Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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1.
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Consider an exporter that sells its accounts receivables off to another firm
that becomes responsible for obtaining cash from the various importers. This reflects:
a. | accounts receivable financing. | c. | factoring. | b. | consignment. | d. | a letter of credit. |
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2.
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Consider an exporter that is willing to send goods to the importer without a
guaranteed payment by the bank. The bank provides a loan to the exporter that is backed by the value
of the exported goods. This reflects:
a. | accounts receivable financing. | c. | factoring. | b. | forfaiting. | d. | a letter of credit. |
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3.
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A __________ provides a summary of freight charges and conveys title to the
merchandise.
a. | letter of credit | c. | bill of lading | b. | banker's acceptance | d. | bill of
exchange |
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4.
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With _______, the exporter ships the goods to the importer while still retaining
actual title to the merchandise.
a. | a letter of credit arrangement | c. | a draft
arrangement | b. | an open account arrangement | d. | a consignment arrangement |
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5.
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A bill of exchange requesting the bank to pay the face amount upon presentation
of documents is a:
a. | banker's acceptance. | c. | letter of
credit. | b. | time draft. | d. | sight draft. |
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6.
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Countertrade represents foreign trade:
a. | restrictions imposed by the government on imports from another
country. | b. | restrictions imposed by the government on exports sent from the
country. | c. | transactions that force the sales of goods of one country to be linked to the
purchase or exchange of goods from the country. | d. | financing provided to an exporter in exchange
for goods provided to the creditor by the exporter. |
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7.
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Which of the following is not a payment method used for international
trade?
a. | consignment. | b. | open account. | c. | factoring. | d. | draft. | e. | letter of
credit. |
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8.
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Which of the following is not true regarding letters of credit?
a. | They are issued by banks on behalf of the importer promising to pay the
exporter. | b. | A revocable letter of credit can be cancelled or revoked at any time without prior
notification to the beneficiary. | c. | They guarantee that the goods shipped are the
goods purchased. | d. | All of the above are true. |
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9.
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A banker's acceptance is a draft drawn on and accepted by a(n)
__________.
a. | bank | c. | exporter | b. | importer | d. | none of the
above |
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10.
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A(n) ___________ is an unconditional promise drawn by one party, instructing the
buyer to pay the face amount upon presentation.
a. | draft | c. | trade acceptance | b. | bill of lading | d. | letter of
credit |
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True/False
Indicate whether the
statement is true or false.
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11.
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An irrevocable L/C obligates the issuing bank to honor all drawings presented in
conformity with the terms of the L/C.
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12.
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The commission earned by the bank for accepting a draft is reflected in the
all-in-rate.
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