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 Multinational Financial Management 

  Alan Shapiro

7 th Edition  J.Wiley & SonsPower Points by Joseph F. Greco, Ph.D.

California State University, Fullerton

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FINNCING F!"#IGN $"D#

CHAPTER 18

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CHAPE! "#E!#$EW%

I. P%N$ $#"&S

II. D!CUN$S

III.FINNCING $#C'NI(U#S

I). G!)#"NN$ S!U"C#S !F#*P!"$ FINNCING ND

C"#DI$ INSU"NC#

). C!UN$#"$"D#

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 $. PAME' E!MS I. P%N$ $#"&S

. Five Principal &eans+. Cash in a-vance

. /etter of Cre-it

0. Drafts1. Consi2n3ent

4. !pen ccount

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 PAME' E!MS 5. Cash in -vance

. &ini3al ris6 to e7porter. Use- where there is

a. Political unrest

b. Goo-s 3a-e to or-erc. New unfa3iliar

custo3er

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 PAME' E!MS C. /etter of Cre-it 8/9C:. letter a--resse- to seller

a. written an- si2ne- bybuyer;s ban6b. pro3isin2 to honor seller;s-rafts.

c. 5an6 substitutes its ownco33it3ent-. Seller 3ust confor3 to ter3s

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 PAME' E!MS . -vanta2es of an /9C to#7porter

a. eli3inates cre-it ris6

b. re-uces -efault ris6

c. pay3ent certainty-. prepay3ent ris6 protection

e.

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 PAME' E!MS 0. -vanta2es of /9C to I3porter

a. ship3ent assure-b. -ocu3ents inspecte-

c. 3ay allow better sales ter3s

-. relatively low=cost

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 PAME' E!MS 1. $ypes of /9Cs

a. -ocu3entaryb. non=-ocu3entary

c. revocable

-. irrevocablee. con

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 PAME' E!MS D. D"F$S

. De

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 PAME' E!MS . $hree Functions of Drafts

a. clear evi-ence of

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 PAME' E!MS 0. $ypes of Drafts

a. si2htb. ti3e

c. clean 8no -ocu3ents

nee-e-:-. -ocu3entary

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 PAME' E!MS #. C!NSIGNN$

. #7porter > the consi2nor

. I3porter > the consi2nee

0. Consi2nee atte3pts to sell

2oo-s to a thir- party? 6eeps so3epro

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 PAME' E!MS F. !P#N CC!UN$

. Creates a cre-it sale

. $o i3porter;s a-vanta2e

0. &ore popular lately because

a. 3aAor sur2e in 2lobal tra-e

b. cre-it infor3ation i3prove-

c. 3ore 2lobal fa3iliarity withe7portin2.

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 PAME' E!MS 1. 5ene

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 $$. ("C)ME'S II. D!CUN$S US#D IN IN$;/ $"D#

. Four 3ost use- -ocu3ents

. 5ill of /a-in2 83ost i3portant:

. Co33ercial Invoice0. Insurance Certi

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 ("C)ME'S 5. 5ill of /a-in2

 $hree functions+. cts as a contract to carry the2oo-s.

. cts as a shipper;s receipt0. #stablishes ownership over

2oo-s if ne2otiable type.

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 ("C)ME'S . $ype of 5ills

a. Strai2htb. !r-er

c. !n=boar-

-. "eceive-=for=ship3ente. Clean

f. Foul

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 ("C)ME'S C. C!&"CI/ IN)!IC#

Purpose+

. /ists full -etails of 2oo-s shippe-

. Na3es of i3porter9e7porter 2iven

0. I-enti

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 ("C)ME'S D. INSU"NC#

. $wo Cate2ories+

a. &arine+ transport by sea

b. ir+ transport by air

. Insurance Certi

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 ("C)ME'S #. C!NSU/" IN)!IC#

/ocal consulate in host countryissues+ a visa for the e7porter;s invoice

reuires fee to be pai- to consulate

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 $$$. F$'A'C$'* ECH'$+)ES III. FINNCING $#C'NI(U#S

. Four $ypes+

. 5an6ers; cceptances

a. Creation+ -rafts accepte-

b. $er3s+ Payable at 3aturity to

hol-er

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 F$'A'C$'* ECH'$+)ES . Discountin2

a. Converts e7porters; -rafts to cash

3inus interest to 3aturity an-co33issions.

b. /ow cost

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 F$'A'C$'* ECH'$+)ES 0. Factorin2

=

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 F$'A'C$'* ECH'$+)ES 1. Forfaitin2

a. De

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 $#. *"#E!'ME' S")!CES "F

 E,P"! F$'A'C$'*

I). G!)#"NN$ S!U"C#S !F

#*P!"$ FINNCING NDC"#DI$ INSU"NC#

. #7port=I3port 5an6 of the U.S.=6nown as #7=I3 5an6

=

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*"#E!'ME' S")!CES "F E,P"! F$'A'C$'*

. #7=I3 5an6 Pro2ra3s+

a. Direct loans to e7portersb. Inter3e-iate loans toe7porters

c. /oan 2uarantees-. Preli3inary co33it3ents

e. Political an- co33ercial

insurance

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*"#E!'ME' S")!CES "FE,P"! F$'A'C$'*5. Private #7port Fun-in2 Corporation

8P#FC!:

. Finances lar2e sales fro3 private

sources

. &ay purchase loans of U.S. i3porters

0. #7I3 5an6 provi-es loan 2uarantees.

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*"#E!'ME' S")!CES "F E,P"! F$'A'C$'*

C. Forei2n Cre-it Insurance ssociation

8FCI:. !ers co33ercial an- political

ris6 insurance

. Ehen insure-, e7porter oftenable to obtain

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#. C")'E!!A(E 

).C!UN$#"$"D#. $hree Speci

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C")'E!!A(E 5. Ehen to Use Countertra-e

. Eith soft=currencyH-evelopin2

countries

. Ehen forei2n contractor3ust

perfor3.