Question 1

_____ is a form of payment in which an importer doesn't pay for goods until after they have been received,creating an unfavorable balance of value for the exporter.

Accepted Answer

An open account agreement is the only choice that fits the description of an importer not paying for goods until after they have been received, creating an unfavorable balance of value for the exporter. Cash in advance and a commercial letter of credit both ensure payment before the goods are received, and a documentary collection involves a bank handling the payment and delivery of documents before releasing the goods to the importer.

Question 2

Martha approaches Stellar Constructions to buy construction equipment.Martha provides Stellar Construction with a written commitment issued by her bank stating that payment will be made to Stellar Constructions as long as all selling conditions have been met.It is evident that Martha uses _____ to pay Stellar Constructions.

Accepted Answer

Martha is using a commercial letter of credit, which is a written commitment issued by a bank on behalf of a buyer, stating that payment will be made to the seller as long as all selling conditions have been met. This provides assurance to the seller that they will receive payment even if the buyer fails to fulfill their side of the agreement.

Question 3

Jonathan imports a guitar from MusicStore Inc. ,a musical instrument manufacturing company in Germany.Jonathan pays the full amount in advance with his credit card.Given the scenario,which of the following statements is true?

Accepted Answer

Paying in advance with a credit card is safest for MusicStore Inc. because they receive the payment before shipping the product, reducing their risk of non-payment.

Question 4

Unlike the Clearing House Interbank Payments System (CHIPS),the Society of Worldwide Interbank Financial Telecommunications (SWIFT):

Accepted Answer

The statement that SWIFT does not manage client accounts is true, as SWIFT is a messaging network used by banks to communicate payment instructions, but does not actually hold or transfer funds between banks. The other options are false, as SWIFT is privately owned and does not hold funds, while CHIPS does transfer money between banks.

Question 5

LisTop Group is a bank that primarily does business with consumers.It can be said that LisTop Group is a _____.

Accepted Answer

Conventional bank is a type of bank that primarily does business with consumers. Trade center banks deal with international trade finance, federal banks are government-owned or affiliated banks, and money center banks deal with large corporations and institutions.

Question 6

In the context of methods of payment in international business,unlike cash in advance,a commercial letter of credit:

Accepted Answer

A commercial letter of credit provides a level of protection to both the exporter and the importer. It ensures that the exporter will receive payment for the goods shipped and the importer will receive the goods ordered. It is a widely used and accepted method of payment in international trade.

Question 7

Zencorp,a steel manufacturing company,exports its products to Madivis Homes and gets paid by an open account agreement.Given the scenario,which of the following statements is true?

Accepted Answer

In an open account agreement, the buyer (Madivis Homes, in this case) receives the goods before payment is made, effectively allowing them to purchase goods on credit. This is beneficial for the buyer as it improves cash flow and reduces immediate financial pressure.

Question 8

Widget Corp. ,a manufacturer and supplier of train coaches worldwide,needs access to more credit than a single bank can handle.Widget Corp.approaches a group of banks that can provide it with the required credit.It is evident that Widget Corp.obtains credit from _____.

Accepted Answer

A syndicate is a group of banks that come together to provide a large loan to a borrower, such as Widget Corp. This allows Widget Corp. to access more credit than a single bank could provide. Open account, commercial letter of credit, and consignment are types of payment methods, not credit arrangements.

Question 9

_____ is a private company that handles large payments to governments and corporations.

Accepted Answer

The Clearing House Interbank Payments System (CHIPS) is a private company that handles large payments to governments and corporations. The other options, IMF, Fedwire, and SWIFT, are international organizations or networks that may also handle financial transactions, but do not specifically deal with large payments to governments and corporations like CHIPS does.

Question 10

_____ are large banks that borrow from and lend to governments,other banks,and corporations.

Accepted Answer

Money center banks are large banks that operate in major financial centers and provide services like borrowing and lending to governments, corporations and other banks. Retail banks cater to individual customers, commercial banks serve local businesses, and corporate banks specialize in serving large corporations.

Question 11

HewPack Bank is a large bank that supports the financial operations of large businesses worldwide.HewPack Bank borrows from and lend to governments,other banks,and corporations.It is evident that HewPack Bank is a _____.

Accepted Answer

HewPack Bank is a large bank that deals with other banks and corporations, making it a money center bank. Retail banks primarily serve individual customers, commercial banks primarily cater to small and medium-sized businesses, and corporate banks typically serve large corporations.

Question 12

OrStar,an automobile spares manufacturing company,exports its products to Widget Corp.and gets paid by an open account agreement.Given the scenario,which of the following statements is true?

Accepted Answer

CB) An open account agreement, where goods are shipped and delivered before payment is due, can create an unfavorable balance of value for the exporter (OrStar) until payment is received, as it bears the risk of non-payment.C) In an open account transaction, the importer (Widget Corp.) receives the goods before payment is made, effectively making the importer a lender to the exporter (OrStar) until the payment is made.

Question 13

Unlike money center banks,conventional banks primarily do business with _____.

Accepted Answer

Conventional banks primarily do business with consumers, providing services such as checking accounts, savings accounts, loans, and mortgages. Money center banks, on the other hand, deal more with corporations and larger financial institutions.

Question 14

Jacob imports a motorcycle from Powell Motors,an automobile manufacturing company in Belwick.Jacob pays the full amount in advance with his credit card.Given the scenario,which of the following statements is true?

Accepted Answer

The answer of Jacob imports a motorcycle from Powell Motors,an...

Question 15

In the context of international trade and investment institutions,the International Monetary Fund is an example of a(n):

Accepted Answer

The answer of In the context of international trade and...

Question 16

Unlike the Clearing House Interbank Payments System (CHIPS),the Society of Worldwide Interbank Financial Telecommunications (SWIFT):

Accepted Answer

SWIFT does not hold funds, it only facilitates communication between banks to transfer funds. The other options are incorrect: A is incorrect as SWIFT is a cooperative owned by its member banks; B is incorrect as SWIFT does not manage client accounts; D is incorrect as transferring money between banks is a primary function of SWIFT.

Question 17

Allied Gadgets,an industrial equipment manufacturer,accepts selling terms that are less than favorable in order to secure more business.The company exports its products to a small scale industry (SSI)in Belwick with the terms that the SSI doesn't pay for the goods until after they have been received.The payment method used in this scenario is _____.

Accepted Answer

An open account refers to a credit arrangement in which a buyer agrees to purchase goods or services and pay for them at a later date, after they have been received. This is the most likely payment method used in this scenario, as the SSI in Belwick is not expected to pay for  the goods until after they have been received. Consignment involves the transfer of goods to another party who agrees to sell them for a commission, and the consignor retains ownership until they are sold. A commercial letter of credit is a payment method in which a bank guarantees payment to a seller if certain conditions are met, and it typically involves an intermediary bank. A documentary collection involves the use of banks to facilitate payment, typically by exchanging shipping documents for payment or acceptance of a bill of exchange. Neither of these methods appears to be applicable to the scenario described.

Question 18

_____ is a highly secure form of payment in which an importer's bank offers a guarantee of payment when goods are delivered as long as all selling conditions have been met.

Accepted Answer

A commercial letter of credit is a highly secure form of payment in which an importer's bank offers a guarantee of payment when goods are delivered as long as all selling conditions have been met. This provides reassurance to the exporter that they will receive payment for their goods and allows for a smooth and secure international trade transaction. The other options, cash in advance, open account agreement, and consignment, do not provide the same level of security and guarantee of payment.

Question 19

_____ is a global telecommunications company that facilitates secure international payment transfers from one bank to another.

Accepted Answer

The Society of Worldwide Interbank Financial Telecommunications (SWIFT) is a global telecommunications company that facilitates secure international payment transfers from one bank to another. It provides a network that enables financial institutions worldwide to send and receive information about financial transactions securely.

Question 20

Adam imports a set of audio recording equipment by purchasing it using his credit card from a company in the United States.He pays the full amount to the company before the product is shipped.It is evident that the method of payment in this scenario is _____.

Accepted Answer

The method of payment in this scenario is cash in advance because Adam pays the full amount to the company before the product is shipped.

Quiz 20: Global Finance and Accounting