Question

Outline and discuss two methods of payments in international trade and two methods of financing international trade for a selected Multi National Corporation in your jurisdiction.

Answer 1

The two most common method of payment in international trade are:

· Cash In advance: Cash in advance is a payment method where the payment has to be made prior to the delivery of the goods or services. This can be at the time when the order is being placed. This is most advantageous for the seller.

· Open account: In this method the payment becomes due after the goods or services has been delivered. Normally here there is a gap of few days after between the goods delivered and payment due. This is most advantageous for the buyer or the importer.

The two most common method of financing international trade is:

· Pre-payment: Pre-payment is generally a method where the customer has to make the payment at the time when he is placing the order. This is most beneficial for the exporter and also the cheapest source but for that the exporter should be a big brand and should have high quality products which have high demand.

· Export-Import banks: These banks are setup with the objective to enhance the export of the country and provide assistance in financing. They can also provide letter of credit which is a good way to assure the exporter and importer.