Deck 18: Financing International Trade

Question 1

A ________ is a request for payment that is created when an importer asks its bank to write a letter to an exporter indicating that the importer's bank will honor the request.

A) draft
B) bill of lading
C) banker's acceptance
D) commercial invoice

Answer 1

A

Question 2

When an exporter is dealing with a high credit risk customer,________ as a form of payment is most often used.

A) draft
B) banker's acceptance
C) open account
D) cash in advance

Answer 2

D

Question 3

The Export-Import Bank of the United States is the only independent U.S.government corporation whose sole purpose is to support ________ in their efforts to conduct international trade.

A) foreign importers
B) small businesses
C) U.S. exporters
D) foreign exporters to the U.S.

Answer 3

C

Question 4

What is the name of the company that purchases the accounts receivable of other firms?

A) shipping company
B) common carrier
C) export factor
D) insurance carrier

Question 5

A documentary credit reduces the uncertainty of a transaction by

A) creating guarantees of payment by the importer.
B) providing insurance in case of loss or damage to the merchandise.
C) allowing extended repayment terms for the importer.
D) clearly establishing the acts that the exporter must carry out in order to receive payment.

Question 6

The Financial Credit Insurance Association offers two basic types of insurance polities to protect exporters against ________ and ________ risks.

A) exchange rate, political
B) commercial, political
C) exchange rate, economic
D) commercial, logistics

Question 7

The Export-Import Bank of the U.S.is the only independent U.S.government corporation whose sole purpose is to support ________ in their efforts to conduct international trade.

A) U.S. exporters
B) U.S. importers
C) both U.S. exporters and importers
D) potential U.S. importers

Question 8

In which one of the following payments does the exporter retain title to the shipment as long as possible?

A) sight draft
B) time draft
C) documentary collection
D) documents against payment

Question 9

If the transfer of title for the shipped goods is desired,which type of bill of lading is used?

A) straight
B) on-board
C) received-for-shipment
D) order

Question 10

Insurance policies that covers all of the exports of a firm are known as

A) umbrella policies.
B) floating policies.
C) clean policies.
D) multi-line policies.

Question 11

If a bank accepts a ________ draft,it may become a ________.

A) time, banker's acceptance
B) sight, banker's acceptance
C) time, trade acceptance
D) sight, trade acceptance

Question 12

The terms and conditions of a(n)________ documentary credit cannot be changed unless all parties involved first agree to the change.

A) revocable
B) irrevocable
C) confirmed
D) straight

Question 13

A(n)________ is a document required by certain countries which forces the exporter to provide information to customs officials in the importing country with the goal of preventing false declarations of the value of the merchandise.

A) consular invoice
B) order bill of lading
C) commercial invoice
D) clean bill of lading

Question 14

What is the correct term for documentary credit that cannot be changed unless all parties involved first agree to the change?

A) revocable
B) irrevocable
C) confirmed
D) straight

Question 15

The International Chamber of Commerce provides the following EXCEPT:

A) writing export credit insurance.
B) promoting international trade and investment.
C) setting rules and standards for international trade.
D) arbitration and other forms of dispute resolution.

Question 16

When a bank accepts a time draft for payment and sells it in the money markets,it is known as a

A) time draft.
B) trade acceptance.
C) forfait transaction.
D) banker's acceptance.

Question 17

What is the name of the request for payment that is created when an importer asks its bank to write a letter to an exporter indicating that the importer's bank will honor the request?

A) draft
B) bill of lading
C) banker's acceptance
D) commercial invoice

Question 18

A(n)________ is a contract issued to an exporter by the shipping company that agrees to transport the goods to their destination.

A) consular invoice
B) insurance certificate
C) bill of lading
D) draft

Question 19

With forfaiting,an irrevocable guarantee,known as a(n)________,may be created by the importer's government.

A) trade acceptance
B) documents against payment
C) documents against acceptance
D) aval

Question 20

With a ________,the exporter retains title and control of the goods until the importer has paid for the goods.

A) sight draft
B) time draft
C) documentary collection
D) clean bill of lading

Question 21

What is the purpose of marine insurance?

Question 22

In which of the two forms of payment does the exporter not give up control of the merchandise until paid: a documents against payment collection or a documents against acceptance collection?

Question 23

From the importer's point of view the most attractive method of payment is

A) open account.
B) time draft.
C) documentary collection.
D) documents against payment.

Question 24

What are the advantages of a documentary credit to an exporter and an importer?

Question 25

What are four different methods by which an exporter can accept payment from an importer? List them in increasing order of risk to the importer.

Question 26

Which one of the following methods of payments is most straightforward and one that is the least risky for the exporter?

A) documents against payment
B) time draft
C) documentary collection
D) cash in advance

Question 27

What is a banker's acceptance? How is one created? Whose liability is it?

Question 28

Which one of the following is NOT an advantage to exporters of documentary credits?

A) It substitutes the creditworthiness of the bank for the importer.
B) It enhances the probability the exporter will experience delays due to exchange controls.
C) It requires strict adherence to the terms.
D) It clearly establishes the acts the exporter must perform in order to receive payment.

Question 29

When an exporter plans to sell internationally,which one of the following would be considered most often?

A) be paid as late as possible
B) be paid in advance
C) who has title to the goods
D) countries where additional legal complexities exist

Question 30

What is the most popular way for an exporter to finance its accounts receivable?

Question 31

Explain the fundamental financing problem in international trade?

Question 32

Firms that do a substantial amount of foreign trade would most often be interested to purchase a marine insurance policy that is ________.

A) written with minimum payments
B) based on each transaction
C) open or floating
D) closed