Terms of Payment Quiz

What are terms of payment?

• Conditions or rules agreed upon between a buyer and a seller for goods or services provided

• The total amount of money paid for goods or services

• The date when goods are delivered to the buyer

• The method of transportation used for delivering goods

Why is it important for both buyer and seller to agree on terms of payment before a transaction?

• To ensure clarity and avoid disputes regarding payment for goods or services

• To increase the price of goods

• To reduce the quality of services

• To delay the delivery of goods

Which of the following is NOT listed as a term of payment in the provided material?

• Letter of Credit

• Cash in Advance

• Deferred Payment

• Open Account

If a seller wants to ensure payment is made at the time goods are delivered, which term of payment should they choose from the list?

• Letter of Credit

• Cash in Advance

• Cash on Delivery

• Open Account

What is a Letter of Credit in terms of payment?

• A commitment by a bank on behalf of a buyer that payment will be made to the exporter if conditions are met.

• A direct payment from buyer to seller without any bank involvement.

• A method where payment is made before goods are shipped.

• A type of loan given to exporters.

Why is a Letter of Credit considered one of the most secure methods of payment?

• Because it guarantees payment by the buyer regardless of conditions.

• Because it involves a commitment by a bank, ensuring payment to the exporter if conditions are met.

• Because it allows payment before goods are shipped.

• Because it is a cash transaction.

Why is the "Cash in Advance" method often unattractive to buyers?

• It offers discounts to buyers.

• It has cash flow implications and poses risk of not receiving goods after payment.

• It guarantees delivery of goods.

• It allows buyers to pay after receiving goods.

What is the main responsibility of the exporter’s bank in a Bill of collection/Sight Draft transaction?

• To collect payment by sending documents to the importer’s bank

• To manufacture goods for the exporter

• To negotiate the price with the importer

• To deliver goods directly to the importer

Why must an invoice be stamped by the bank in international trade?

• To be accepted by Customs

• To increase the value of goods

• To reduce shipping costs

• To avoid paying taxes

Funds are transferred from the importer to the exporter in a Bill of collection/Sight Draft process by:

• Funds are received from the importer and remitted to the exporter through their particular bank in exchange for documents.

• Funds are paid in cash at the port of entry.

• Funds are sent directly from the importer to the exporter without any bank involvement.

• Funds are transferred only after the goods are delivered and inspected.