What is a bill?

A bill is a valuable security issued by the drawer in accordance with the law, requiring oneself or instructing others to pay a certain amount unconditionally to the payee or the holder, that is, certain valuable securities that can replace cash circulation. In a broad sense, bills refer to various valuable securities and vouchers, such as bonds, stocks, bills of lading, treasury bonds, invoices, and so on.

Characteristics and types of bills:

1. Bills are vouchers with certain rights: the right to request payment, the right of recourse.

2. The rights and obligations of bills are without any reason; as long as the holder obtains the bill, they have already acquired all the rights granted by the bill.

3. Bill laws in various countries require the form and content of bills to be standardized and regulated.

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4. Bills are negotiable securities. Except for the restrictions inherent in the bill itself, bills can be transferred by endorsement and delivery.II. Types of Bills of Exchange

1. Based on the drawer: Banker's Draft and Trade Bill.

2. Based on the acceptor: Commercial Acceptance Bill and Bank's Acceptance Bill.

3. Based on the time of payment: Sight Bill or Demand Draft, and Time Bill or Usance Bill.

4. Based on the presence of attached documents: Clean Bill and Documentary Bill.

In our country, bills refer to a collective term for drafts (bank drafts and trade bills), checks, and promissory notes (bank promissory notes). Generally, a bill is a negotiable instrument issued in commerce by the drawer, which unconditionally stipulates that the drawer or another person unconditionally pays a certain amount, and the holder has certain rights. Instruments that fall under the category of bills include drafts, promissory notes, checks, bills of lading, certificates of deposit, stocks, bonds, and so on.

A draft is a bill issued by the drawer, requiring the drawee to make an unconditional payment of a certain amount to the payee or holder upon presentation or within a certain period. Drafts are one of the most widely used credit instruments in international settlements. Based on the drawer, they are divided into bank drafts and trade bills.

A trade bill is a type of draft. A commercial bill, or trade bill, refers to an unsecured short-term bill issued by financial companies or certain enterprises with high creditworthiness.A commercial bill is a note issued by the drawer, entrusting the drawee to pay a certain amount unconditionally to the payee or the holder on a specified date. Legal persons and other organizations with a deposit account in a bank must have a real transaction or debt relationship to use commercial bills. They are applicable to settlement within the same city or in different places.

The reliability of commercial paper depends on the credit level of the issuing enterprise. It can be endorsed and transferred, but generally cannot be discounted at banks. The term of commercial paper is below 12 months. Due to its higher risk, the interest rate is higher than the interest rate of bank deposits of the same period. Commercial paper can be issued directly by enterprises or sold on behalf of dealers. However, the credit review of the issuing enterprise is very strict. If sold by dealers, they actually guarantee the commercial paper sold to investors behind the scenes. Sometimes, commercial paper is also issued at a discount.

The content of commercial paper rating includes liquidity, that is, short-term debt repayment ability. It can be analyzed from three levels:

1. Overall liquidity analysis. First, the working capital should be analyzed. Working capital is the current assets minus current liabilities, which is the main indicator to measure the overall liquidity status. Secondly, ratio analysis can be carried out. The main ratio indicators to measure liquidity include: current ratio, quick ratio, accounts receivable turnover rate, etc.

2. Spare liquidity analysis. The above ratios can only reflect the overall liquidity status of the company, so special attention should also be paid to the analysis of clear internal and external cash sources, because these cash can meet the repayment of due commercial paper.

In the case of market turmoil, the availability and reliability of spare liquidity become very critical in the rating. The main content of this aspect of analysis includes: the cash created by corporate operations and its stability, etc.

3. Additional credit support analysis. In addition to the above two points, the assessment of commercial paper should also examine whether the issuance of commercial paper has received additional credit support. For commercial paper issued with bank support, the method of support and the credit status of the supporter itself should also be considered.

Long-term debt repayment ability analysis:

In practice, the focus is on evaluating the capital structure, that is, the proportion of enterprise's own funds to borrowed funds. If the proportion is high, it indicates that the capital structure is sound and the long-term debt repayment ability is strong.Common ratios include debt ratios, long-term debt, current liabilities, and the ratios of owner's equity, among others.

Commercial paper is a credit instrument that directly reflects the issuer's commercial credit status.

The rating of commercial paper is primarily based on the debtor's ability to pay debts on time. Commercial paper can be categorized into four levels: A, B, C, and D, as well as three subcategories: A-1, A-2, and A-3. Their meanings are as follows:

A Level: This is the highest level of commercial paper, indicating that this type of commercial paper has the strongest ability to pay on time. A-1, A-2, and A-3 are used to denote the relative degree of safety.

A-1 Level: It indicates that payment on time is absolutely safe or very safe, with absolute safety denoted by A minus l plus.

A-2 Level: It has a relatively strong ability to pay on time, but its safety is not as high as the A-1 level.

A-3 Level: The ability to pay on time is fairly satisfactory, but it is more susceptible to adverse factors such as environmental changes.

B Level: It has sufficient ability to pay on time, but changes in conditions or temporary adversity can undermine this ability.

C Level: The ability to pay is questionable.

D Level: It indicates that this commercial paper is currently in default or is expected to be in default upon maturity.Extended information: The discount rate of commercial bills is based on the interest rate. Interest rates are an important lever and professional term in economic studies, lending, leasing, and other financial practices, as well as in corporate financial management. Therefore, there are long and short-term deposit interest rates and long and short-term loan interest rates, etc.; that is, the level or height of interest rates varies depending on the entity and the term. Interest rates are often determined by the entity for the other party or negotiated by the lending and borrowing parties. For example, the state determines the level of interest rate policy or the fluctuation range of the benchmark interest rate based on the state of the national economy, and banks determine the specific levels (numbers) of lending and deposits based on that range, and the interest rate between enterprises and individuals is determined by the lender or both parties.

The discount rate is commonly used in financial forecasting, corporate financial management, and specific financing practices for calculation purposes. For example, an appropriate discount rate is used to forecast economic development, corporate financial growth calculations, investment forecasts and return calculations, asset evaluation, and corporate value evaluation, etc. The determination of the discount rate is based on the relevant annuity term and the purpose of the discount rate, adjusting related factors (coefficients) based on the interest rate, and is generally estimated and determined by the acting party.

"Credit endorsement" means credit guarantee. For example, using the company's reputation as your "credit endorsement" means that our company guarantees that you are a trustworthy person and can establish business with him.

Endorsement, a financial term, originally refers to the act of the bill holder recording relevant matters on the back of the bill or an attached slip and signing or stamping it to transfer the bill rights to others or to grant others the right to exercise certain bill rights.

Commercial bills for project payments generally refer to the use of commercial bills to pay for project payments. There are certain risks when using commercial bills for payment, such as the commercial bill being guaranteed by the credit of the acceptor, and there may be a situation where it cannot be honored upon maturity. Whether to use commercial bills for project payments should be stipulated in the project contract to avoid subsequent disputes. Commercial bills are short-term unsecured bills issued by financial companies or enterprises, used by the issuer to raise funds. Commercial bills can be endorsed and transferred, but generally cannot be discounted at banks. The reliability of commercial bills depends on the creditworthiness of the issuing enterprise and is a type of credit instrument.

What is commercial bill payment?

Commercial bill payment is the act of using commercial bills for payment. A commercial bill is a payment note between the payer and the payee, issued by a third-party drawer, instructing the payer to unconditionally pay the corresponding amount to the payee or the holder within a specified period. The issuer of the commercial bill is not restricted and can be issued by either the payer or the payee. Commercial bills are accepted by the payer or the payee after being issued by a non-bank payer, and commercial bills accepted by banks are called bank acceptance bills.

Commercial bills have a payment term, which is determined by the negotiation between the payer and the payee. In addition, the payee can transfer the commercial bill to others for collection. When the payee of the commercial bill needs funds, they can apply for discounting at the bank with the bill that has not yet matured. Commercial bills do not necessarily have to be cashed and settled in a designated area and can be done in different locations.What does it mean by "bouncing a commercial bill"?

Simply put, a commercial bill bouncing refers to the default on a commercial bill, which fails to be successfully cashed. A commercial bill, short for a commercial note, is an unsecured short-term bill issued by a financial company or enterprise. It is primarily used to help the issuer of the bill raise funds, with the drawee required to pay a certain amount unconditionally upon presentation of the bill or on a specified date.

The term "bouncing" originally referred to the act of a bank being unable to cash a check due to insufficient funds in the account, and then returning the check to the holder. In short, it means a breach of contract, and this concept has been extended to various industries and fields. The reliability of a commercial bill depends on the creditworthiness of the issuing enterprise, making it a credit instrument.

Differences between commercial bills and bank bills:

1. Different drawers

The drawer is the person who promises to honor the bill. When you present the bill to them, they are obligated to pay. The drawer of a bank bill is a bank, while the drawer of a commercial bill is a payee other than a bank, which is the enterprise that issued the bill.

2. Different credit ratings

The drawer of a bill determines its creditworthiness. A bank bill is backed by the credit of a bank; a commercial bill is backed by the credit of the issuing enterprise. Of course, the credit of a bank is higher than that of an enterprise, so the credit rating of a bank bill is higher than that of a commercial bill.

3. Different risks

The risk associated with a bill is determined by the creditworthiness of its drawer. Since a bank bill is backed by a bank's credit, it carries a lower risk compared to a commercial bill, which is backed by an enterprise's credit.The risk of bills lies in the situation where the acceptor has no funds to pay when the bill matures. The inability to cash a bank acceptance bill occurs when the issuing bank goes bankrupt, while the inability to cash a commercial bill occurs when the issuing company goes bankrupt due to poor management. Generally speaking, the risk of a bank going bankrupt is still lower than the risk of a company going bankrupt.

4. Different liquidity

Commercial bills have a lower credit rating, so in actual transactions, the party receiving the bill tends to prefer bank acceptance bills. Therefore, in terms of liquidity, commercial bills are less liquid than bank acceptance bills.

5. Other differences

In addition to the above differences, there are also distinctions between bank acceptance bills and commercial bills in terms of the issuance process, discount interest rates, and discount conditions.