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24 September, 02:46

A letter of credit:

a. Ensures a company that funds will be available when needed

b. Is analogous to a credit card that companies can draw on as needed

c. Is a representation that a company has a high credit rating

d. Provides a guarantee of payment from the buyer, reducing the credit risk to the seller

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Answers (1)
  1. 24 September, 04:49
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    d. Provides a guarantee of payment from the buyer, reducing the credit risk to the seller

    Explanation:

    A letter of credit is a document that guarantees a seller of payment from the buyer. It is drafted and issued by a bank assuring the seller of timely and full payment. A letter of credit is applied mostly in international trade where the buyer and seller hardly meet or know each other.

    Banks issue a letter a credit against cash or other securities. Should the buyers fail to make payment, a letter of credit assures the seller that the bank will take responsibility for the payment. Banks usually charge a fee for issuing letters of credit.
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Home » Business » A letter of credit: a. Ensures a company that funds will be available when needed b. Is analogous to a credit card that companies can draw on as needed c. Is a representation that a company has a high credit rating d.
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