INTERNATIONAL

FINANCIAL MANAGEMENT
CHAPTER 7: INTERNATIONAL TRADE FINANCE
GVHD: TRẦN ĐĂNG KHOA
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OUTLINE
01 DEFINITION

02 PROCESS OF PREPAYMENT

03 BENEFITS AND RISKS

DEFINITION
 DEFINITION

PREPAYMENT

 The buyer accepts the seller's offer price by

the order and transfers a partial or full
payment to the seller
 The payment occurs before the goods are
delivered to the seller.
 REASONS

First time buyer: The seller does not have

much information about new customers.

Exporters need a stable source of capital

PROCESS OF
PREPAYMENT

Bank transfer T/T

 o
BENEFITS
RISKS
BENEFITS - IMPORTER

 Much better price negotiable from the seller

 RISKS - IMPORTER
 Trustworthiness and capability of the seller.

 Are goods fully insured during shipping?

 Wrong product may be recognized

 If paying in advance, it means putting all the

money in one place, leading to a zero turnover
 BENEFITS EXPORTER

Using the buyer's money to produce, in the short run

solves his cash flow problems and therefore has no
upper limit on revenue

Gain an advantage in trading

 There was no risk because he was paid for the goods

RISKS - EXPORTER

The disadvantage of negotiating prices.

Exchange rate difference.