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60 Cards in this Set

  • Front
  • Back
What form of credit involves the supplier having sufficient cash flow to finance the entire trade cycle, beginning with the production of the product until payment is eventually made by the buyer?
supplier credit
Under what method will the exporter not ship the goods until the buyer has remitted payment to the exporter?
prepayment method
What is an instrument issued by a bank on behalf of the importer (buyer) promising to pay the exporter (beneficiary) upon presentation of shipping documents in compliance with the terms stipulated therin
letter of credit (L/C)
A _______ (or _____ of __________) is an unconditional promise drawn by one party, usually the exporter, instructing the buyer to pay the face amount of the draft upon presentation
a draft (or bill of exchange)
_________ are trade transactions that are handled on a draft basis and processed through banking channels. Banks on both ends act as intermediaries in the processing of shipping documents and the collection of payment
documentary collections
If shipment is made under a sight draft, the exporter is paid once shipment has been made and the draft is presented to the buyer for payment. This is known as ___________.
documents against payment
If a shipment is made under a time draft, the exporter instructs the buyer's bank to release the shipping documents against acceptance (signing) of the draft. This method of payment is sometimes referred to as ___________.
documents against acceptance
By accepting a time draft, the buyer is promising to pay the exporter at the specified future date. This accepted draft is also known as a ______, which is different from a banker's acceptance.
trade acceptance
under what arrangement does the exporter ship the goods to the importer while still retaining actual title to the merchandise?
a consignment arrangement
the opposite of prepayment is the ______, in which the exporter ships the merchandise and expects the buyer to remit payment according to the agreed upon terms.
open account transaction
in _______, the bank will provide a loan to the exporter secured by an assignment of the account receivable
accounts receivable financing
since there is a danger that the buyer will never pay at all, the exporting firm may consider selling the accounts receivable to a third party, known as a _________. In this type of financing, the exporter sells the accounts receivable without recourse.
factor
T/F the factor assumes only some of the administrative responsibilities involved in collecting from the buyer and the associated credit exposure
FALSE
the factor assumes ALL administrative responsibilities
Factoring provides benefits to the exporter in what 3 ways?
1) by selling the accounts receivable, the exporter does not have to worry about the administrative duties involved in maintaining and monitoring an accounts receivable accounting ledger
2) the factor assumes the credit exposure to the buyer, so the exporter does not have to maintain personnel to assess the creditworthiness of foreign buyers
3) by selling the receivable to the factor, the exporter receives immediate payment and improves its cash flow
_____________ is often used because it is the importer who must be creditworthy from a factor's point of view. This involves a network of factors in various countries that assess credit risk
cross-border factoring
trade-related letters of credit are known as ________ or ____________.
commercial letters of credit or import/export letters of credit
what are the 2 types of commercial letters of credit?
revocable and irrevocable
what are revocable letters of credit?
they can be canceled or revoked at any time without prior notification to the beneficiary, but it is no longer used
what are irrevocable letters of credit?
they cannot be canceled or amended without the beneficiary's consent
what time of bank issues the L/C?
issuing bank
the correspondent bank in the beneficiary's country to which the issuing bank sends the L/C is commonly referred to as the ____________
advising bank
a draft is also known as a _______
bill of exchange
what is a draft?
an unconditional promise drawn by one party, usually the exporter, requesting the importer to pay the face amount of the draft at sight or at a specified future date
a _________ is a time draft drawn on and accepted by a bank
banker's acceptance
the time period, or _______, of most time drafts is usually any where from 30 - 180 days
tenor
what is the key document in an international shipment under an L/C? It serves as a receipt for shipment and a summary of freight charges; most importantly, it conveys title to the merchandise
the bill of landing (B/L)
if the merchandise is to be shipped by boat, the carrier will issue what is known as a(n) ______________
ocean bill of lading
when the merchandise is shipped by air, the carrier will issue a(n) ____________
airway bill
with a __________, title passes to the holder of the endorsed B/L
negotiable B/L
the exporter's (seller's) description of the merchandise being sold to the buyer is the ___________
commercial invoice
what 6 examples of information does a commercial invoice normally contain?
name and address of seller
name and address of buyer
date
terms of payment
price, including freight, handling, and insurance if applicable
quantity, weight, packaging, etc.
shipment information
a ______ can be used to guarantee invoice payments to a supplier. It promises to pay the beneficiary if the buyer fails to pay as agreed
standby letter of credit
a ________ is a variation of the standard commercial L/C that allows the first beneficiary to transfer all or part of the original L/C to a third party
transferable letter of credit
what is it called when the original beneficiary of the L/C pledges (or assigns) the proceeds under an L/C to the end supplier?
assignment of proceeds
_________ refers to the purchase of financial obligations, such as bills of exchange or promissory notes, without recourse to the original holder, usually the exporter
forfaiting
what term denotes all types of foreign trade transactions in which the sale of goods to one country is linked to the purchase or exchange of goods from that same country?
countertrade
______ is the exchange of goods between two parties without the use of any currency as a medium of exchange
barter
in a _________ or clearing-account arrangement, the delivery of goods to one party is compensated for by the seller's buying back a certain amount of the product from that same party
compensation
what term denotes the exchange of goods between two parties under two distinct contracts expressed in monetary terms?
counterpurchase
the ________ was established in 1934 with the original goal of facilitating Soviet-American trade. Its missions today are to finance and facilitate the export of American goods and services and to maintain the competitiveness of American companies in overseas markets
Export-Import Bank
______________ is the most widely used insurance policies to banks. It enables banks to confirm letters of credit issued by foreign banks supporting a purchase of U.S. exports
Bank Letter of Credit Policy
the __________ policy is issued to an "administrator" such as a bank, trading company, insurance broker, or government agency
umbrella policy
the _______ policy is used primarily by experienced exporters. it provides insurance, coverage on short terms export sales to many different buys
multibuyer policy
the ______ policy allows an exporter to selectively insure certain short-term transactions to preapproved buyers
single-buyer policy
T/F short term notes have been increasingly used in recent years
TRUE
short-term notes are also known as _______
unsecured debt securities
what are unsecured debt securities referred to in Europe?
Euronotes
what are the interest notes based on with short-term notes
based on LIBOR, the interest rate charged on interbank loans among Europeans and other countries
short-term notes typically have maturities of __, ___, or ___ months
1, 3, or 6 months
T/F some MNCs continually roll short-term notes over as a form of intermediate-term financing
TRUE
who underwrites short-term notes for MNCs and also sometimes purchase them for their own investment portfolios?
commercial banks
____________ is also referred to as Euro-commercial paper
commercial paper
T/F Dealers issue commercial paper for MNCs along with the backing of an underwriting syndicate
FALSE
they issue it WITHOUT the backing, so a selling price is not guaranteed to the issuers
T/F maturities can't be tailored to the issuer's preferences
FALSE, they can be tailored
how can dealers make a secondary market using commercial paper?
by offering to purchase commercial paper before maturity
what are direct loans from banks, which are typically utilized to maintain a relationship with banks, called?
bank loans
T/F bank loans are a popular source of long-term fund for MNCs
FALSE
short-term fund
T/F MNCs rely mostly on direct loans from banks if other sources of short-term funds are unavailable
TRUE
T/F some MNCs maintain credit arrangements with various banks around the world
FALSE
MOST do
some MNCs have credit arrangements with more than _____ foreign and domestic banks
100