What are Corporate Credit Cards? – Different Types of Cards
February 12, 2025
We live in a world which idolizes innovation. We tend to idolize companies which have produced some products which can be considered to be innovative. The underlying belief in the capitalistic system is that innovation is beneficial. It is innovation which creates more value, and since the capitalistic system allows the creator of innovation to […]
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While the system of debit and credit is the foundation for maintaining balance and accuracy, it can often feel overwhelming for beginners and even for clerical staff who handle day-to-day bookkeeping. The Golden Rules of Accounting are designed to simplify these concepts into actionable principles that anyone can use. These rules break down the most […]
In the past few articles, we have studied about the various models that are available to help us predict the value of a firm based on the dividends that it provides. However, all these models had one flaw. They expected that the dividends of the firm will follow some set pattern. For instance, the assumptions […]
In terms of products and service coverage, the commercial banking ecosystem is much larger than the retail banking ecosystem. Corporations have a wide variety of business needs and commercial banks being their financial partners are expected to take care of these needs. In this article, we will have a closer look at the various categories of products that are offered by commercial banks. Details about the various types of products will be discussed in later articles.
There are many commercial banks across the world that provide treasury and cash management services to their clients. Corporations find it effective to outsource their treasury tasks to banks since banks have expertise in treasury operations and are able to manage the money more effectively. This service is used by many cash-rich corporations in the world.
The money is received by the banks in the form of checks or electronic payments. As a result, commercial banks in many parts of the world process these transactions on behalf of their clients. This is because instead of every company processing its own transactions, the bank can process transactions on behalf of everybody and reap the benefits of economies of scale. They can offer cheaper services to their clients and can still generate a profit in the process.
Payroll processing is another service that is commonly provided by commercial banks to their clients. Once again, this is because of the fact that the bank is intricately involved in the process of disbursing payroll payments.
Commercial banks actually have no interest in owning this equipment. This is because leasing is a complicated business and banks do not have to know how to manage the same. They generally purchase these assets on behalf of their clients and use the lease agreement as a way to finance the equipment. This helps corporations take on more debt without showing the same on their balance sheet and hence without impacting their debt-to-equity ratios.
Foreign trade transactions require the intervention of a creditworthy third party. Here is where banks help their clients conduct their business seamlessly. Commercial banks help corporations by issuing letters of credit which facilitate the movements of goods and services overseas.
Neither party pays money to the other. Instead, they keep paying money to an escrow account in a commercial bank. The commercial bank takes the responsibility of disbursing this money only when the terms of the contract have been met. Hence, both parties are able to use the bank’s reputation in order to facilitate deal-making between each other.
The bottom line is that commercial banks provide a wide variety of services to their clients. The coverage of these services is much wider as compared to the services which are provided to individuals.
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