60.
The person or business initiating a draft is known as the _____.
A.
beneficiary
B.
drawee
C.
maker
D.
trustee
The person or business initiating the draft is known as the maker (in this
case, the U.S. exporter). The party to whom the draft is presented is known
as the drawee (in this case, the Bank of Paris).
61.
A _____ is simply an order written by an exporter instructing an importer, or
an importer’s agent, to pay a specified amount of money at a specified
time.
A.
letter of credit
B.
bill of lading
C.
draft
D.
banker’s letter
A draft is simply an order written by an exporter instructing an importer, or
an importer’s agent, to pay a specified amount of money at a specified time.
62.
A _____ is payable on presentation to the drawee.
A.
bill of lading
B.
time draft
C.
sight draft
D.
letter of credit
Drafts fall into two categories, sight drafts and time drafts. A sight draft is
payable on presentation to the drawee. A time draft allows for a delay in
payment—normally 30, 60, 90, or 120 days.
63.
A _____ allows for a delay in payment.
A.
bill of lading
B.
time draft
C.
sight draft
D.
letter of credit
Drafts fall into two categories, sight drafts and time drafts. A sight draft is
payable on presentation to the drawee. A time draft allows for a delay in
payment—normally 30, 60, 90, or 120 days.
64.
A banker’s acceptance _____.
A.
is payable to the drawee immediately on presentation in a bank
B.
is a time draft that has been drawn on and accepted by a bank
C.
is a sight draft that can be used as a negotiable instrument in banks
D.
allows a buyer possession of the merchandise without signing any formal
documents
A time draft allows for a delay in payment—normally 30, 60, 90, or 120 days.
When a time draft is drawn on and accepted by a bank, it is called a
banker’s acceptance.
65.
A _____ is issued to the exporter by the common carrier transporting the
merchandise and serves as a receipt, a contract, and a document of title.
A.
bill of lading
B.
sight draft
C.
time draft
D.
letter of credit
The bill of lading is issued to the exporter by the common carrier
transporting the merchandise. It serves three purposes: it is a receipt, a
contract, and a document of title.
66.
As a receipt, the bill of lading indicates that the carrier _____.
A.
provides a written promise of payment before releasing the merchandise
B.
has obtained the merchandise described on the face of the document
C.
receives payment from a third-party such as a bank or trading house
D.
is obligated to provide a transportation service in return for a certain
charge
A bill of lading serves three purposes: it is a receipt, a contract, and a
document of title. As a receipt, it indicates that the carrier has received the
merchandise described on the face of the document.
67.
In a typical international trade transaction, the _____.
A.
exporter should obtain a letter of credit to initiate transactions
B.
importer and exporter maintain an account with the same bank
C.
importer’s bank sends a letter of credit to the exporter’s bank
D.
importer’s bank sends the draft and bill of lading to the exporter’s bank
In a typical international trade transaction, the importer’s bank sends a
letter of credit to the exporter’s bank. The exporter’s bank advises the
exporter of the opening of a letter of credit in his favor.
68.
The Export-Import Bank _____.
A.
is an international financial institution that provides loans for capital
programs
B.
provides finance to facilitate trade between United States and other
countries
C.
is an independent agency of the United Nations
D.
focuses on policies that have an impact on the exchange rate and the
balance of payments
The Export-Import Bank, often referred to as Ex-Im Bank, is an independent
agency of the U.S. government. Its mission is to provide financing aid that
will facilitate exports, imports, and the exchange of commodities between
the United States and other countries.
69.
Which of the following statements is true of export credit insurance?
A.
Exporter will require more insurance if a letter of credit is used in
transactions.
B.
The FCIA provides coverage against commercial risks and political risks.
C.
Private associations cannot offer export insurance in the United States.
D.
Organizations do not receive coverage against political risks of global
trade.
In the United States, export credit insurance is provided by the Foreign
Credit Insurance Association (FCIA), an association of private commercial
institutions operating under the guidance of the Export-Import Bank. The
FCIA provides coverage against commercial risks and political risks.
70.
_____ is an alternative means of structuring an international sale when
conventional means of payment are difficult, costly, or nonexistent.
A.
Floating exchange system
B.
Countertrade
C.
Letter of credit trade
D.
Fixed exchange system
Countertrade denotes a whole range of barter-like agreements; its principle
is to trade goods and services for other goods and services when they
cannot be traded for money. Countertrade is an alternative means of
structuring an international sale when conventional means of payment are
difficult, costly, or nonexistent.
71.
_____ denotes a whole range of barter-like agreements and its principle is
to trade goods and services for other goods and services when they cannot
be traded for money.
A.
Countertrade
B.
Cross-selling
C.
Matchmaking
D.
Letter of credit
Countertrade denotes a whole range of barter-like agreements; its principle
is to trade goods and services for other goods and services when they
cannot be traded for money. Countertrade is an alternative means of
structuring an international sale when conventional means of payment are
difficult, costly, or nonexistent.
72.
Which of the following statements is true of countertrade?
A.
Countertrade reduces the profitability of competing firms and is
considered an unethical practice.
B.
Countertrade is a conventional means to pay exporters.
C.
Smaller organizations commonly use countertrade in international
transactions.
D.
Countertrade occurs when goods and services are traded for other goods
and services.
Countertrade denotes a whole range of barter-like agreements; its principle
is to trade goods and services for other goods and services when they
cannot be traded for money. Countertrade is an alternative means of
structuring an international sale when conventional means of payment are
difficult, costly, or nonexistent.
73.
_____ is the direct exchange of goods and/or services between two parties
without a cash transaction and is the simplest arrangement.
A.
Counterpurchase
B.
Barter
C.
Offset
D.
Switch trading
Barter is the direct exchange of goods and/or services between two parties
without a cash transaction. Although barter is the simplest arrangement, it
is not common.
74.
_____ is viewed as the most restrictive countertrade arrangement and is
primarily used for one-time-only deals in transactions with trading partners
who are not creditworthy or trustworthy.
A.
Switch trading
B.
Offset
C.
Barter
D.
Buyback
Barter has two disadvantages. First, if goods are not exchanged
simultaneously, one party ends up financing the other for a period. Second,
firms engaged in barter run the risk of having to accept goods they do not
want, cannot use, or have difficulty reselling at a reasonable price. For
these reasons, barter is viewed as the most restrictive countertrade
arrangement. It is primarily used for one-time-only deals in transactions
with trading partners who are not creditworthy or trustworthy.
75.
_____ is a reciprocal buying agreement and occurs when a firm agrees to
buy a certain amount of materials back from a country to which a sale is
made.
A.
Counterpurchase
B.
Barter
C.
Offset
D.
Switch trading
Counterpurchase is a reciprocal buying agreement. It occurs when a firm
agrees to purchase a certain amount of materials back from a country to
which a sale is made.
76.
In a(n) _____, one party agrees to purchase goods and services with a
specified percentage of the proceeds from the original sale and this party
can fulfill the obligation with any firm in the country to which the sale is
being made.
A.
switch trade
B.
offset
C.
barter
D.
buyback
An offset is similar to a counterpurchase insofar as one party agrees to
purchase goods and services with a specified percentage of the proceeds
from the original sale. The difference is that this party can fulfill the
obligation with any firm in the country to which the sale is being made.
77.
Which of the following terms refers to the use of a specialized third-party
trading house in a countertrade arrangement?
A.
Counterpurchase
B.
Barter
C.
Offset
D.
Switch trading
The term switch trading refers to the use of a specialized third-party trading
house in a countertrade arrangement. Switch trading occurs when a third-
party trading house buys the firm’s counterpurchase credits and sells them
to another firm that can better use them.
78.
A(n) _____ occurs when a firm builds a plant in a country and agrees to take
a certain percentage of the plant’s output as partial payment for the
contract.
A.
buyback
B.
barter
C.
offset
D.
switch trade
A buyback occurs when a firm builds a plant in a country—or supplies
technology, equipment, training, or other services to the country—and
agrees to take a certain percentage of the plant’s output as partial payment
for the contract.
79.
Which of the following is an advantage of countertrade?
A.
Countertrade uses instruments such as time draft and sight draft.
B.
It is an effective way of doing business with developing nations.
C.
It provides exporters and opportunity to obtain direct revenue.
D.
Countertrade prevents exchange of unusable or poor-quality goods.
Countertrade’s main attraction is that it can give a firm a way to finance an
export deal when other means are not available. Given the problems that
many developing nations have in raising the foreign exchange necessary to
pay for imports, countertrade may be the only option available when doing
business in these countries.