Which of these financing methods entails the greatest risk for exporters?
A) Documentary collection
B) Advance payment
C) Letter of credit
D) Open account

Question

Quizplus · Accepted Answer

Open account financing method involves the exporter shipping the goods and then invoicing the buyer, who agrees to pay at a later date. This method poses the greatest risk for exporters as they do not have any guarantee of payment and are relying solely on the buyer's creditworthiness and honesty. The other financing methods such as documentary collection, advance payment, and letter of credit provide some level of security and reduce the risk of non-payment.

Which of These Financing Methods Entails the Greatest Risk for Exporters