Question 1

________ is a payment method commonly used when there is an ongoing relationship between the involved parties.
A)Advance payment
B)Documentary collection
C)Letter of credit
D)Open account

Accepted Answer

The answer of ________ is a payment method commonly used...

Question 2

Which of the following normally takes the form of a wire transfer of money from the bank account of the importer directly to that of the exporter prior to shipment of merchandise?
A)documentary collection
B)letter of credit
C)advance payment
D)open account

Accepted Answer

Advance payment is a method of payment where the importer pays the exporter in advance of the shipment of goods. This is typically done through a wire transfer from the importer's bank account directly to that of the exporter. This method is considered to be the lowest risk for the exporter but carries more risk for the importer as they are paying upfront without any guarantee of receiving the goods.

Question 3

Which of the following statements is true of countertrade?
A)Countertrade is practiced by countries when there is a lack of hard currency.
B)Countertrade involves products whose prices on world markets tend to remain steady.
C)Countertrade usually involves industrial products and computer softwares.
D)Hedging risk in countertrade is prohibited.

Accepted Answer

Countertrade is usually practiced by countries that face a shortage of hard currency. It involves the exchange of goods or services instead of currency in international trade. This avoids the need for one country to acquire hard currency to pay for goods and services from another. Countertrade may involve products whose prices on world markets tend to fluctuate, making it a useful tool for countries facing economic instability. It can involve a wide range of products, from industrial goods to agricultural products, but not necessarily limited to industrial products and computer softwares. Hedging risk in countertrade is not prohibited, but it may be more complex due to the use of multiple currencies and types of goods or services being exchanged.

Question 4

Advance payment is commonly used for export/import financing when ________.
A)two parties are unfamiliar with each other
B)the buyer has obtained credit for the transaction
C)the transaction is for a relatively high amount
D)the buyer has good credit rating at banks

Accepted Answer

Advance payment is commonly used when two parties are unfamiliar with each other to minimize the risk of non-payment or fraud.

Question 5

A company proposes that in exchange for a hard-currency sale,it will make a hard-currency purchase of an unspecified product from the buyer nation in the future.Which of the following is the company proposing?
A)a counterpurchase
B)an offset
C)a buyback
D)a barter

Accepted Answer

The company is proposing an offset arrangement, which involves a hard-currency sale followed by a hard-currency purchase in the future. In an offset, the company using this arrangement may purchase any goods and services from the supplying nation, not necessarily any specific product. Counterpurchase, buyback, and barter do not fit the scenario described in the question.

Question 6

Which of the following is a method of export/import financing?
A)offset
B)buyback
C)switch trading
D)documentary collection

Accepted Answer

Documentary collection is a method of export/import financing where the seller/exporter ships the goods to the buyer/importer and presents the shipping documents to their bank, along with instructions for payment. The bank then forwards the documents to the buyer's bank, which releases the documents to the buyer upon payment or acceptance of a draft. This method is less costly than using letters of credit and offers some protection to the seller. Offset, buyback, and switch trading are not methods of export/import financing, but rather types of international trade arrangements.

Question 7

A document ordering the importer to pay the exporter a specified sum of money at a specified time is called a ________.
A)bill of lading
B)letter of credit
C)bill of exchange
D)management contract

Accepted Answer

A bill of exchange is a document ordering the importer to pay the exporter a specified sum of money at a specified time. A bill of lading is a document that serves as a receipt of goods shipped and a contract of carriage, while a letter of credit is a promise from a bank to pay a specified amount of money to the exporter on behalf of the importer. A management contract is an agreement between two parties where one agrees to provide management services to the other.

Question 8

Which of the following is a method of export/import financing in which the importer's bank issues a document stating that the bank will pay the exporter when the exporter fulfills the terms of the document?
A)sight draft
B)bill of lading
C)letter of credit
D)bill of exchange

Accepted Answer

This is describing a letter of credit, which is a common method of export/import financing. The importer's bank issues a document (the letter of credit) stating that they will pay the exporter once the exporter fulfills the terms outlined in the document. This provides a guarantee of payment to the exporter and reduces the risk of non-payment for the exporter. The other options listed (sight draft, bill of lading, bill of exchange) are also relevant to trade finance, but do not describe this specific method.

Question 9

Which of the following financing methods entails the greatest risk for importers?
A)documentary collection
B)advance payment
C)letter of credit
D)open account

Accepted Answer

The answer of Which of the following financing methods entails...

Question 10

________ is a countertrade whereby one company sells to another its obligation to make a purchase in a given country.
A)Franchising
B)Joint venture
C)Switch trading
D)Barter

Accepted Answer

Switch trading, also known as counterpurchase, is a type of countertrade where one company sells to another its obligation to make a purchase in a given country. In this arrangement, the buying company agrees to purchase a specific amount of goods from the selling company, and in return, the selling company agrees to purchase goods of equal value from the buying company in the future.

Question 11

Which of the following financing methods entails the greatest risk for exporters?
A)supersedeas bond
B)advance payment
C)letter of credit
D)open account

Accepted Answer

Open account is the financing method that entails the greatest risk for exporters. In this method, goods are shipped to the importer with no or minimal upfront payment, and the exporter relies on the importer's creditworthiness to receive payment at a later date. This poses a high risk of non-payment or delayed payment for the exporter. Other financing methods such as advance payment, letter of credit, and supersedeas bond provide more security for the exporter.

Question 12

A(n)________ becomes a negotiable instrument that can be traded among financial institutions when inscribed "accepted" by an importer.
A)sight draft
B)ocean bill of lading
C)time draft
D)inland bill of lading

Accepted Answer

A time draft becomes a negotiable instrument that can be traded among financial institutions when inscribed "accepted" by an importer. A sight draft is payable upon presentation, an ocean bill of lading is a document of title that serves as evidence of the contract of carriage of goods by sea, and an inland bill of lading is a document that evidences the receipt of goods by a carrier for transportation between inland points.

Question 13

Export/import financing in which a bank acts as an intermediary without accepting financial risk is called ________.
A)documentary collection
B)counterpurchase
C)buyback
D)open account

Accepted Answer

In a documentary collection, the bank acts as an intermediary to facilitate the export/import transaction without accepting financial risk. The bank receives and sends documents related to the shipment, but the payment is made directly between the buyer and the seller. The other options - counterpurchase, buyback, and open account - involve different levels of financial risk for the bank.

Question 14

Which of the following refers to a contract between the exporter and shipper that specifies merchandise destination and shipping costs?
A)sight draft
B)bill of lading
C)letter of credit
D)bill of exchange

Accepted Answer

A bill of lading is a contract between the exporter and the shipper that outlines details such as the destination of the merchandise and shipping costs. A sight draft is a payment document, a letter of credit is a financial guarantee, and a bill of exchange is a type of financial instrument.

Question 15

Buyback is defined as ________.
A)the export of industrial equipment in return for products produced by that equipment
B)an agreement that a company will offset a hard-currency sale to a nation by making a hard-currency purchase of an unspecified product from that nation in the future
C)the sale of goods or services to a country by a company that promises to make a future purchase of a specific product from that country
D)the exchange of goods or services for a certain amount of money

Accepted Answer

The answer of Buyback is defined as ________.
A)the export of...

Question 16

A form of countertrade that usually typifies long-term relationships between the companies involved is called ________.
A)barter
B)franchising
C)offset
D)buyback

Accepted Answer

The answer of A form of countertrade that usually typifies...

Question 17

Which of the following is the oldest known form of countertrade?
A)counterpurchase
B)switch trading
C)offset
D)barter

Accepted Answer

Barter is the oldest known form of countertrade, dating back to ancient civilizations where they traded goods and services without the use of money.

Question 18

Which of the following requires an importer to pay for the imported goods when they are delivered?
A)sight draft
B)inland bill of lading
C)air way bill of lading
D)time draft

Accepted Answer

A sight draft requires the importer to pay for the imported goods when they are delivered.

Question 19

The sale of goods and services to a country by a company that promises to buy a specific product from that country in the future is called a(n)________.
A)counterpurchase
B)offset
C)joint venture
D)barter

Accepted Answer

A counterpurchase is when a company sells goods and services to a country with a promise to buy a specific product in return. This is different from an offset, which involves the sale of unrelated products, a joint venture, which is a partnership between two companies, and barter, which involves the exchange of goods without the use of money.

Question 20

An offset agreement differs from a counterpurchase agreement in that an offset agreement ________.
A)fails to specify the type of product that must be purchased
B)fails to specify the amount that will be spent on the purchase
C)fails to give a business greater freedom in fulfilling its end of a countertrade deal
D)fails to make a hard-currency purchase of any product from that nation in the future

Accepted Answer

An offset agreement often does not specify the exact type of product that must be purchased, allowing for more flexibility in fulfilling the agreement's terms compared to a counterpurchase agreement, which typically involves more specific terms regarding the products or services to be exchanged.

Quiz 13: Selecting and Managing Entry Modes

________ is a payment method commonly used when there is an ongoing relationship between the involved parties.

Which of the following normally takes the form of a wire transfer of money from the bank account of the importer directly to that of the exporter prior to shipment of merchandise?

Which of the following statements is true of countertrade?

Advance payment is commonly used for export/import financing when ________.

A company proposes that in exchange for a hard-currency sale,it will make a hard-currency purchase of an unspecified product from the buyer nation in the future.Which of the following is the company proposing?

Which of the following is a method of export/import financing?

A document ordering the importer to pay the exporter a specified sum of money at a specified time is called a ________.

Which of the following is a method of export/import financing in which the importer's bank issues a document stating that the bank will pay the exporter when the exporter fulfills the terms of the document?

Which of the following financing methods entails the greatest risk for importers?

________ is a countertrade whereby one company sells to another its obligation to make a purchase in a given country.

Which of the following financing methods entails the greatest risk for exporters?

A(n) ________ becomes a negotiable instrument that can be traded among financial institutions when inscribed "accepted" by an importer.

Export/import financing in which a bank acts as an intermediary without accepting financial risk is called ________.

Which of the following refers to a contract between the exporter and shipper that specifies merchandise destination and shipping costs?

Buyback is defined as ________.

A form of countertrade that usually typifies long-term relationships between the companies involved is called ________.

Which of the following is the oldest known form of countertrade?

Which of the following requires an importer to pay for the imported goods when they are delivered?

The sale of goods and services to a country by a company that promises to buy a specific product from that country in the future is called a(n) ________.

An offset agreement differs from a counterpurchase agreement in that an offset agreement ________.