Which of the Following Is the Best Definition of Letter

question 326

Multiple Choice

Which of the following is the best definition of letter of credit?

• A) A written statement by a bank that money will be paid, provided conditions specified in the letter are met.
• B) Short-term financing in which the factor purchases all of a firm's receivables and forwards the proceeds to the seller as soon as they are collected.
• C) The time period between the acquisition of inventory and when cash is collected from receivables.
• D) Loan negotiated with banks for day-to-day operations.
• E) Costs that fall with increases in the level of investment in current assets.

---

Definitions:

Liberally Administered

A principle or policy applied in a manner that is flexible, generous, or not strictly in accordance with strict rules or formalities.

Aggrieved Party

An individual or entity that has suffered legal wrong or harm, and who is entitled to bring a lawsuit against the party responsible for that harm.

Modified Contract

An agreement where the original terms have been altered or amended by the parties involved, following mutual consent.

Consideration

The value (such as money, a promise, or a service) that is given by both parties in a contract making the agreement legally binding.