CHAPTER 15
FOREIGN TRADE AND SHORT-TERM FINANCING
15.1
Which of the following payment methods provides the exporter with the strongest
protection against risk?
a.
Cash in advance
b.
Letter of credit
c.
Draft
d.
Consignment
15.2
Which of the following payment methods provides both parties with a strong
measure of protection against commercial and political risks?
a.
Cash in advance
b.
Letter of credit
c.
Draft
d.
Consignment
15.3
Most L/Cs issued in connection with commercial transactions are
a.
documentary
b.
clean
c.
revocable
d.
without discrepancies
15.4
An exporter shipping goods to a nation that may impose currency controls will
seek an L/C that is
a.
revocable
b.
clean
c.
documentary
d.
confirmed by a domestic bank
15.5
The party to a draft who signs and sends the draft to the second party is called the
a.
drawer
b.
payee
c.
drawee
d.
opening bank
15.6
RJR Nabisco sells its export receivables to a firm that takes responsibility for
collecting payment from the importers. RJR has used
a.
accounts receivable financing
b.
factoring
c.
forfaiting
d.
letter of credit
15.7
The only U.S. agency dedicated solely to financing and facilitating U.S. exports is
the
a.
b.
c.
d.
Ex Im Bank
Foreign Credit Insurance Association
Bankers' Association for Foreign Trade
Agency for International Development
15.10 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?
a.
the Ex Im Bank
b.
Private Export Funding Corporation
c.
Foreign Credit Insurance Association
d.
Bankers' Export Financing Association
15.11 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.
a.
factor, factor
b.
factor, borrowing firm
c.
borrowing firm, factor
d.
borrowing firm, borrowing firm
15.12 Countertrade arrangements may take the form of
a.
barter
b.
buyback
c.
drafts
d.
both a and b
15.18 The other name for a draft is a
a.
bill of exchange
b.
bankers acceptance
c.
currency collar
d.
overdraft
15.20 Why is Ex Im Bank financing often referred to as financing of “last resort?”
a.
it will not provide financing unless the U.S. exporter is doing business in
more than one country
b.
it will not provide financing unless private capital is unavailable
c.
fees are extremely high for guarantees and insurance
d.
the Ex-Im Bank authorizes loans for only the worst credit risks
15.23 Which of the following L/Cs is safest for the exporter?
a.
revocable, confirmed L/C
b.
irrevocable, unconfirmed L/C
c.
irrevocable, confirmed L/C
d.
revocable L/C
15.24 An exporter manufacturing a specialized piece of equipment can hedge the risk
that its customer will cancel the contract before shipment by obtaining a
a.
consignment contract
b.
open account
c.
bill of lading
d.
letter of credit
15.29 Microsoft sells software to a French firm. In return, the French firm's bank, Credit
Agricole, acknowledges it will pay Microsoft after the software is delivered to its
client. Microsoft has most probably used
a.
accounts receivable financing
b.
factoring
c.
forfaiting
d.
letter of credit
15.30 Caterpillar Tractor sells heavy construction equipment to a Polish firm. In return,
the Polish firm issues a promissory note to Caterpillar promising to pay for the
equipment over a five-year period. Caterpillar sells the note to Deutsche Bank at a
discount. Caterpillar has used
a.
accounts receivable financing
b.
factoring
c.
forfaiting
d.
letter of credit
15.35 Which of the following firms would find a factor most useful?
a.
Levi Strauss, which has been shipping jeans to the same customers in 120
countries for over 40 years,
b.
Brown and Root, which manages major construction projects around the
world
c.
RC Cola, which periodically ships a small order of soft drinks overseas
d.
IBM, which exports mainframes and other expensive equipment to
customers in over 100 countries around the world