118k views
5 votes
Which of the following financing methods would be used by an exporter that enjoys good relations with a buyer in a well-established market?

A) letter of credit
B) cash in advance
C) sales on open account
D) barter
E) arrival draft

User Matt Wills
by
8.0k points

1 Answer

4 votes

Final answer:

An exporter with good relations and a well-established market with a buyer would likely use sales on open account (option C) for financing, signifying a high level of trust and reflecting past reliable transactions.

Step-by-step explanation:

An exporter that enjoys good relations with a buyer in a well-established market would most likely use sales on open account as their financing method. This approach reflects a high level of trust between the exporter and the buyer, as it allows the buyer to pay for the goods after they have been received. This type of transaction eliminates the need for more secure, but also more costly, methods like letters of credit or cash in advance, and it suggests a streamlined process that benefits from a history of reliable transactions between the involved parties.

Factors contributing to the choice of this method include reduced transactional costs, improved business relationships, and the exporter's confidence in the buyer's ability to pay on time. This method is a clear indication of a strong, established rapport between trading partners. However, it also exposes the exporter to some credit risk, which is mitigated by the existing trust and track record of the buyer.

User Mousebird
by
8.0k points