Question 1

Countertrade provides a way for firms to trade either by using a small amount of hard currency or even none at all.

Accepted Answer

Countertrade allows firms to trade goods and services using alternative forms of payment such as bartering or offsetting. This means that a small amount of hard currency or no currency at all may be required for the transaction to take place.

Question 2

Advance payment made by an importer to an exporter normally takes the form of a sight draft.

Accepted Answer

Advance payment can take different forms such as a wire transfer, letter of credit, or a check. It is not necessary for it to take the form of a sight draft.

Question 3

Typically,indirect exporting relies on local sales representatives or distributors.

Accepted Answer

False

Question 4

Franchising is primarily used in the manufacturing industries.

Accepted Answer

Franchising is not primarily used in the manufacturing industries. It is commonly used in industries such as food service, retail, and hospitality.

Question 5

Cross licensing occurs when companies use licensing agreements to swap intangible property with one another.

Accepted Answer

Cross licensing involves companies exchanging or sharing intangible assets through licensing agreements.

Question 6

Switch trading is the export of industrial equipment in return for products produced by that equipment.

Accepted Answer

The answer of Switch trading is the export of industrial...

Question 7

Countertrade is not an option for smaller companies because of the cash outlays involved.

Accepted Answer

Countertrade can be a viable option for smaller companies as it allows them to trade without having to rely solely on cash transactions. Countertrade can involve bartering goods or services, offsetting payments, or signing contracts with payment through other means such as commodities or services. This allows smaller companies to conserve cash and minimize financial risk.

Question 8

Advance payment is the least favorable method of payment collection for exporters.

Accepted Answer

The answer of Advance payment is the least favorable method...

Question 9

Matching market needs to the company's abilities is the first step in developing a successful export strategy.

Accepted Answer

The answer of Matching market needs to the company's abilities...

Question 10

Direct exporters always sell directly to end users.

Accepted Answer

Direct exporters may sell to intermediaries such as wholesalers, distributors or retailers before the product reaches the end user.

Question 11

Using a distributor increases an exporter's risk.

Accepted Answer

The answer of Using a distributor increases an exporter's risk....

Question 12

The most common method used for buying and selling goods internationally is licensing.

Accepted Answer

The most common method used for buying and selling goods internationally is through international trade, which includes imports and exports. Licensing is one of the methods used for entering foreign markets, but it is not the most common method for buying and selling goods internationally.

Question 13

A sight draft extends the period of time following delivery by which the importer must pay for goods.

Accepted Answer

The answer of A sight draft extends the period of...

Question 14

Companies can achieve economies of scale by expanding into international markets.

Accepted Answer

By expanding into international markets, companies can increase their sales volume and reduce their production costs by taking advantage of economies of scale, which can lead to increased profitability.

Question 15

Agency relationships are popular among exporters because they are easy to terminate should difficulties arise.

Accepted Answer

Agency relationships can be difficult to terminate depending on the terms of the agreement and the laws of the countries involved.

Question 16

Letters of credit are popular among traders because banks assume most of the risks.

Accepted Answer

Letters of credit involve the bank guaranteeing payment to the seller, assuming the risk of the buyer's default. Therefore, traders often prefer using letters of credit as banks hold the majority of the risk.

Question 17

The open account method of export/import financing is used when the two parties are unfamiliar with each other.

Accepted Answer

The open account method is typically used when the two parties have a trusting relationship, as it involves shipping the goods before payment is received.

Question 18

Most large companies use exporting as a means of expanding total sales when the domestic market has become saturated.

Accepted Answer

Exporting allows companies to tap into new markets and increase sales when the demand in their domestic market has become saturated.

Question 19

A confirmed letter of credit is guaranteed by both the exporter's bank in the country of export and the importer's bank in the country of import.

Accepted Answer

A confirmed letter of credit is a type of letter of credit in which the exporter's bank in the country of export adds its own guarantee to that of the importer's bank in the country of import. This provides an additional layer of protection for the exporter, as they now have two banks backing the letter of credit.

Question 20

The brand name or trademark of a company is normally the single most important item desired by a franchisee.

Accepted Answer

The brand name or trademark of a company provides recognition, credibility and a customer base, which are all important factors for a franchisee's success.

Quiz 13: Selecting and Managing Entry Modes