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Letters of credit

• Letters of Credit (LC) is an example of OBSAs (Off-Balance Sheet Activities). LC simply says that if a firm cannot make a promised payment within say 90 days, the bank will make the payment. There is no immediate liability that shows up on the balance sheet and the bank earns a fee income for the guarantee.

 
 

Follow this link for all the terms related to credit.

 
 Embedded terms in definition
 Balance sheet
Credit
Firm
Income
Liability
Will
 
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