Letter of credit and Management efficiency ratio: Difference between pages

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(LC or sometimes LOC).  
''Financial ratio analysis.''


A promise document issued by a bank or another issuer to a third party to make a payment on behalf of a customer in accordance with specified conditions.  
A management efficiency ratio is a financial ratio designed to measure the efficiency of management in controlling the working capital or other resources used by the business.  


Letters of credit are frequently used in international trade to make funds available in a foreign location.
For example, the inventory turnover ratio.




 
Also known as an Activity ratio, or an Efficiency ratio.
==== Letter of credit contrasted with documentary collection ====
Letters of credit are often contrasted, from the perspective of a seller, with an alternative structure of [[documentary collection]]s.
 
A letter of credit is a ''direct'' obligation of a bank to pay (against specified documents).
 
A documentary collection means a bank ''collecting'' payment from the buyer (by presenting documents to the buyer).
 
 
A letter of credit therefore gives superior protection to the seller against credit risk or delayed cash flow, or both.
 
For this reason letters of credit are more expensive to arrange.
 
 
Compared with documentary collections (DCs), letters of credit (LCs) are used for larger transactions, and a larger total value of transactions.
 
LC and DC indicative data is summarised below.
 
=====Average transaction sizes (US exports)=====
LCs: US$ 0.5 - 1 million
 
DCs: US$ 0.1 - 0.2 million
 
=====Proportion of world trade in goods=====
LCs: 10 - 15%
 
DCs: 1 - 2%




== See also ==
== See also ==
* [[Advising bank]]
* [[Asset turnover]]
* [[Bank payment obligation]]
* [[Inventory turnover ratio]]
* [[Clean letter of credit]]
* [[Non-current asset turnover]]
* [[Commercial risk]]
* [[Revenue per employee]]
* [[Condition]]
* [[Working capital]]
* [[Confirmed letter of credit]]
* [[Confirming bank]]
* [[Credit]]
* [[Deferred payment letter of credit]]
* [[Documentary collection]]
* [[Documentary credit]]
* [[Irrevocable letter of credit]]
* [[Issuing bank]]
* [[LOC backed]]
* [[Revocable letter of credit]]
* [[Standby letter of credit]]
* [[Term letter of credit]]
* [[Time letter of credit]]
* [[Trade finance]]
* [[Uniform Customs and Practice for Documentary Credits]]
* [[Usance letter of credit]]
 
 
==External link==
[http://voxeu.org/article/trade-finance-around-world Trade finance around the world, Centre for Economic and Policy Research, 2016]
 
 
__NOTOC__


[[Category:Manage_risks]]
[[Category:Accounting,_tax_and_regulation]]
[[Category:Risk_frameworks]]
[[Category:The_business_context]]
[[Category:Trade_finance]]

Latest revision as of 12:49, 2 February 2019

Financial ratio analysis.

A management efficiency ratio is a financial ratio designed to measure the efficiency of management in controlling the working capital or other resources used by the business.

For example, the inventory turnover ratio.


Also known as an Activity ratio, or an Efficiency ratio.


See also