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1、Multinational Financial Management Alan Shapiro7th Edition J.Wiley & SonsPower Points byJoseph F. Greco, Ph.D.California State University, Fullerton1 FINANCING FOREIGN TRADECHAPTER 182CHAPTER OVERVIEW:I.PAYMENT TERMSII.DOCUMENTSIII.FINANCING TECHNIQUESIV.GOVERNMENT SOURCES OF EXPORT FINANCING AN

2、D CREDIT INSURANCEV.COUNTERTRADE3I.PAYMENT TERMSI.PAYMENT TERMSA. Five Principal Means:1.Cash in advance2.Letter of Credit3.Drafts4.Consignment5.Open Account4PAYMENT TERMSB. Cash in Advance1.Minimal risk to exporter2.Used where there isa. Political unrestb.Goods made to orderc.New unfamiliar custome

3、r5PAYMENT TERMSC. Letter of Credit (L/C)1.A letter addressed to sellera.written and signed by buyers mising to honor sellersdrafts. c.Bank substitutes its owncommitmentd.Seller must conform to terms6PAYMENT TERMS2. Advantages of an L/C to Exportera.eliminates credit riskb.reduces default ri

4、skc.payment certaintyd.prepayment risk protectione.financing source7PAYMENT TERMS3. Advantages of L/C to Importera.shipment assuredb.documents inspectedc.may allow better sales termsd.relatively low-cost financinge.easy cash recovery if discrepancies8PAYMENT TERMS4. Types of L/Csa.documentaryb.non-d

5、ocumentaryc.revocabled.irrevocablee.confirmedf.transferable9PAYMENT TERMSD.DRAFTS1.Definition:- unconditional order in writing- exporters order for importer to pay - at once (sight draft) or- in future (time draft)10PAYMENT TERMS2. Three Functions of Draftsa.clear evidence of financial obliga-tionb.

6、reduced financing vides negotiable and uncondi-tional financial instrument(ie. May be converted to a bankers acceptance)11PAYMENT TERMS3. Types of Draftsa.sightb.timec.clean (no documents needed)d.documentary12PAYMENT TERMSE.CONSIGNMENT1.Exporter = the consignor2.Importer = the consignee3.

7、Consignee attempts to sellgoods to a third party; keeps some profit, remits rest to consignor.4.Use: Between affiliates13PAYMENT TERMSF.OPEN ACCOUNT1.Creates a credit sale2.To importers advantage3.More popular lately becausea.major surge in global tradeb.credit information improvedc.more global fami

8、liarity with exporting.14PAYMENT TERMS4.Benefits of Open Accounts:a.greater flexibility in makinga tradeb.lower transactions costs5.Major disadvantage:highly vulnerable to government currency controls.15II. DOCUMENTSII.DOCUMENTS USED IN INTL TRADEA.Four most used documents1. Bill of Lading (most imp

9、ortant)2. Commercial Invoice3. Insurance Certificate16DOCUMENTSB. Bill of LadingThree functions:1.Acts as a contract to carry the goods.2.Acts as a shippers receipt3. Establishes ownership overgoods if negotiable type.17DOCUMENTS2.Type of Billsa.Straightb.Orderc.On-boardd.Received-for-shipmente.Clea

10、nf.Foul18DOCUMENTSC.COMMERCIAL INVOICEPurpose:1.Lists full details of goods shipped2.Names of importer/exporter given3.Identifies payment terms4.List charges for transport and insurance.19DOCUMENTSD.INSURANCE1.Two Categories:a.Marine: transport by seab.Air: transport by air2.Insurance Certificateiss

11、ued to show proof of insurance3.All shipments insured today.20DOCUMENTSE.CONSULAR INVOICELocal consulate in host country issues: a visa for the exporters invoice requires fee to be paid to consulate21III. FINANCING TECHNIQUESIII.FINANCING TECHNIQUESA.Four Types:1.Bankers Acceptancesa. Creation: draf

12、ts acceptedb. Terms: Payable at maturity to holder22FINANCING TECHNIQUES2. Discountinga.Converts exporters drafts to cash minus interest to maturity and commissions.b.Low cost financing with few feesc.May be with (exporter still liable) or without recourse(bank takesliability for nonpayment).23FINAN

13、CING TECHNIQUES3.Factoring-firms sell accounts receivable to another firm known as the factor.a.Discount charged by factorb.Non-recourse basis: Factorassumes all payment risk.c.When used:1.)Occasional exporting2.)Clients geographically dispersed.24FINANCING TECHNIQUES4. Forfaitinga.Definition:discou

14、nting at a fixed rate without recourse of medium-term accounts receivable denominated in a fully convertible currency.b.Use: Large capital purchasesc.Most popular in W. Europe25IV. GOVERNMENT SOURCES OF EXPORT FINANCINGIV.GOVERNMENT SOURCES OF EXPORTFINANCING AND CREDIT INSURANCEA.Export-Import Bank

15、 of the U.S.-known as Ex-Im Bank-finances and facilitates U.S. exports only. 26GOVERNMENT SOURCES OF EXPORT FINANCING1. Ex-Im Bank Programs:a.Direct loans to exportersb.Intermediate loans to exportersc.Loan guaranteesd.Preliminary commitmentse.Political and commercial insurance27GOVERNMENT SOURCES O

16、F EXPORT FINANCINGB.Private Export Funding Corporation(PEFCO)1.Finances large sales from privatesources2.May purchase loans of U.S. importers3.ExIm Bank provides loan guarantees.28GOVERNMENT SOURCES OF EXPORT FINANCINGC.Foreign Credit Insurance Association(FCIA)1.Offers commercial and politicalrisk insurance2.When insured, exporter oftenable to obtain financing faster.29V. COUNTERTRADEV.COUNTERTRADEA. Three Specific Forms:1.Barterdirect exchange in kind2.Co