1 / 28

Foundations of Multinational Financial Management 5 th Edition Alan Shapiro J.Wiley & Sons

Foundations of Multinational Financial Management 5 th Edition Alan Shapiro J.Wiley & Sons. Power Points by Joseph F. Greco, Ph.D. California State University, Fullerton. Financing Foreign Trade. Chapter 18. The Trade Cycle and Risk. Types of Risk. Preshipment Shipment Postshipment.

zelig
Télécharger la présentation

Foundations of Multinational Financial Management 5 th Edition Alan Shapiro J.Wiley & Sons

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Foundations of Multinational Financial Management5th EditionAlan Shapiro J.Wiley & Sons Power Points by Joseph F. Greco, Ph.D. California State University, Fullerton

  2. Financing Foreign Trade Chapter 18

  3. The Trade Cycle and Risk

  4. Types of Risk • Preshipment • Shipment • Postshipment

  5. PAYMENT TERMS • I. PAYMENT TERMS • A. Four Principal Means: • 1. Cash in advance • 2. Letter of Credit • 3. Drafts • 4. Open Account

  6. PAYMENT TERMS • B. Cash in Advance • 1. Minimal risk to exporter • 2. Used where there is: • a. Political unrest • b. Goods made to order • c. New and unfamiliar customer

  7. PAYMENT TERMS • C. Letter of Credit (L/C) • 1. A letter addressed to seller • a. Written and signed by buyer’s bank • b. Promising to honor seller’s drafts. • c. Bank substitutes its own commitment • *d. Seller must conform to terms

  8. PAYMENT TERMS • 2. Advantages of an L/C to Exporter • a. Eliminates credit risk • b. Preshipment risk protection

  9. PAYMENT TERMS • 3. Advantages of L/C to Importer • a. Shipment assured. • b. Documents inspected. • c. May allow better sales terms. • d. Relatively low-cost financing. • e. Easy cash recovery if discrepancies arise.

  10. PAYMENT TERMS • 4. Types of L/Cs • a. Documentary • b. Irrevocable • c. Confirmed

  11. PAYMENT TERMS • D. DRAFTS • 1. Definition: • - Unconditional order in writing • - Exporter’s order for importer to pay • - At once (sight draft) or • - In future (time draft)

  12. PAYMENT TERMS • 2. Three Functions of Drafts • a. Clear evidence of financial obligation. • b. Reduced financing costs. • c. Can be a financial product for investors. • (i.e. May be converted to a banker’s acceptance)

  13. PAYMENT TERMS • 3. Types of Drafts • a. Sight • b. Time

  14. PAYMENT TERMS • F. OPEN ACCOUNT • 1. Creates a credit sale • 2. To importer’s advantage • 3. More popular lately because • a. Major surge in global trade. • b. Credit information improved. • c. More global familiarity with exporting.

  15. PAYMENT TERMS • 4. Benefits of Open Accounts: • a. Greater flexibility in making a trade. • b. Lower transactions costs. • 5. Major disadvantage: • - Highly vulnerable to government currency controls.

  16. DOCUMENTS • II. DOCUMENTS USED IN INT’L TRADE • A. Three most used documents • 1. Bill of Lading (most important) • 2. Commercial Invoice • 3. Insurance Certificate

  17. DOCUMENTS • B. Bill of Lading • Three functions: • 1. Acts as a contract to carry the goods. • 2. Acts as a shipper’s receipt • 3. Establishes ownership over goods if negotiable type.

  18. DOCUMENTS • C. COMMERCIAL INVOICE • Purpose: • 1. Lists full details of goods shipped • 2. Names of importer/exporter given • 3. Identifies payment terms • 4. List charges for transport and insurance.

  19. DOCUMENTS • D. INSURANCE • 1. Two Categories: • a. Marine: transport by sea • b. Air: transport by air • 2. Insurance Certificate issued to show proof of insurance.

  20. SHORT-TERMFINANCING TECHNIQUES • III. FINANCING TECHNIQUES • A. Four Types: • 1. Bankers’ Acceptances • a. Creation: drafts accepted • b. Terms: Payable at maturity to holder

  21. SHORT-TERMFINANCING TECHNIQUES • 2. Discounting • a. Converts exporters’ drafts to cash • minus interest to maturity and • commissions. • b. Low cost financing with few fees. • c. May be with (exporter still liable) or without recourse (bank takes • liability for nonpayment).

  22. SHORT-TERMFINANCING TECHNIQUES • 3. Factoring: • firms sell accounts receivable to another firm known as the factor. • a. Discount charged by factor • b. Non-recourse basis: Factor assumes all payment risk. • c. When used: • 1.) Occasional exporting. • 2.) Clients geographically dispersed.

  23. SHORT-TERMFINANCING TECHNIQUES • 4. Forfaiting • a. Definition: • Discounting at a fixed rate without recourse for medium-term accounts receivable. • b. Use: Large capital purchases • c. Most popular in W. Europe

  24. GOVERNMENT SOURCES • IV. GOVERNMENT SOURCES OF EXPORT • FINANCING AND CREDIT INSURANCE • A. Export-Import Bank of the U.S. • -known as Ex-Im Bank • -Finances and facilitates U.S. exports only.

  25. GOVERNMENT SOURCES • 1. Ex-Im Bank Programs: • a. Direct loans to exporters • b. Intermediate loans to exporters • c. Loan guarantees • d. Preliminary commitments • e. Political and commercial insurance

  26. GOVERNMENT SOURCES • Restrictions: • At least 51% U.S. content • No armaments • Must be environmentally friendly

  27. COUNTERTRADE • V. COUNTERTRADE • A. Three Specific Forms: • 1. Barter • Direct exchange in kind. • 2. Counterpurchase: • Sale/purchase of unrelated goods but with currencies. • 3. Buyback: • Repayment of original purchase through sale of a related product.

  28. COUNTERTRADE • B. When to Use Countertrade • 1. With “soft-currency” developing countries. • 2. When tariffs or quotas prevent • trade.

More Related