David Chapter 07 mod

David Chapter 07 mod - Chapter 7 TERMS OF PAYMENT LEARNING...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 7 T ERMS OF P AYMENT LEARNING OBJECTIVES At the end of this chapter, the student should: 1 Identify alternative terms of payment in international trade. 2 Understand the advantages/disadvantages of securing payment through cash in advance 3 Understand the advantages/disadvantages of securing payment through the use of open accounts. 4 Understand the advantages/disadvantages and procedures of securing payment through letters of credit. 5 Understand the procedures in documentary collection in international trade. 6 Understand the procedures in the use of purchasing cards, procurement cards, credit cards, trade cards, and bank guarantees in international trade. 7 Understand the strategic advantages of using the proper method of payment. PREVIEW This chapter helps exporters achieve a major goal: getting paid for an international shipment. It focuses on the strategic dimensions of payment terms—for instance, how demanding cash in advance for a product can put an exporter at a competitive disadvantage. We will look at law applying to payment terms and will direct considerable focus to the processing of a letter of credit as a term of payment.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
7-2 Chapter 7 Terms of Payment CHAPTER OUTLINE 7-1 Introduction I. Exporter wants to get paid. II. International payments are more complicated and risky than domestic payments. a. Lack of credit information b. Lack of personal contact c. Difficult, expensive collections d. No easy legal recourse e. Higher litigation costs f. Mistrust 7-2 Alternative Terms of Payment I. Cash in advance a. Traditional method b. High probability of losing business due to payment choice c. No loss due to non-payment II. Letter of credit a. Traditional method b. Fairly high probability of losing business due to payment choice c. Very little chance of loss due to nonpayment III. Documentary collection a. Traditional method b. Low probability of losing business due to payment choice c. Low probability of loss due to nonpayment IV. Open account a. Traditional method b. No chance of losing business due to payment choice c. Relatively high chance of loss due to nonpayment V. Trade card a. Newer method b. Low probability of losing business due to payment choice c. Almost nil chance of loss due to nonpayment 7-3 Risks in International Trade 7-2a Country Risk I. Political issues a. Customs, tariff issues b. Tendency toward strikes c. Payment terms should be more secure II. Economic health a. High unemployment may mean policies against imports that steal jobs.
Background image of page 2
Chapter 7 Terms of Payments 7 -3 b. High inflation may mean price controls. c. If country’s balance of payments are in high deficit, there may be restrictions on imports. III. Social system of country a. Culture which condones fraud b. Biased justice system 7-2b Commercial Risk I. May be difficult to obtain information II. Sources of information: a. Credit report companies b. Factoring houses c. Some accounting firms d. Insurance companies e. Banks 7-2c Exposure I. Risk of non-payment is probability of not getting paid or of getting paid late. II.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 15

David Chapter 07 mod - Chapter 7 TERMS OF PAYMENT LEARNING...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online