Which one of the following is the most suitable service for a cafe owner who needs a short-term source of money to buy ingredients before customers pay thei...
Question 1 Report
Which one of the following is the most suitable service for a cafe owner who needs a short-term source of money to buy ingredients before customers pay their invoices? Select one answer from overdraft, mortgage, savings account or shares. The cafe owner has a business current account at a local bank.
(a) Select the answer. [1]
(b) State one feature of the service selected. [1]
(c) Give two reasons why this service is suitable for the cafe owner. [2]
Answer Details
(a) The suitable service is an overdraft. [1]
(b) An overdraft allows the account holder to withdraw or spend more than is in the current account, up to an agreed limit. [1]
(c) This is suitable because it provides short-term credit, allowing the cafe to pay suppliers for ingredients before customer invoices are received. Interest is normally charged only on the amount used, and the facility is linked to the existing business bank account. [2]
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