Which type of draft requires payment at a specified time in the future after being presented?

Which type of draft requires payment at a specified time in the future after being presented?

• A. Demand draft
• B. Time draft
• C. Option trading
• D. Promissory note

Answer: (B)

The type of draft that requires payment at a specified time in the future after being presented is known as a time draft. This financial instrument is a written order that directs the payment of a specific amount at a future date. Time drafts are typically used in international trade and long-term transactions where the seller needs assurance of payment at an agreed time rather than immediately. This allows businesses to manage their cash flow effectively, as they can plan for when they will receive payment. It contrasts with other financial instruments like demand drafts, which require payment upon presentation, and promissory notes, which are more like written promises to pay a specific amount at a future date but do not have the same structure as drafts. Understanding the nuances between these different types of financial instruments is critical for effective business management and financial dealings.

The type of draft that requires payment at a specified time in the future after being presented is known as a time draft. This financial instrument is a written order that directs the payment of a specific amount at a future date. Time drafts are typically used in international trade and long-term transactions where the seller needs assurance of payment at an agreed time rather than immediately.

This allows businesses to manage their cash flow effectively, as they can plan for when they will receive payment. It contrasts with other financial instruments like demand drafts, which require payment upon presentation, and promissory notes, which are more like written promises to pay a specific amount at a future date but do not have the same structure as drafts. Understanding the nuances between these different types of financial instruments is critical for effective business management and financial dealings.