Question 1

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)Draft
B)Bill of lading
C)Letter of credit
D)Bill of exchange

Accepted Answer

This method is known as a letter of credit. It provides a guarantee to the exporter that they will receive payment once they have met the terms and conditions outlined in the letter of credit. The importer's bank issues the letter of credit, which serves as an assurance to the exporter that they will be paid when the terms of the agreement are fulfilled.

Question 2

Which of the following is NOT a form of investment entry?
A)Strategic alliance
B)Wholly owned subsidiary
C)Joint venture
D)Turnkey project

Accepted Answer

A turnkey project is a type of contract where a facility is constructed and made ready for operation, not a form of investment entry.

Question 3

Which of the following requires the importer to pay when goods are delivered?
A)Sight draft
B)Bill of lading
C)Time draft
D)Airway bill

Accepted Answer

A sight draft requires the importer to pay upon the delivery of goods.

Question 4

Which of the following allows the bank issuing a letter of credit to modify the terms of the letter only after obtaining the approval of both exporter and importer?
A)Revocable letter of credit
B)Confirmed letter of credit
C)Bill of lading
D)Irrevocable letter of credit

Accepted Answer

An irrevocable letter of credit cannot be modified or canceled without the consent of all parties involved, including the exporter and importer.

Question 5

Which of the following is a contract between the exporter and shipper that specifies merchandise destination and shipping costs?
A)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 shipper that outlines the shipment details, including destination and shipping costs. It also serves as a receipt of the goods being shipped and a document of title to them. A draft is a written order from one party to another to pay a certain amount of money. A letter of credit is a financial agreement between two parties that guarantees payment to the seller. A bill of exchange is a financial document used in international trade transactions.

Question 6

The ________ payment method is commonly used when there is an ongoing relationship between the two parties.
A)advance payment
B)documentary collection
C)letter of credit
D)open account

Accepted Answer

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

Question 7

When an exporter ships merchandise and later bills the importer for its value,it is using a(n)________ type of export/import financing.
A)advance payment
B)open account
C)letter of credit
D)documentary collection

Accepted Answer

When an exporter ships merchandise and later bills the importer for its value, it is known as an open account transaction. This type of export/import financing involves no intermediary bank, and the exporter relies on the importer's creditworthiness to make payment once the goods have been received. It is a common form of payment in situations where the two parties have an established relationship and trust each other. Choices A, C, and D are all forms of financing that involve a third party bank, which is not present in an open account transaction.

Question 8

A ________ joint venture is formed when each partner requires the same component in its production process.
A)backward
B)multistage
C)forward
D)buyback

Accepted Answer

The answer of A ________ joint venture is formed when...

Question 9

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

Accepted Answer

A document ordering the importer to pay the exporter a specified sum of money at a specified time is called a bill of exchange, also known as a draft. A bill of lading is a document issued by a carrier that confirms the receipt of specific goods, while a letter of credit is a document issued by a bank that guarantees payment to the exporter. An airway bill is a document used in air cargo transportation that serves as a receipt and contract between the shipper and carrier.

Question 10

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

Advance payment entails the greatest risk for importers because they have to pay the exporter before receiving the goods, leaving them vulnerable to non-delivery or delivery of substandard goods.

Question 11

Which of the following is a contractual entry mode in which one company supplies another with intangible property and other assistance over an extended period?
A)Franchising
B)Management contract
C)Licensing
D)Strategic alliance

Accepted Answer

Franchising is a contractual entry mode where one company (the franchisor) provides another company (the franchisee) with intangible property, such as trademarks and business models, along with ongoing support and assistance.

Question 12

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

Accepted Answer

When an importer accepts a time draft, it becomes a negotiable instrument that can be traded among financial institutions. Sight drafts and airway bills do not require acceptance, and a bill of lading is not a negotiable instrument on its own.

Question 13

Letters of credit are popular among traders because most of the risks are assumed by ________.
A)countertraders
B)importers
C)exporters
D)banks

Accepted Answer

Letters of credit are essentially a guarantee from a bank that payment will be made to the exporter once certain conditions are met, such as providing proof of shipment. As a result, banks assume most of the risks, making it a safer option for traders.

Question 14

A ________ is a separate company created and jointly owned by two or more independent entities to achieve a common business objective.
A)wholly owned subsidiary
B)joint venture
C)strategic alliance
D)turnkey project

Accepted Answer

A joint venture is a type of partnership where two or more businesses or organizations create a separate legal entity to achieve a common goal or undertake a specific project. In a joint venture, each participant is responsible for profits, losses, and costs associated with the company or project.

Question 15

Which of the following is a contractual entry mode in which a company owning intangible property grants another firm the right to use that property for a specified period of time?
A)Franchising
B)Management contract
C)Licensing
D)Strategic alliance

Accepted Answer

Licensing is a contractual entry mode in which a company owning intangible property (such as patents, trademarks, or technology) grants another firm the right to use that property for a specified period of time. The licensee pays royalties or other fees to the licensor, and the licensor retains ownership of the property. Franchising typically involves the licensing of a business system, while management contracts involve the provision of management services. Strategic alliances involve the formation of a partnership or joint venture between two or more firms.

Question 16

When one company is hired to design,construct,and test a production facility for a client,the arrangement is called a ________.
A)turnkey project
B)licensing agreement
C)joint venture
D)franchising agreement

Accepted Answer

A turnkey project is when a company is hired to design, construct, and test a production facility for a client, providing a complete solution that is ready to use upon completion. Licensing agreements involve the use of a company's intellectual property in exchange for royalties or fees. Joint ventures involve two or more companies forming a partnership to undertake a specific project or business activity. Franchising agreements involve a company granting a third party the right to use its brand name and business model in exchange for fees and royalties.

Question 17

Which of the following financing methods entails the greatest risk for exporters?
A)Documentary collection
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 because it involves the exporter shipping the goods and invoicing the buyer with the expectation of payment at a later date. This leaves the exporter vulnerable to non-payment by the buyer or payment delays, which could result in financial losses for the exporter. The other financing methods (documentary collection, advance payment, and letter of credit) offer more secure payment options for the exporter.

Question 18

In which type of joint venture do the parties choose to invest together in downstream business activities?
A)Backward integration
B)Multistage
C)Forward integration
D)Buyback

Accepted Answer

In a forward integration joint venture, the parties agree to invest together in downstream business activities, which means they collaborate on activities that take place after the production process, such as distribution, marketing, and sales. This type of joint venture can enable the parties to gain better control of the supply chain and customer relationships, and ultimately enhance their competitive advantage.

Question 19

Contractual entry modes include all of the following EXCEPT ________.
A)franchising
B)management contracts
C)licensing
D)strategic alliances

Accepted Answer

Strategic alliances are not considered contractual entry modes as they involve a collaborative partnership rather than a contract between two parties. Contractual entry modes, on the other hand, involve legally binding agreements such as franchising, management contracts, and licensing.

Question 20

Which of the following can be modified by the issuing bank without obtaining approval from either the exporter or the importer?
A)Revocable letter of credit
B)Confirmed letter of credit
C)Bill of lading
D)Irrevocable letter of credit

Accepted Answer

The answer of Which of the following can be modified...

Quiz 11: Selecting and Managing Entry Modes

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 is NOT a form of investment entry?

Which of the following requires the importer to pay when goods are delivered?

Which of the following allows the bank issuing a letter of credit to modify the terms of the letter only after obtaining the approval of both exporter and importer?

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

The ________ payment method is commonly used when there is an ongoing relationship between the two parties.

When an exporter ships merchandise and later bills the importer for its value,it is using a(n) ________ type of export/import financing.

A ________ joint venture is formed when each partner requires the same component in its production process.

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

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

Which of the following is a contractual entry mode in which one company supplies another with intangible property and other assistance over an extended period?

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

Letters of credit are popular among traders because most of the risks are assumed by ________.

A ________ is a separate company created and jointly owned by two or more independent entities to achieve a common business objective.

Which of the following is a contractual entry mode in which a company owning intangible property grants another firm the right to use that property for a specified period of time?

When one company is hired to design,construct,and test a production facility for a client,the arrangement is called a ________.

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

In which type of joint venture do the parties choose to invest together in downstream business activities?

Contractual entry modes include all of the following EXCEPT ________.

Which of the following can be modified by the issuing bank without obtaining approval from either the exporter or the importer?