Quiz 18: Financing International Trade

Business

The fundamental financing problem in international trade occur when goods are shipped internationally, it takes time to ship them, and someone must own the goods, which requires financing during their transit between countries. The exporter would like to be paid immediately upon completion of the goods, but this requires that the importer will pay at the time of completion of goods instead of after receiving the goods. But in many cases the importers are not interested in pre-paying for goods that may be damaged during shipment and they generally interested in paying as late as possible. The less net working capital that the exporter utilizes, the more valuable is for his business, but not gets paid at the time of completion of goods push them towards the financing problem; of not having sufficient amount for next export order. These problems arise in domestic shipment of goods as well, but when the shipment and sales of goods occur within a single currency, there is a common jurisdiction and system of courts that adjudicates contractual disputes between buyers and sellers. When goods are shipped across boarder, through additional legal complexities also arise.

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