Answer to Question 1
a. Barter is exercised even in domestic trade in straightforward, one-shot deals. It requires a single contract, has a short time span, and is less complicated than other forms, requiring little managerial commitment or additional resources.
b. Compensation deals involve payment both in goods and cash. For example, a company may sell its equipment to the government of Brazil, and receive half the payment in a hard currency and the other half in merchandise.
c. Counterpurchase involves two distinct contracts. In the first contract, the seller agrees to sell its product at a set price and receives cash payment from the buyer. However, this first deal is contingent on a second contract wherein the seller also agrees to purchase goods from the buyer for the total monetary amount or a set percentage of same. If the exchange is not of equal value, partial payment may be made in cash.
d. In a product buy-back agreement, the seller agrees to supply technology or equipment to construct a facility and receives payment in the form of goods produced by the facility. For example, the seller might design and construct a factory in the buyer's country to manufacture tractors. The seller is compensated by receiving finished tractors from the factory it built, which it then sells in world markets. In essence, the original transaction involves goods and services that produce other goods and services, which are then received in payment.
Answer to Question 2
b
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