explain banking and insurance as auxiliaries to trade
Answers
Auxiliaries to trade:
Banking -
It provides credit facility to industries and trading firms.
The goods and services produced by the manufacturer are sold to buyer in exchange of money. The common medium of exchange is circulated by the banking branch of Commerce. The banks help the buyers and the sellers in making and collecting payments. Now business man can send money from one place to the other in the form of BANK draft, cheques, etc. Banks are also financing Businessman by granting them loan, credit facility, etc. Banks are helping in external trade also by issuing letter of credit and by providing foreign currency.
Insurance -
Provides coverage from various types of risks.
There are different types of risk which a businessman has to face. The insurance branch of Commerce helps in removing the hindrance of risk by providing protection and compensation to the insured. Insurance companies agree to undertake to make goods the loss suffered by the Businessman. The common types of risks covered by an insurance company are damage of goods during transit, storage, by fire, flood, rain, etc.
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