Question: 1. In which of the following circumstances might an exporter choose to use a collection? a. buyer...

1. In which of the following circumstances might an exporter choose to use a collection?

a. buyers country is politically unstable

b. The buyer is creditworthy, but has a record of slow payment.

c. There is some buyer risk, but there is a market for the goods in the buyers country.

d. Above B and C

2. One ratio that uses the Income statement for analysis is

a. Current Ratio

b. Accounts Receivable Turnover

c.Debt/Equity Ratio

d. Debt Service ratio

3. When deciding whether to issue a bond, what following factors the issuing bank will consider.

i. Exporters performance risk

ii. The Exporters credit standing.

iii. The beneficiarys credit standing.

iv. Risk of unfair calling of the bond.

a. i, ii, and iii

b. ii, iii, iv

c. i, iii, and iv

d. i, ii and iv

4. Colombo Ports Authority is inviting various contractors for constructing their new terminal. The project will be awarded to only one of the contractors. What type of a bond is called from the contractors?

a. Performance Bond

b. Bid Bond

c. Advance Payment Bond

d. Retention Bond

5. Avalised Collections are:

a. Discrepant documents under DCs which are held pending realization

b. Collection bills which have been already accepted by the Buyer

c. Deferred Payable Bills under DCs

d. Collection bills where the importers bank has provided a guarantee

6. Irrevocable Confirm Credit Cannot Be Cancelled or Amended Without the Agreement of

a. Beneficiary, Confirming Bank, Issuing Bank

b. Applicant, Beneficiary, Issuing Bank

c. Beneficiary, Confirming Bank, Applicant

d. Advising Bank, Beneficiary, Issuing Bank

7. Transaction risk refers to

a. the impact of exchange rate changes on the value of committed cash flows. These are mostly receivables (payables) from export (import) contracts and repatriation of dividends.

b. the present value of future cash flow operations of a firm's parent company and foreign subsidiaries.

c. the impact of exchange rate changes on the valuation of foreign assets (mainly foreign subsidiaries) and liabilities on a multinational company's consolidated balance sheet. Usually, translation risk is measured in net terms, i.e. net foreign assets minus net foreign liabilities.

d. None of the above

8. Penetration pricing

a. has one main disadvantage is that this policy can easily be matched or undercut by competitors

b. is aimed to quick in sales, capture market share, utilise full capacity and economies of scale in productive process and keep the competitors away from the market.

c. is known as charging highest price for the new product.

d. is used when the marketplace is insensitive to price; therefore premium price is charged

9. Documentary collection

a. is a commitment by a bank on behalf of the buyer that payment will be made to the exporter, provided that the terms and conditions stated have been met, as verified through the presentation of all required documents.

b. can avoid credit risk because payment is received before the ownership of the goods is transferred

c. a Bank facilitates the exchange and offers verification process and complete recourse in the event of non-payment.

d. exporter hands over the task of collecting payment for goods supplied to his or her bank, which sends the shipping documents to the importer's bank together with payment instructions.

10. What was the first form of a Letter of Credit called

a. Travellers Cheques

b. Documentary Credit

c. Travellers Letter of Credit

d. None of the above

11. In a collection, who is the principal?

a. The exporter

b. The importer

c. The exporters bank

d. The importers bank

12. If payment is to be made at time of that documents are to be presented, this is referred to as a __________.

a. Usance Letter of Credit

b. Confirmed Letter of Credit

c. Irrevocable Letter of Credit

d. Sight Letter of Credit