Which of the following methods of payment represents the least level of risk for exporters?
A)Bill of exchange
B)Letter of credit
C)Open account
D)Pre-payment
E)It's all equal

Question

Quizplus · Accepted Answer

Prepayment carries the least risk. However, it must be booked as deferred revenue as it is unearned until the goods are shipped. This goes on the books as a liability, while cash is put on the other side of the balance sheet.
Key Takeaway: Remember that future cash flows must be discounted for time. Upfront payments are a treasure, as long as you get the accounting right. Changing billing terms is a way to squeeze out additional margins.

Which of the Following Methods of Payment Represents the Least