Abstract:
In this paper we will discuss about barter system. It allows exchanging goods and services without taking the monetary value of them. Barter system can also be run through a barter exchange.Barter is a kind of trading system where goods and services are exchanged directly, without considering the monetary value, for other services or goods. Barter may be bilateral or multilateral and in most developed countries, it runs parallel to the monetary system. If any money crisis occurs, due to hyperinflation or unstable currency, then barter replaces money.
In finance, barter is normally used when the companies are trading without using the monetary values of the goods and services, that is, "non money finance". Usually when the money constraints get too much expensive, then the economic actors use barters to trade the commodities.
Corporate barter involves in the usage of a special currency unit termed as trade-credit. Barter system may be run through a barter exchange as well. Barter exchange increases the purchasing power and revenue of the traders. It also improves the cash flow.
A barter exchange maintains a one to one relationship with the members, which allows two completely different types of businesses to trade with each other. For example, suppose a food retailer A wants some acres of land, whose value is 1500 dollars, to open a shop but, the landscaper B does not want to purchase foods from the retailer. Then, a good barter exchange will issue "trade dollars" to A that he can use in his own way.
However, while choosing a barter exchange the traders should be clear about the fact that the exchange will allow them to spend. Most of the barter exchanges don't allow the traders to spend their earned profits; therefore the money will be of no use.
