Chapter 13

time draft

A ________ extends credit to the importer by requiring payment at some specified time after the importer receives the goods.

joint venture

A ________ is a separate company created and owned by two or more independent entities to achieve a common business objective.

an offset

A company proposes that in exchange for a hard-currency sale, it will make a hard-currency purchase of an unspecified product from the buyer nation in the future. Which of the following is the company proposing?

bill of exchange

A document ordering the importer to pay the exporter a specified sum of money at a specified time is called a ________.

export management company

A(n) ________ exports products on behalf of an indirect exporter.

two parties are unfamiliar with each other

Advance payment is commonly used for export/import financing when ________.

open account

Export/import financing in which an exporter ships merchandise and later bills the importer for its value is called ________.

confirmed letter of credit

Martin Exporting requests ABC Bank to add its own guarantee of payment to a letter of credit, which creates a(n) ________.

knowledge of the target market's cultural, political, legal, and economic conditions

The biggest advantage of an export management company is usually its ________.

buyback

The export of industrial equipment in return for products produced by that equipment is called ________.

counter purchase

The sale of goods and services to a country by a company that promises to buy a specific product from that country in the future is called a(n) ________.

identification of potential market

What is the first step in selecting a foreign market?

a turkey project

When one company is hired to design, construct, and test a production facility for a client, the arrangement is called ________.

advance payment

Which of the following financing methods entails the lowest risk for exporters?

licensing

Which of the following is a contractual entry mode in which a company owning intangible property grants another firm the right to use that property for a specified period of time?

franchising

Which of the following is a contractual entry mode in which one company supplies another with intangible property and other assistance over an extended period?

They create future competitors.

Which of the following is a disadvantage of strategic alliances?

letter of credit

Which of the following is a method of export/import financing in which the importer's bank issues a document stating that the bank will pay the exporter when the exporter fulfills the terms of the document?

access to new markets

Which of the following is an advantage of exporting?

The parent company receives all profits generated by the subsidiary.

Which of the following is an advantage of wholly owned subsidiaries?

They can stunt the growth of the exporter's market share by charging very high prices.

Which of the following is true of distributors?

revocable letter of credit

Which of the following letters of credit can be modified without obtaining approval from either the exporter or the importer, by the bank issuing the letter of credit?

advance payment

Which of the following normally takes the form of a wire transfer of money from the bank account of the importer directly to that of the exporter prior to shipment of merchandise?

direct export

Which of the following occurs when a company sells its products to buyers in a target market without going through intermediary companies?

barter

Which of the following refers to the exchange of goods or services directly for other goods or services without the use of money?

sight draft

Which of the following requires an importer to pay for the imported goods when they are delivered?

Franchising requires ongoing assistance from the franchiser while licensing normally involves a one-time transfer of property.

Which of the following statements best differentiates between franchising and licensing?

A major advantage of licensing is that it is the least risky method of international expansion.

Which of the following statements is true of licensing?

switch trading

________ is a countertrade whereby one company sells to another its obligation to make a purchase in a given country.

Exporting

________ is the most common form of international business activity.

Indirect exporting

________ occur(s) when a firm sells its products to a domestic customer, which in turn exports the product, in either its original form or a modified form.

distributors

________ take ownership of the merchandise when it enters their country and accept all the risks associated with generating local sales.