This category covers all kinds of topics in finance including corporate finance and financial management. The topics on financial institution and stock exchange will also be included.
A clean letter of credit or simply clean LC is one form of various letters of credit. It does not specify any terms and conditions as strictly as in a documentary credit. It does not contain the condition of presenting the bill of exchange from the exporter to demand the payment. In a clean letter […]
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A direct pay letter of credit is a special form of standby letter of credit. With a direct payment letter of credit, the issuing bank directly pays to the beneficiary. It does not include any clause of performance or non-performance from the seller. Like a standby, it can provide financial security to the seller by
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By default, most of the Letters of Credit issued are irrevocable and unconfirmed. The issuing bank cannot attach a confirmation to the primary documentary credit. Any letter of credit that is issued without an advising bank’s confirmation is considered as the unconfirmed letter of credit. An unconfirmed letter of credit is simple to execute and
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A letter of credit is issued to provide a financial guarantee to the seller. In some cases, the sellers may require further confirmation of the buyers’ credit. An advising bank provides the confirmation in addition to that of the issuing bank. It reduces the default risk of the buyer due to economic or financial reasons.
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A transferrable letter of credit provides further flexibility to all the parties in the trade. It primarily acts as the documentary credit for payment confirmation, while provides the advance credit facility to the seller (middleman). The first beneficiary upon approval can include one or more secondary beneficiaries in the credit transfer list. The first beneficiary
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A letter of credit is used for the financial guarantee and mode of payment in large international trades. By default, a documentary credit is issued in favor of the beneficiary, the seller, or the brokers in the trade deals. The beneficiary cannot transfer the offered credit to any other party. Hence, documentary credits issued by
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Back to back letter of credit arrangement comprises of two different documentary credits issued by two banks. The first letter of credit is issued on the buyer’s application by its issuing bank in favor of the broker. The second LC is issued by the broker’s bank in the favor of the manufacturer or seller. A
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In simplest of terms, margin trading refers to buying on borrowed money. Day traders and speculators, in particular, use this trading strategy to earn profits. However, qualifying for a margin account and the leverage limits with margin trading are difficult. Traders and investors open margin accounts with broker houses. They deposit initial deposits and fulfill
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Large projects require significant funding that is served through debt financing. Corporate institutes, banks, and creditors fund these large projects in tandem. The risks of default of the borrower or project failure are significant in such scenarios. Creditors may find it difficult to prioritize the claims to collateral in such a scenario. An intercreditor agreement
Intercreditor Agreement: Definition and Key Challenges Read More »
In stock market terminology, a long and short position means buying and selling the assets respectively. Investors can make profits by buying low and selling at higher prices, that is holding the investments for long positions. Contrary to common concepts, investors can make profits when the price of an asset falls, it is called short
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