque; (iii) order cheque; (iv) crossed cheque
(b) Explain any six factors which a bank manager would take into consideration in evaluating application for a loan
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(a)(i) Bearer cheque: payable to whoever presents it (the bearer); no endorsement is needed.
(ii) Open cheque: an uncrossed cheque that can be cashed over the counter.
(iii) Order cheque: payable only to the named payee or to whoever he orders by endorsing it.
(iv) Crossed cheque: has two parallel lines across its face, so it cannot be cashed over the counter and must be paid into a bank account.
(b) Any six: character and integrity of the borrower; purpose of the loan (viability of the project); capacity to repay – income/cash flow; collateral/security offered; amount and duration of the loan; past record with the bank (account operation); borrower's own capital in the business; government credit guidelines; state of the economy and the industry.
Define each cheque precisely; in (b) explain each factor briefly.