“Whether credit would be useful or not, it depends on the situations”. Give two different examples in support of this statement.
IN some cases, credit plays a vital positive role and plays negative role as well. It mainly depends on situations.
Take the example of Salim, a shoe manufacturer. Salim has received an order for 3000 pairs of shoes to be delivered in a month time. To complete production on time, Salim has to hire few more workers. He has to purchase the raw materials. He obtains loans. First he asks the leather supplier to supply leather on credit terms. He also obtains loan in cash from the trader as advance payment for 1000 pairs of shoes with a promise to deliver the whole order by the end of the month.
At the end of the month, Salim is able to deliver the order and makes a good profit. Take the other case of Swapna. She takes a loan from the money lender to meet the expenses of cultivation hoping that her harvest would help repay the loan. Anyhow, her crops fails. She is unable to repay the money lender and the debt grows over the year into a large amount. Next year, Swapna takes a fresh loan for cultivation. But her earnings are not enough to cover the old loan. She has to sell a part of the land to pay off the debt. Credit, instead of helping Swapna improve her earnings, left her worse off.