Question

Your firm engages in international trade with a few different countries where it supplies products and gains products in return. Often your firm supplies your product first and receives the products from the other firm later. Which form of payment is​ this?

a) Open account
b) Documentary collection
c) Letter of credit
d) Cash in advance

Answer 1

An 'open account' is used when a firm supplies products first and receives the products from the other firm later, common in trusted international trade relationships.

Step-by-step explanation:

When a firm supplies products first and receives products from the other firm at a later date, the form of payment used is known as an open account. This is a common practice in international trade where trust and established relationships between the trading parties exist. The seller extends credit to the buyer, who pays after receiving the goods, according to the terms agreed upon by both parties. This method contrasts with other forms of payment like documentary collections, letters of credit, or cash in advance, where payments are secured or made before or at the time of delivery.