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In which cases are monetary transactions between businesses referred to as loans or credit?
  • a)
    When businesses exchange goods for cash
  • b)
    When transactions are based on mutual trust
  • c)
    When businesses receive investments
  • d)
    When businesses make cash payments
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
In which cases are monetary transactions between businesses referred t...
Monetary transactions between businesses referred to as loans or credit when transactions are based on mutual trust.

Explanation:
In the world of business, monetary transactions can take various forms depending on the nature of the transaction and the relationship between the parties involved. While transactions such as exchange of goods for cash, receiving investments, or making cash payments are common, it is specifically when transactions are based on mutual trust that they are referred to as loans or credit.

1. Exchange of goods for cash:
- In this type of transaction, a business sells its goods or services to another business and receives cash in return.
- This is a straightforward transaction where the buyer pays the seller for the goods or services provided.
- It does not involve any element of lending or credit as the payment is made immediately.

2. Receiving investments:
- When a business receives investments, it means that individuals or other businesses are providing funds to support the growth or operations of the business.
- Investments can be in the form of equity, where the investors become partial owners of the business, or in the form of debt, where the investors lend money to the business.
- In the case of debt investments, the transactions can be referred to as loans or credit, as the business is borrowing money from the investors and is obligated to repay it with interest.

3. Making cash payments:
- Making cash payments is a common practice in business transactions where one business pays another for goods or services provided.
- Similar to the exchange of goods for cash, this type of transaction does not involve lending or credit, as the payment is made immediately.

4. Transactions based on mutual trust:
- When businesses engage in monetary transactions based on mutual trust, it means that they are extending credit to each other.
- Credit refers to the provision of goods, services, or money with the expectation of payment at a later date.
- In such transactions, one business provides goods or services to another business without receiving immediate payment.
- The receiving business becomes a debtor and is obligated to repay the amount owed at a later agreed-upon date.
- These transactions are referred to as loans or credit because one business is effectively lending money or extending credit to another.

In conclusion, monetary transactions between businesses are referred to as loans or credit when they are based on mutual trust, where one business provides goods, services, or money to another business without immediate payment, and the receiving business becomes a debtor with the obligation to repay the amount owed at a later date.
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Community Answer
In which cases are monetary transactions between businesses referred t...
Monetary transactions between businesses are referred to as loans or credit when they are based on mutual trust. This means one business extends credit to another, allowing the recipient to pay at a later date.
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In which cases are monetary transactions between businesses referred to as loans or credit?a)When businesses exchange goods for cashb)When transactions are based on mutual trustc)When businesses receive investmentsd)When businesses make cash paymentsCorrect answer is option 'B'. Can you explain this answer?
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