State the purpose of a promissory note. Describe why a supplier would use a promissory note for short-term financing instead of trade credit.
What will be an ideal response?
A promissory note is a written pledge by a borrower to pay a certain sum of money to a creditor at a specified future date. The purpose is to attempt to ensure payment through a legally binding and enforceable contract. A promissory note is also a negotiable instrument. Because a promissory note is negotiable, the manufacturer, wholesaler, or company extending credit may be able to discount, or sell, the note to its own bank. Typically, customers are asked to sign a promissory note when a manufacturer or wholesaler is uneasy about extending trade credit to a retailer because a promissory note is both legally enforceable and is more secure.
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a. unconstitutional; it interferes with foreign trade b. unconstitutional; states must charge fees for the use of public facilities c. constitutional; it is related to benefits received d. constitutional; it only applies to foreign merchants, so it does not discriminate against interstate commerce e. constitutional so long as the federal government imposes a similar tax