CGBP Trade Finance Quiz

CGBP Trade Finance Quiz The inability or unwillingness of the buyer to accept delivery of a shipment when it is ready is referred to as - ✔✔commercial risk Fluctuation of exchange rates causing the price of products t ...

CGBP Trade Finance Quiz The inability or unwillingness of the buyer to accept delivery of a shipment when it is ready is referred to as - ✔✔commercial risk Fluctuation of exchange rates causing the price of products to plummet and causing the seller to renegotiate pricing before shipment would be considered - ✔✔economic risk Country risk includes - ✔✔political risk + economic risk When purchasing or selling foreign currency at a spot rate, what best describes your adverse (negative) foreign exchange risk? - ✔✔the loss due to an unexpected change in the country's quoted foreign exchange rate The current market conditions indicate that in the next 90 days the US dollar is expected to decline in value. The company is currently going through a very tight cash flow period and must monitor cash closely. The company has an outstanding foreign currency payable that is due for payment in the next 60 days. The current spot rate is favorable to cover the payable due in 60 days. Which of the following would you recommend based on the current condition of the company? - ✔✔forward contract Which of the following best defines the balance of payments? - ✔✔the sum of the current account, the capital account and the change in official reserves Companies that have operations overseas use transfer pricing to revalue their balance sheet creating a "paper" gain or loss. Which best describes this type of exposure? - ✔✔translation exposure The main purpose of a credit report is to - ✔✔establish a method for customers to obtain favorable payment terms. The average cost for an individual credit report is - ✔✔$60 — $200 each. The method of payment that carries the greatest risk for the exporter is - ✔✔open account. The method of payment that carries the greatest risk for the importer is - ✔✔cash in advance. When shipping under a letter of credit the exporter is guaranteed payment when - ✔✔the exporter has complied with all terms and conditions as specified in the letter of credit. A documentary collection differs from a letter of credit in that - ✔✔the exporter cannot transfer risk to a banking institution. A common technique of transference of payment risk is - ✔✔forfaiting the receivable. Credit insurance can be purchased from - ✔✔Ex-Im Bank. A letter of credit reduces credit risk to the exporter by - ✔✔requiring the importer to pay should the exporter comply exactly with the terms and conditions of the letter of credit. Political risk is best defined as the inability of a foreign customer to pay its debts in full and on time as a result of - ✔✔actions of their government. After the recent election in your buyer's country the currency was drastically devalued, which will make it difficult for your buyer to pay you on time. This would be considered - ✔✔economic risk. Your new international customer has been in business for less than one year and is owned by an individual with little industry experience. When evaluating your risk, this customer shows significant - ✔✔commercial risk. The UCP which defines the rights and obligations of banks and businesses involved in documentary transactions is considered - ✔✔a guideline for practices. The goal of the WTO is to help - ✔✔importers and exporters conduct their business. The SWIFT System is - ✔✔a method to communicate payment information between banks. Funds remitted through a company check, drawn on a foreign bank will arrive in the seller's account - ✔✔when the foreign bank confirms and remits funds. A confirmed letter of credit includes a - ✔✔second bank's promise to pay upon complying document presentation. Unless otherwise stated, all letters of credit are considered - ✔✔irrevocable. When funds are transferred 60 days after sight without a draft, this is a__________ letter of credit. - ✔✔deferred payment The cost for a documentary collection is less expensive than a letter of credit because the bank - ✔✔does not assume any risk. Export credit insurance rates are based on - ✔✔the country of destination, company risk and value of credit. The eUCP provides banks with guidelines to - ✔✔electronically communicate and transmit documents for documentary collections. The standard messaging system used by banks around the world is known as - ✔✔SWIFT The buyer has placed US$50,000.00 in an escrow account for the purchase of goods from the seller. Which best describes this type of transaction. - ✔✔Advance purchase 15,000 chickens are received in exchange for 25,000 umbrellas This type of transaction is best described as: - ✔✔Barter The SBA provides US exporters with - ✔✔loan guarantee programs for export transactions. The International Chamber of Commerce created the UCP600 as a - ✔✔guideline for international banking transactions. Export-Import (Ex-Im) Bank of the U.S. country limitation schedule indicates the term and availability for - ✔✔the private and public sector for terms of up to one year, one to seven years and over seven years. Having sufficient collateral on your balance sheet is the basis for most financing. Which of the following is considered collateral? - ✔✔accounts receivable and inventory Factors will discount foreign accounts receivable if they meet certain requirements. Which of the following best describes without recourse? - ✔✔The factor buys the invoice (account receivable) outright and takes full responsibility for the collection of the invoice. Which of the following product groups would be considered for medium- and long- term financing through an Ex-Im Bank guarantee to a US exporter? - ✔✔large industrial equipment, the construction of a dam, a jet plane and long-term service contracts