Note: Answer the following questions :

1.One of the key differences between Documents Against Payments (D/P) and Documents Against Acceptance (D/A) is that if you are using the D/P, the exporter instructs the presenting bank to hand over shipping and title documents (representing title to the goods shipped) to the importer only if the importer accepts the accompanying bill of exchange or draft by signing it; whereas, for D/A, the exporter instructs the presenting bank to hand over shipping and title documents (representing title to the goods shipped) to the importer only if the importer makes the full payment.

A True

B False

2.Trade transactions handled on a draft are processed through banking channels. Although in documentary collection, exporters bank collects the payment for the exporter, draft hold less protection of exporter as banks are not obligated to honour payments on buyer's behalf.

A True

B False

3.Payment in Advance trade finance instrument allows the exporter to receive the payment ahead of receiving goods or services and presents highest risk to the exporter.

A True

B False

4.Commercial risk is one of the greatest financial risks facing exporters and importers alike. Commercial risk assessment are risks such as non-tariff trade barriers, central bank exchange regulations, or ban on the sale of certain products in specific countries.

A True

B False

5.International trade finance instruments, risk insurance, international financial institutions and aid agencies, and risk transfer are all different risk mitigation options that could be explored by exporters and importers alike to manage risks.

A True

B False

6.For an exporter, the decision to enter a new market could stem from a sales and marketing intuition based on its domestic market conditions and it could be a reactive response to an unsolicited request by a foreign customer. Regardless of the driver, the marketing and supply chain factors must remain a top priority in planning new ventures into international markets.

A True

B False

7.International Contract Risk Analysis is the process whereby an analyst identifies risks in a particular trade transaction and proposes solutions to reduce these risks.

A True

B False

8.The variable cost approach is a method where product costing is based on a calculation of the Cost of Goods Sold (COGS) and a calculation of Selling, General and Administrative (SG&A) expenses. These two broad categories of costs, COGS and SG&A, are used to determine the underlying product and service cost.

A True

B False

9.For exporters, any sale is a gift until payment is received. Therefore, exporters want to receive payment as soon as possible, preferably as soon as an order is placed or before the goods are sent to the importer.

A True

B False

10. A wealth of expert opinion from major banks, embassies or consulates are available for free or at a negligible fee are available to exporters and importers to manage and mitigate risks while doing business globally.

A True

B False

11. Factoring is a commonly used financing solution by exporting companies to convert its foreign receivables into immediate cash by selling them to a factoring house. A "factoring house" is a:

A Company that helps exporters establish credit in a foreign market.

B Company that helps exporters plan cash Dow in a way to extend payables as much as

possible while accelerating collection of receivables.

C Company that purchases domestic and foreign receivables and provide immediate

payment of the invoice to the exporter, in part or in full.

D Company that provides margin-based financing to the exporter for the time the exporter

places the receivable into collections with a collection agency.

12. Golfing Inc. assembles golf carts that are used on golf course as well as other touristic locations such as resorts and beaches. In recent years, Golfing Inc. has received multiple inquiries from companies based in Cuba for the purchase of their product. In consideration of the contract, Golfing Inc. has requested payments to be made via letter of credit. Furthermore, given the size of the contract, Golfing Inc.'s supplier is seeking a guarantee of future payment. Which of the following will be an ideal type of letter of credit Golfing Inc. should ask for?

A Red clause letter of credit

B Transferable letter of credit

C Confirmed letter of credit

D Revolving letter of credit

13. In which of the following trade finance situations would a performance guarantee be procured?

A When an exporter wishes to respond to an international public tender that requires all bidders provide cash deposits or an irrevocable guarantee to secure their bids.

B When two parties engage in a bilateral negotiation outside of the tendering process to reassure the foreign importer and strengthen the position of the seller.

C When negotiating parties are engaged in a long-term international contract and an instrument is needed to undertake payment of the seller to uphold the terms of the commercial contract to the satisfaction of the importer.

D When one of the negotiating parties wants guarantee of financial compensation if a bidder that has submitted a proposal refuses to accept a contract that is being awarded (e.g. due to competing obligations).

14. Put the following steps for the issuance of a letter of credit in the correct order:

I.The issuing bank forwards the letter of credit to the advising bank.

II.The advising bank advises the exporter of the received letter of credit.

III.The importer instructs its bank to issue a letter of credit in favour of the exporter with pre-negotiated terms.

IV.The exporter and importer sign a contract with the requirement to issue a letter of credit.

A IV, III, I, II

B II, I, III, IV

C II, III, I, IV

D I, II, III, IV

15. Rwanda Import Inc. signed a contract with Zimbabwe Expo! Inc. for the purchase of drilling equipment used in infrastructure development. The Rwandan company is interested in obtaining the product prior to payment but the Zimbabwean company wants to receive the payment up-front to minimize their risk of non-collecting. What is the recommended trade instrument for both companies to use?

A Transferable letter of credit

B Open payment terms

C Letter of credit and letter of guarantee

D Corporate letter of credit

16. Which of the following best describes a bond?

A An instrument issued by a bank in which the bank agrees to pay of sum of money when the exporter fulfils its obligation to the importer.

B An instrument issued by which a guarantor will guarantee the execution of the exporter's obligation in favour of the importer.

C An instrument by which a guarantor secures a long-term loan.

D An instrument issued by an insurance company that pays the importer when the exporter delivers on their contractual obligation.

17. Which of the following is a key factor that can possibly negatively impact the cash %ow of a company doing business on the international market?

A Advance payment in contracts

B Exchange controls

C Close monitoring

D Pre-investment planning

18. This is a form of ADR in which the disputing parties use an individual who meets with each party separately to determine their issues and help resolve their differences. Which of the following best matches this definition?

A Conciliation

B Mediation

C Arbitration

D Fact-finding

19. Which of the following is a method by which an exporter can try to collect its receivables?

A Confirmation

B Remitting

C Write off the uncollectible amount

D Taking legal action against the buyer with the assistance of lawyers

20. Which of the following is a correct statement about the standby letter of credit?

A A standby letter of credit is opened and issued in favor of a foreign government agency when a company has fulfilled all of their obligations under a foreign government contract.

B A standby letter of credit is the same as a normal letter of credit but it is used in a situation where the bank has agreed agree to release an agreed upon sum of money (based on a documentary submission by one party) if the party who opened the instrument has not fulfilled certain obligations.

C A standby letter of credit is a type of instrument that will undertake payment once the seller performs in accordance with the terms of the commercial contract.

D A standby letter of credit is sometimes used as an unconditional instrument, meaning that the guarantor can delay payment to the beneficiary on simple demand.

21. Grand L'eau Lte (GLL), a French water treatment facility manufacturer, has received a contract to design, manufacture and install a water treatment facility in the Somalian city of Mogadishu. The contract is valued at EUR 1 million and will be paid by the buyer in EUR. GLL has never signed a contract outside of Europe and does not have any strategic partners it can leverage to ensure a successful completion of this contract. After multiple negotiations, the Executive Vice President of Business Development decided to sign the contract as a first step towards diversifying GLL's market reach. GLL expects to complete the contract without any local partners. Which of the following will have an impact on GLL's cash flow?

A Payment via letter of credit which has been secured in an escrow account of a Belgian bank in Antwerp.

B Fluctuations in the foreign exchange.

C Political tensions in Somalia can delay delivery and installation of the water treatment facility.

D Exchange controls.

22. Which of the following plays a role to verify that the documents received are as required in the collection order and forwards them to the importer's bank?

A The principal

B The collecting bank

C The remitting bank

D The drawee

23. Idream2export Inc. is a known manufacturer of LED light used for signal lights in its country. In recent years, the demand for such product has grown significantly in the foreign market. Idream2export Inc. has lost to its foreign competition due to limited appetite for taking on foreign market risk and limited working capital. Recently, Idream2export Inc. has been introduced to their ECA via their bank and are looking at various solutions to help mitigate foreign market risk. In particular, the company is considering accounts receivable insurance to help secure the collection of receivables. Which of the following risks is covered under this insurance policy?

A Damage to merchandise in transport

B Currency Fluctuation

C Commercial disputes

D Insolvency

24. Which of the following best describes the function of a red clause letter of credit?

A To authorize the advising bank to make advances to the exporter against the guarantee of the importer's bank.

B To indicate the exact number of times a revolving documentary letter of credit may be renewed.

C To indicate to the exporter that a problem has occurred with the importer's finance instruments, and signal the need to renegotiate.

D To highlight specific terms struck between the importer and the exporter that are outside of the standard negotiations used with letters of credit.

25. InTrouBle Inc. recently approached its bank to seek assistance in financing its cash shortfall. After an hour-long meeting and review of InTrouBle Inc.'s financial situation, the banker mentioned the company has significant amount of accounts receivable outstanding from foreign buyers that is blocking the company's working capital. The bank recommended InTrouBle Inc. use a trade finance tool that enables exporters to bring in cash by selling medium-term foreign accounts receivable at a discount, on a "without recourse" basis. This instrument is commonly known as:

A Forfaiting

B Factoring

C Margining

D Collection