(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 an application for a loan.
Explanation
(a)(i) Bearer Cheque; is a cheque that is made payable to whoever presents it and that is the meaning of the word bearer. It does not mean that no name is written on the cheque. The cheque can be presented by anybody despite the name written on it.
(ii) Open Cheque; is the opposite of a crossed cheque because it does not have two lines drawn across its face. An open cheque is cashed at the counter and it is not compulsory to pay it into the payee's current account.
(iii) Order cheque; is a cheque made payable to a person named on it or his order. What this means is that an order cheque is only paid to the person whose name appeared on it or another person he will order the bank to pay the money to by endorsing the cheque to be paid to the person.
(iv) Crossed Cheque; is the opposite of an open cheque because it has two lines drawn across its face. A crossed cheque is never cashed at the counter. It is paid into the payee's current account.
(b) Factors which a bank manager would take into consideration in evaluating an application for loan are:
(i) The type of account the customer operates.
(ii) The actual amount involved.
(iii) The past financial dealings of the customer with the bank.
(iv) The purpose for which the loan will be used.
(v) The manager will also like to know the source of repayment and period of repayment.
(vi) The customer's referees.
(vii) The collateral security offered.