In a short essay, describe the four primary factors that ...

[ashley]

In a short essay, describe the four primary factors that determine the cost of export financing.
 
  What will be an ideal response?

Question 2

Coordination refers to ________.
 
  A) linking various value activities within an organization
  B) identifying the span of control within an organization
  C) portioning the performance of specific tasks
  D) assigning tasks to qualified managers

[gcook]

Answer to Question 1

a. Creditworthiness of the exporterFirms with little collateral, minimal international experience, or those that receive large export orders that exceed their manufacturing capacity, may encounter much difficulty in obtaining financing from banks and other lenders at reasonable interest rates or may not receive financing at all.
b. Creditworthiness of the importerAn export sales transaction often hinges on the ability of the buyer to obtain sufficient funds to purchase the goods. Some buyers, particularly those from developing economies or countries with currency controls, may be unable to secure financing through letters of credit.
c. Riskiness of the saleInternational sales are usually more risky than domestic ones. Banks are reluctant to loan funds for risky sales. Even when funds are provided, financing institutions tend to expect a higher return on loans for risky projects. Riskiness is a function of the value and marketability of the goods being sold, extent of uncertainty surrounding the sale, degree of political and economic stability in the buyer's country, and the likelihood that the loan will be repaid.
d. Timing of the saleIn international trade, the exporter usually wants to be paid as soon as possible, while the buyer prefers to delay payment, especially until it has received or resold the goods. In some industries, the length of time to complete a sale may be considerable. A common challenge arises when the firm receives an unusually large order from a foreign buyer. In this case, the exporter needs to draw on substantial working capital to initiate and conclude production of the order. This is particularly burdensome for resource-constrained SMEs.

Answer to Question 2

A