Chapter 16 International business – Flashcards
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Proactive firms do not consider exporting until their domestic market is saturated.
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False
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Exporters often face voluminous paperwork and complex formalities.
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True
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The U.S. Department of Commerce organizes trade events that help potential exporters make foreign contacts and explore export opportunities
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True
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Nearly every state in the U.S. maintains active trade commissions to promote exports.
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True
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Hiring an EMC will help a novice exporter identify opportunities and navigate the paperwork involved in exporting.
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True
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Lack of knowledge is one of the biggest impediments to a company becoming a successful exporter.
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True
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A letter of credit states that an exporter has availed credit from the bank to manufacture goods.
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False
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The bank promises to pay on behalf of the importer when a bank is used as a third party in international transactions.
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True
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A draft is simply an order written by an exporter instructing an importer to pay a specified amount of money at a specified time
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True
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A sight draft allows for a delay in payment.
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False
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When a time draft is drawn on and accepted by a business firm, it is called a trade acceptance.
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True
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Time drafts cannot be sold to investors at a discount from its face value.
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False
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The bill of lading does not serve as a document of title as such.
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False
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The bill of lading can function as collateral against which funds may be advanced to the exporter by its local bank.
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True
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U.S. organizations can get financing aid from the Export-Import Bank.
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True
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Ex-Im Bank has a direct lending operation under which it lends dollars to foreign borrowers.
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True
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Foreign Credit Insurance Association is a part of the U.S Department of Commerce and guides the activities of the Export-Import Bank.
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False
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Countertrade denotes a whole range of agreements that involve financial exchanges.
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True
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Barter is a reciprocal buying agreement that occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sale is made.
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False
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A counterpurchase gives exporters more flexibility than an offset.
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False
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The term switch trading refers to the use of a specialized third-party trading house in a countertrade arrangement.
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True
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Countertrade is least attractive to large, diverse multinational enterprises
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False
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Which of the following is true of exporting?
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A common pitfall of exporting is a poor understanding of competitive conditions in the foreign market.
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Japan's great trading houses are called _____.
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sogo shosha
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_____ is a nationwide group of international trade attorneys who provide free initial consultations to small businesses on export-related matters.
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ELAN
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_____ are export specialists that act as the export marketing department or international department for their client firms.
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Export Management Companies
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Firms commonly employ a(n) _____ as third party in international transactions.
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Reputable bank
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Importers usually issue a _____ to importers in international transactions.
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Letter of credit
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A ____ is the instrument normally used in international commerce to effect payment.
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Draft
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A _____ allows for a delay in payment—normally 30, 60, 90, or 120 days.
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Time Draft
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The _____ is issued to the exporter by the common carrier transporting the merchandise.
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Bill of lading
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A _____ serves as a receipt, a contract, and a document of title.
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Bill of lading
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An importer obtains a _____ from a local bank in a typical international transaction.
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Letter of credit
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The Export-Import Bank is an independent agency of the _____.
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U.S government
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_____ can avail loans from Ex-Im Bank to pay U.S. suppliers.
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Foreign borrowers
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The Foreign Credit Insurance Association provides coverage:
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against commercial risks and political risks faced by exporters.
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_____ is an alternative means of structuring an international sale when conventional means of payment are difficult, costly, or nonexistent.
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Countertrade
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In the modern era, the concept of countertrade arose as a way for the _____ to purchase imports.
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Soviet Union and the Communist states of Eastern Europe
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_____ is viewed as the most restrictive countertrade arrangement.
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Barter
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_____ is primarily used for one-time-only deals in transactions with trading partners who are not creditworthy or trustworthy.
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Barter
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_____ occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sale is made.
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Counterpurchase
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42. A(n) _____ occurs when a firm supplies technology, equipment, training, or other services in a country and agrees to take a certain percentage of the resultant output as partial payment for the contract.
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Buyback
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The main attraction of a(n) _____ is that it can give a firm a way to finance an export deal when there are no other means available.
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Countertrade
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Which of the following statements is true of exporting?
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It helps a firm achieve economies of scale.
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The great promise of exporting is that:
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large revenue opportunities are often found in foreign markets.
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Which of the following statements is true of reactive firms?
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They consider exporting only after their domestic market is saturated.
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Which of the following is a common difficulty that traders face when exporting goods or services to other countries?
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Exporters often face voluminous paperwork and complex formalities.
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Japan's _____ have offices all over the world, and they proactively, continuously seek export opportunities for their affiliated companies large and small.
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sogo shosha
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In the _____ program organized by the U.S. Department of Commerce, department representatives accompany groups of U.S. businesspeople abroad to meet with qualified agents, distributors, and customers.
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matchmaker
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Which of the following statements is true about Small Business Administration (SBA)?
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The SBA employs trade officers throughout the United States.
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Which of the following is a nationwide group of international trade attorneys who provide free initial consultations to miniature businesses on export-related matters?
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ELAN
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Through its _____ program, the SBA oversees about 850 volunteers with international trade experience to provide one-on-one counseling to active and new-to-export businesses.
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Score
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Which of the following statements is true of EMCs?
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EMCs are export specialists that act on behalf of their client firms
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In theory, the advantage of EMCs is that they are:
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experienced specialists who can help the neophyte exporter.
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Which of the following is a successful exporting strategy used by 3M?
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Add additional products once exporting becomes successful
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In a letter of credit transaction, the importer secures the letter of credit:
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before product shipment.
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Which of the following is a document used to give the title of the products to a bank?
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Bill of lading
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A _____ states that the bank will pay a specified sum of money to a beneficiary, normally the exporter, on presentation of particular, specified documents.
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Letter of credit
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Bank charges on letters of credit will depend on the:
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Size of the transaction
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A draft used in international transactions:
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is a document requesting payment
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In an international transaction involving a bank as a third party, the exporter ships the product after:
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the bank promises to pay on the importer's behalf.
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Which of the following is a major advantage of using a letter of credit?
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It helps international traders engage in trade with trust.
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Which of the following is a disadvantage of using a letter of credit (L/C)?
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The importer must pay a bank fee for the letter of credit.
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The person or business initiating a draft is known as the ____.
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Maker
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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.
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Draft
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A _____ is payable on presentation to the drawee.
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Sight Draft
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A _____ allows for a delay in payment.
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Time Draft
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A banker's acceptance:
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Is a time draft that has been drawn on and accepted by a bank.
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A _____ is issued to the exporter by the common carrier transporting the merchandise.
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Bill of lading
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As a receipt, the bill of lading indicates that the carrier:
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has obtained the merchandise described on the face of the document.
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In a typical international trade transaction, the:
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importer's bank sends a letter of credit to the exporter's bank.
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The Export-Import Bank:
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provides finance to facilitate trade between United States and other countries.
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Which of the following statements is true of export credit insurance?
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The FCIA provides coverage against commercial risks and political risks.
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_____ is an alternative means of structuring an international sale when conventional means of payment are difficult, costly, or nonexistent.
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Countertrade
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_____ 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.
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Countertrade
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Which of the following statements is true of countertrade?
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Countertrade occurs when goods and services are traded for other goods and services.
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_____ is the direct exchange of goods and/or services between two parties without a cash transaction and is the simplest arrangement.
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Barter
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_____ 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.
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Barter
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_____ 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.
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Counterpurchase
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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.
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Offset
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Which of the following terms refers to the use of a specialized third-party trading house in a countertrade arrangement?
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Switch Trading
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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.
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Buyback
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Which of the following is an advantage of countertrade?
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It is an effective way of doing business with developing nations.
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Which of the following is a major drawback of engaging in countertrade?
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Countertrade may involve the exchange of unusable goods.
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Countertrade is:
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most attractive to large, diverse multinational enterprises.
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A(n) _____ can help new exporters identify opportunities and avoid common pitfalls.
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export management company
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As a document of title, a _____ can be used to obtain payment or a written promise of payment before the merchandise is released to the importer.
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Bill of lading
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_____ can be used when a government restricts the convertibility of its currency to preserve its foreign exchange reserves so they can be used to service international debt commitments and purchase crucial imports.
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Countertrade
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_____ occurs when a third-party trading house buys the firm's counterpurchase credits and sells them to another firm that can better use them.
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Switch Trading
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The main attraction of _____ is that it can give a firm a way to finance an export deal when other means are not available.
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Countertrade
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Which of the following is a disadvantage of countertrade?
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Countertrade contracts may involve the exchange of unusable or poor-quality.
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Which of the following is a reason that firms take a reactive approach to exporting rather than a proactive approach?
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They are intimidated by the complexities and mechanics of exporting to countries where business practices, language, culture, legal systems, and currency are very different from the home market.
