A Disadvantage for Companies That Insist on Less Risky Transactions

question 59

True/False

A disadvantage for companies that insist on less risky transactions, such as a letter of credit, is that they may be losing business to competitors that sell on open accounts.

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Definitions:

Forward Contract

A non-standardized agreement to buy or sell an asset at a future date for a price agreed upon today.

Daily Resettlement

The process in futures trading where the gains or losses of the day are calculated, and accounts are adjusted accordingly to reflect the market value.

Forward Contract

A bespoke contract that allows two parties to trade an asset at a fixed price on a designated date in the future.

Cereal Company

A business entity that specializes in the production and marketing of cereal and grain-based food products.