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WorksheetsInternational Trade Quiz
Total questions: 69
Worksheet time: 35mins
Which of the following is the most common method of buying and selling goods internationally?
exporting and importing
countertrade
a turnkey project
a merger or an acquisition
Which of the following steps of the strategy development process for exports involves performing market research and interpreting results obtained from the research?
identification of a potential market
match needs of the market to the company's abilities
initiation of meetings
commitment of resources
Which of the following steps of the strategy development process for exports involves establishing relationships with potential local distributors?
identification of a potential market
match market needs to the company's abilities
initiation of meetings
commitment of resources
Which of the following is the first step in developing a successful export strategy?
identification of a potential market
match market needs to the company's abilities
initiation of meetings
commitment of resources
Which of the following is true of distributors?
The use of distributors increases the exporter's control over the price buyers are charged.
They are compensated with a fixed salary plus commissions based on the value of their sales.
They are seldom required to take ownership of the merchandise when it enters their country.
They can stunt the growth of the exporter's market share by charging very high prices.
Which of the following occurs when a company sells its products to intermediaries who then resell to buyers in a target market?
indirect exporting
counterpurchase
an acquisition
a joint venture
Which of the following allows a country to earn back some of the currency it pays out for imports?
switch trading
counterpurchase
buyback
direct exporting
Which of the following is the oldest known form of countertrade?
counterpurchase
switch trading
offset
barter
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) ________.
counterpurchase
offset
joint venture
barter
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?
a counterpurchase
an offset
a buyback
a barter
An offset agreement differs from a counterpurchase agreement in that an offset agreement ________.
fails to specify the type of product that must be purchased
fails to specify the amount that will be spent on the purchase
fails to give a business greater freedom in fulfilling its end of a countertrade deal
fails to make a hard-currency purchase of any product from that nation in the future
________ is a countertrade whereby one company sells to another its obligation to make a purchase in a given country.
Barter
Joint venture
Franchising
Switch trading
Licensing
Buyback is defined as ________.
the export of industrial equipment in return for products produced by that equipment
an agreement that a company will offset a hard-currency sale to a nation by making a hard-currency purchase of an unspecified product from that nation in the future
the sale of goods or services to a country by a company that promises to make a future purchase of a specific product from that country
the exchange of goods or services for a certain amount of money
A form of countertrade that usually typifies long-term relationships between the companies involved is called ________.
offset
buyback
joint venture
barter
Which of the following is true about countertrade?
Countertrade is practiced by countries when there is a lack of hard currency.
Countertrade involves products whose prices on world markets tend to remain steady.
Countertrade usually involves industrial products and computer softwares.
Hedging risk in countertrade is prohibited.
Which of the following is a strategic factor that influences a company's international entry mode selection?
market consumption capacity
market receptivity
market size
market intensity
Which of the following statements is true of the strategic factors that influence a company's international entry mode selection?
Low tariffs and high quota limits encourage market entry by means of investment.
Companies that produce goods with high shipping costs prefer exporting.
Companies set up production units in a host market if the total cost of production is lower in the home market.
Markets that are likely to remain relatively small consider exporting as a viable option.
What is the most common method used for buying and selling goods internationally?
Exporting
Licensing
Franchising
Countertrade
Why do most large companies use exporting as a means of expanding total sales?
To avoid tariffs
When the domestic market has become saturated
To reduce shipping costs
To increase risk
How can companies achieve economies of scale?
By reducing production
By expanding into international markets
By increasing tariffs
By limiting exports
Do direct exporters always sell directly to end users?
Yes
No
Sometimes
Only in certain markets
What does indirect exporting typically rely on?
Online sales
Local sales representatives or distributors
Direct sales to end users
Government agencies
Does using a distributor increase an exporter's risk?
Yes
No
Only in certain countries
Only for new products
Why are agency relationships popular among exporters?
They are easy to terminate should difficulties arise.
They guarantee higher profits.
They reduce shipping costs.
They require less paperwork.
Countertrade provides a way for firms to trade either by using a small amount of hard currency or even none at all. Is this statement TRUE or FALSE?
TRUE
FALSE
Not enough information
Only for large companies
Is countertrade not an option for smaller companies because of the cash outlays involved?
TRUE
FALSE
Only for medium companies
Depends on the country
Switch trading is the export of industrial equipment in return for products produced by that equipment. Is this statement TRUE or FALSE?
TRUE
FALSE
Sometimes true
Only in certain industries
A confirmed letter of credit is guaranteed by both the exporter's bank in the country of export and the importer's bank in the country of import. Is this statement TRUE or FALSE?
TRUE
FALSE
Only by the exporter's bank
Only by the importer's bank
Letters of credit are popular among traders because:
banks assume most of the risks
they are free of charge
they require no documentation
they are only used domestically
The brand name or trademark of a company is normally the single most important item desired by a franchisee. Is this statement TRUE or FALSE?
TRUE
FALSE
Only in some industries
Only for international franchises
Selling products directly to buyers in a target market without using intermediary companies is known as:
Sale through export management companies
Sale through local distributors
Export through agents
Sale through export trading companies
Companies involved in direct exporting typically rely on ________.
Distributors
Agents
Export management companies
Export trading companies
A(n) ________ exports products on behalf of an indirect exporter.
Export management company
Subsidiary
Freight forwarder
Local distributor
Sales representative
Identify the method of export/import financing from the options below.
Offset
Buyback
Switch trading
Leasing
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?
documentary collection
letter of credit
advance payment
open account
Advance payment is commonly used for export/import financing when ________.
two parties are unfamiliar with each other
the buyer has obtained credit for the transaction
the transaction is for a relatively high amount
the buyer has good credit rating at banks
Export/import financing in which a bank acts as an intermediary without accepting financial risk is called ________.
documentary collection
counterpurchase
buyback
open account
Which of the following financing methods entails the greatest risk for importers?
documentary collection
advance payment
letter of credit
open account
Which of the following financing methods entails the greatest risk for exporters?
supersedeas bond
advance payment
letter of credit
open account
________ is a payment method commonly used when there is an ongoing relationship between the involved parties.
Advance payment
Documentary collection
Letter of credit
Open account
A document ordering the importer to pay the exporter a specified sum of money at a specified time is called a ________.
bill of lading
letter of credit
bill of exchange
open account
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?
sight draft
bill of lading
letter of credit
bill of exchange
A(n) ______ allows the bank to modify the terms of the letter only after obtaining the approval of both exporter and importer.
bill of lading
revolving letter of credit
bill of exchange
confirmed letter of credit
irrevocable 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?
revocable letter of credit
confirmed letter of credit
at sight letter of credit
usance letter of credit
A(n) ______ is guaranteed by both the exporter's bank in the country of export and the importer's bank in the country of import.
Confirmed letter of credit
Transferrable letter of credit
Revocable letter of credit
Irrevocable letter of credit
Letters of credit are popular among traders because most of the risks are assumed by ________.
distributors
importers
exporters
banks
Export/import financing in which an exporter ships merchandise and later bills the importer for its value is called ________.
advance payment
open account
a letter of credit
documentary collection
Advance payment is the least favorable method of payment collection for exporters. Is this statement TRUE or FALSE?
TRUE
FALSE
Advance payment made by an importer to an exporter normally takes the form of a sight draft. Is this statement TRUE or FALSE?
TRUE
FALSE
The open account method of export/import financing is used when the two parties are unfamiliar with each other. Is this statement TRUE or FALSE?
TRUE
FALSE
The biggest advantage of an export management company is:
Knowledge of the target market's cultural, political, legal, and economic conditions
Well-developed and extensive distribution channels and storage facilities
Well-rounded experience in countertrade-related activities
Financial understanding of investment projects and its manufacturing expertise
Selling goods or services that are paid for, in whole or part, with other goods or services is called ________.
Countertrade
Barter
Outsourcing
Franchising
Which of the following refers to the exchange of goods or services directly for other goods or services without the use of money?
Barter
Loan
Deposit
Interest
Which of the following is a contractual entry mode?
Turnkey projects
Joint ventures
Wholly owned subsidiaries
Greenfield investments
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?
Licensing
Franchising
Joint Venture
Exporting
What is the most important disadvantage of a strategic alliance?
It increases market share.
It reduces competition.
It can create a future local or even global competitor.
It guarantees long-term cooperation.
Do low tariffs and high quota limits encourage market entry by means of investment?
TRUE
FALSE
Sometimes
Only in certain industries
Which of the following statements is true of licensing?
Licensing restricts finances needed for international expansion.
Cross licensing grants a company the right to use a property but does not grant it sole access to a market.
A major advantage of licensing is that it is the least risky method of international expansion.
Licensing increases the likelihood that a licensor's product will appear on the black market.
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?
franchising
management contract
licensing
strategic alliance
When one company is hired to design, construct, and test a production facility for a client, the arrangement is called ________.
a turnkey project
a joint venture
a licensing agreement
a franchise
Which of the following is an investment entry mode?
licensing
franchising
joint venture
turnkey project
Which of the following is an advantage of wholly owned subsidiaries?
The parent company receives all profits generated by the subsidiary.
They are the least expensive investment entry modes.
They help in the sharing of the cost of an international investment project.
They are the least risky when compared to other investment entry modes.
A ________ is a separate company created and owned by two or more independent entities to achieve a common business objective.
Wholly owned subsidiary
Joint venture
Licensing agreement
Management contract
Which of the following types of joint ventures involve parties investing together in downstream business activities?
backward integration
forward integration
multistage
buyback
A ________ joint venture is formed when each partner requires the same component in its production process.
buyback
equity
marketing
technology
Which of the following is a disadvantage of strategic alliances?
They are the most expensive among the investment entry modes.
They increase the likelihood that one partner will try to take advantage of the other.
They create future competitors.
They fail to tap into their competitors' specific strengths.
Is franchising primarily used in the manufacturing industries?
TRUE
FALSE
The primary advantage of franchising is that franchisees have a great degree of organizational flexibility. Is this statement true or false?
TRUE
FALSE
Under a turnkey project, one company supplies another with managerial expertise for a specific period of time. Is this statement true or false?
TRUE
FALSE
