Question 1

When factoring is done on a nonrecourse basis,the ___ has title to the receivables and the ___ is responsible for credit checking and collecting the receivables.

Accepted Answer

In nonrecourse factoring, the factor buys the receivables from the borrowing firm, thus gaining title to them. The factor is also responsible for credit checking and collecting the receivables, as they assume the risk of non-payment.

Question 2

Which of the following is the most important advantage of letter of credit financing?

Accepted Answer

The most important advantage of letter of credit financing is that it eliminates credit risk for the exporter. This means that the exporter is guaranteed to receive payment as long as they comply with the terms of the letter of credit. This reduces the risk of non-payment or delayed payment, which is a major concern for exporters.

Question 3

An exporter shipping goods to a nation that may impose currency controls will seek an L/C that is

Accepted Answer

Confirmed L/Cs are considered the safest option for exporters as the domestic bank (usually the exporter's bank) adds its own guarantee to the L/C. This means that even if the issuing bank or the buyer's country imposes currency controls, the domestic bank will still be obligated to pay the exporter. Revocable L/Cs can be amended or cancelled by the issuing bank at any time without the exporter's consent, making them risky. Clean L/Cs do not require any supporting documents to be presented, leaving the exporter without any proof of shipment or delivery. Documentary L/Cs require supporting documents, but they are not guaranteed by a second bank like confirmed L/Cs.

Question 4

Why is Ex-im Bank financing often referred to as financing of "last resort?"

Accepted Answer

Ex-im Bank financing is often referred to as financing of "last resort" because it provides financing only when private capital is unavailable or inadequate. It is intended to support U.S. exports when traditional financing is not available or is insufficient.

Question 5

The document in international trade that may be required by governments is usually presented to the local consul in exchange for a visa.It is called a

Accepted Answer

The answer of The document in international trade that may...

Question 6

The document in international trade that contains an authoritative description of the merchandise shipped,including the full details on quality,grades,price per unit,and total value stated in a currency is known as the

Accepted Answer

A commercial invoice is the document that contains an authoritative description of the merchandise shipped, including the full details on quality, grades, price per unit, and total value stated in a currency. A bill of lading is a transport document that serves as evidence of the contract of carriage, while an insurance certificate is a document that confirms the existence of insurance coverage. A consular invoice is a document required by some countries to facilitate customs clearance.

Question 7

Which one of the following is an advantage to open account financing?

Accepted Answer

Open account financing does not require payment from the buyer at the time of shipment, which eliminates customer resistance. It is not an advantage to have high risk, seller financing production or increased risk from currency controls.

Question 8

Which of the following payment methods provides the exporter with the weakest protection against default risk?

Accepted Answer

Consignment offers the weakest protection against default risk for the exporter because payment is only received after the goods are sold by the distributor or agent, leaving the exporter exposed to the risk of non-payment.

Question 9

The only U.S.agency dedicated solely to financing and facilitating U.S.exports is the

Accepted Answer

The Export-Import Bank of the United States (Eximbank) is the only U.S. agency dedicated solely to financing and facilitating U.S. exports. The other options listed either provide credit insurance or focus on other aspects of international trade, but not specifically financing and facilitating U.S. exports.

Question 10

Of all shipping documents,which of the following is the most important?

Accepted Answer

The bill of lading is the most important shipping document as it serves as a receipt for the goods being shipped and a contract between the shipper and carrier. It also serves as proof of ownership of the goods and is required for the release of the goods at the destination port. Insurance certificate and commercial invoice are also important documents, but they do not serve the same purpose as the bill of lading in terms of ownership and release of goods. Consular invoice is not a commonly used document and is not as important as the other three.

Question 11

When a letter of credit is unconfirmed,the obligation to provide credit belongs to

Accepted Answer

In the context of a letter of credit, when it is unconfirmed, the primary obligation to honor the credit falls on the opening bank, which is the bank that issues the letter of credit at the request of the importer (buyer). This means the opening bank is committed to ensuring payment to the exporter (beneficiary) upon presentation of the documents specified in the letter of credit, assuming all terms and conditions are met.

Question 12

Countertrade transactions will most probably take the form of

Accepted Answer

Countertrade transactions usually involve the exchange of goods or services for other goods or services rather than using cash. Barter and buyback are two common types of countertrade transactions. Credit card purchases and cash in advance are traditional payment methods that do not involve any form of countertrade. Open account terms involve credit transactions, but they do not necessarily involve countertrade.

Question 13

The party to a draft who signs and sends the draft to the second party is called the

Accepted Answer

The drawer is the party who creates and signs the draft, and then sends it to the drawee (the party who is expected to pay). Therefore, option A) is the correct answer. Option B) payee is not correct as payee is the party who is entitled to receive payment. Option C) drawee is not correct as drawee is the party who is required to make payment. Option D) broker is not correct as it is not related to the process of drafting or sending a draft.

Question 14

Suppose the Fluor Corporation is seeking to bid on a construction project in Turkey.Which Eximbank program will be most useful to Fluor?

Accepted Answer

The answer of Suppose the Fluor Corporation is seeking to...

Question 15

Eximbank has recently become more aggressive in fighting perceived abuses by foreign export-credit agencies.One area that Eximbank has targeted is

Accepted Answer

Eximbank has targeted foreign mixed-credit financing, which involves other countries' export-credit agencies providing financing to their domestic companies for the purchase of U.S. goods and services, but with limited competition and transparency, which can result in unfair advantages and market distortions. Eximbank has been working to level the playing field and promote fair competition.

Question 16

Which of the following payment methods provides both parties with a strong measure of protection against commercial and political risks?

Accepted Answer

Letter of credit provides both parties with a strong measure of protection against commercial and political risks. The buyer's bank issues a letter of credit to the seller, promising to pay a specified amount of money upon the presentation of certain documents. This ensures that the seller will receive payment as long as they comply with the terms and conditions of the letter of credit. Additionally, the buyer is protected as the funds are held by the bank until the conditions of the letter of credit are met, minimizing the risk of non-delivery or non-performance by the seller.

Question 17

Most L/Cs issued in connection with global trade transactions are

Accepted Answer

Most L/Cs issued in connection with global trade transactions are documentary, meaning that they require presentation of specific documents in order to receive payment. Clean L/Cs, which do not require this documentation, are less common. L/Cs can also be either revocable or irrevocable, but the question does not provide enough information to determine which type is most common. Finally, L/Cs are typically created by banks rather than buyers and sellers alone.

Question 18

Which one of the following countries has the reputation for the greatest length of time for companies to collect on the average bill?

Accepted Answer

Iran is known for having a challenging business environment, including long payment terms and delays, which can result in extended periods for companies to collect on bills.

Question 19

Which of the following payment methods provides the exporter with the strongest protection against risk?

Accepted Answer

Cash in advance offers the exporter the strongest protection against risk because payment is received before the ownership of the goods is transferred.

Question 20

Which of the following organizations was created by the Bankers' Association for Foreign Trade to mobilize private capital for financing the export of big?ticket items by U.S.firms?

Accepted Answer

The Private Export Funding Corporation was created by the Bankers' Association for Foreign Trade in 1970 to mobilize private capital for financing the export of big-ticket items by U.S. firms. Eximbank, Foreign Credit Insurance Association, and Bankers' Export Financing Association are all separate entities with different purposes.

Quiz 18: Financing Foreign Trade

When factoring is done on a nonrecourse basis,the _ has title to the receivables and the _ is responsible for credit checking and collecting the receivables.