An Exporter Can Share Exchange Rate Risk with Their Customers

question 31

Multiple Choice

An exporter can share exchange rate risk with their customers by

• A)invoicing in their customer's local currency.
• B)splitting the difference, and invoicing half of sales in local currency and half of sales in home currency.
• C)invoicing sales in a currency basket such as the SDR as the invoice currency.
• D)both b and c

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Definitions:

Factoring Accounts Receivable

The financial practice of selling accounts receivable to a third party at a discount to obtain immediate cash.

Installment Accounts Receivable

Receivables from sales where the customer makes regular payments over a period until the full purchase price is paid.

Dishonoring a Note

The failure to pay a promissory note when it comes due, resulting in a default.

Pledging Accounts Receivable

The practice of using accounts receivable as collateral for a loan.