📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!

    Question

    Which of the following is the primary purpose of a

    Letter of Credit (LC) in trade finance?
    A Providing a short-term loan Correct Answer Incorrect Answer
    B Ensuring payment security in international trade Correct Answer Incorrect Answer
    C Guaranteeing performance in a construction contract Correct Answer Incorrect Answer
    D Increasing working capital for MSMEs Correct Answer Incorrect Answer
    E Reducing foreign exchange risk Correct Answer Incorrect Answer

    Solution

    A Letter of Credit (LC) is a financial instrument used in international trade to guarantee that a buyer’s payment to a seller will be received on time and for the correct amount. If the buyer fails to make a payment, the bank that issued the LC covers the amount.

    Practice Next
    More Financial Management Questions

    Relevant for Exams:

    ask-question