Tee Time Golf Resort plans to carry an inventory of golf clubs from a German manufacturer. The manufacturer has promised delivery in four weeks, which will be just in time for the beginning of Tee Time's golf season at its St. Louis course. In order to prudently watch cash flow, you have recommended that Tee Time Resort sign a letter of credit with an international bank asking the bank to disburse payment when the clubs arrive at the St. Louis course and after they are inspected.

Question

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A letter of credit represents an agreement issued by the customer for products coming from other nations. It is a promise for a bank to pay the seller at a specified time, if certain conditions have been met.

Tee Time Golf Resort Plans to Carry an Inventory of Golf