Ask Question, Ask an Expert


Ask Financial Management Expert


Superstores Ltd is engaged in the import and distribution of kitchen wares in Mauritius and also for the regional countries. Goods are imported on open account and collection basis. The goods that are re-exported to the region are under documentary credit.

Recently the main supplier (exporter) of kitchen wares contacted Superstores Ltd to inform them that trade has to be done only on documentary credit terms/ letters of credit.

This will impact on Superstores’ banking facility and has contacted you, as their banker, to advise them on the way forward. During the meeting, the following problems have been set and you are requested to give answers to clarify their doubts.

Towards the end of the meeting, the finance manager of Superstores informs you that they have already reached their limit in terms on banking facilities with their banks and they cannot request any further increase.

problem1. describe the following terms used in Trade Finance:

(i) Open account;

(ii) Documentary collections;

(iii) Incoterms;

(iv) Avalised bill of exchange;

(v) Charter Party bill of Lading.

problem2. How do you think the change from import under documentary collections to documentary credit will affect the company’s banking facilities?

problem3. Using separate diagrams/ flow charts show how Letter of Credit and documentary collection operate.

problem4. Taking into account the restraint in terms of banking facilities, how would you advise the company to operate so as to be able to open letters of credit in favour of their suppliers and at the same time not to request additional banking facilities?

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M96332

Have any Question? 

Related Questions in Financial Management

A price level adjusted mortgage plam is made with the

A price level adjusted mortgage (PLAM) is made with the following terms: Amount=95000, Initial interest rate=4%, Term=30 yrs, Points = 6%. Payments are to be adjusted at the beginning of each year. Assuming inflation is ...

Bond prices and yields assume that the financial management

Bond prices and yields Assume that the Financial Management Corporation's $1,000 par value bond has a 5.400% coupon, matures on May 15, 2023, has a current price quote of 112.721 and a yield to maturity (YTM) of 4.361%. ...

Company cpn and dealer swapfin are engaged in three

Company CPN and dealer SwapFin are engaged in three transactions with each other. From SwapFin's perspective, the market values are as follows: Explain the consequences to SwapFin if CPN defaults with and without closeou ...

Shelton inc has sales of 389000 costs of 177000

Shelton, Inc., has sales of $389,000, costs of $177,000, depreciation expense of $42,000, interest expense of $23,000, and a tax rate of 35 percent. (Do not round intermediate calculations.) What is the net income for th ...

Consider the following project a new product requires an

Consider the following project: A new product requires an initial investment of $3,000,000 and will be depreciated to an expected salvage of zero over 3 years. The price of the new product is expected to be $37,500, and ...

You purchased 1000 shares of the new fund at a price of 20

You purchased 1,000 shares of the New Fund at a price of $20 per share at the beginning of the year. You paid a front-end load of 4.25%. The securities in which the fund invests increase in value by 16.75% during the yea ...

Coupon ratesvolbeat corporation has bonds on the market

Coupon Rates Volbeat Corporation has bonds on the market with 14 years to maturity, a YTM of 10.1 percent, a par value of $1,000, and a current price of $952. The bonds make semiannual payments. What must the coupon rate ...

The following information pertains to questions 10 11 and

[The following information pertains to questions 10, 11, and 12]. A basic ARM is made for $200,000 at an initial interest rate of 6% for 30 years with an annual reset date. The borrower believes that the interest rate at ...

Iguana inc manufactures bamboo picture frames that sell for

Iguana, Inc., manufactures bamboo picture frames that sell for $35 each. Each frame requires 5 linear feet of bamboo, which costs $3.00 per foot. Each frame takes approximately 30 minutes to build, and the labor rate ave ...

1 what is the dupont analysis and how does it aid in

1. What is the DuPont analysis, and how does it aid in financial analysis? 2. How does operating income differ from net income? How do operating assets differ from total assets? What is the advantage in removing nonopera ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro