CSEET · Business Communication · Common Business Terminologies
An importer in Mumbai wants to assure an overseas supplier that payment will be made once the shipping documents match the agreed terms. The importer's bank issues a written undertaking to pay the supplier. This document is called a:
It is a letter of credit. The buyer's bank issues it, promising to pay the seller once documents that comply with the agreed terms are presented. This reduces the seller's risk in international trade, unlike a bill of exchange or promissory note.
- ABill of exchange
- BBank guarantee for performance
- CLetter of creditCorrect
- DPromissory note
Explanation
A letter of credit is issued by the buyer's bank, undertaking to pay the seller when the stipulated documents are presented and comply with the terms. A bill of exchange is an order drawn by the seller, not the bank's undertaking. A promissory note is the debtor's own promise to pay. A performance guarantee covers failure to perform a contract rather than payment against documents.
Did you get it right without looking?
One question tells you little. A timed set on Common Business Terminologies shows your real accuracy, how long you take and where you lose marks.
More Common Business Terminologies questions
- Which of the following pairs correctly matches a corporate term with its meaning?
- Which of the following best describes the term 'collateral' in a loan agreement?
- A customer's account shows a negative balance because the bank allowed withdrawals beyond the deposited amount under a pre-arranged limit. T…
- Which of the following is the best meaning of the business jargon 'blind copy' (bcc) when Neha sends a tender notice to five vendors and als…
- A manager writes, 'Please find the invoice enclosed with this letter.' In business correspondence, the word 'enclosure' (Encl.) at the botto…
- Which document, issued by a carrier or its agent, acts as a receipt for goods shipped, evidence of the contract of carriage and, in its nego…