InterComp normally sells $50,000 worth of software to Power Source, a retail elec?tronics store, each summer on terms requiring payment in sixty days. One year, InterComp wants cash, but Power Source wants the usual sixty days. To meet both needs, the parties can arrange
A) a certificate of deposit.
B) a bearer bond.
C) a trade acceptance.
D) an international letter of credit.

Question

Quizplus · Accepted Answer

A trade acceptance is a time draft, similar to a check, that is drawn by the seller (InterComp) and accepted by the buyer (Power Source) for payment at a future date. In this case, InterComp can create a trade acceptance with a maturity date of sixty days, which Power Source can then accept as payment. This allows Power Source to maintain their usual payment terms while providing InterComp with cash now. Certificate of deposit and bearer bond are not suitable in this scenario, and while an international letter of credit could work, it is more complex and costly than a trade acceptance.

InterComp Normally Sells $50,000 Worth of Software to Power Source