Financing

FINANCING Management
Topics covered:
      * Scope of International Financing
      * Bills of Exchange
      * Promissory Notes
      * Negotiability of Bills and Notes
Negotiation and Transfer of Bills
SCOPE OF INTERNATIONAL FINANCING
1)The Financing of Foreign Trade: Involves the underwriting, paying and collecting of money for the purchase of goods and services.
2)Trade Documents: are used to facilitate the financing of foreign trade.
      a. Bills of Lading: documents of title that represent the goods being traded (discussed in Lecture 10).
      b. Bills of Exchange and Promissory Notes: documents used for transferring money from the buyer to the seller.
      c. Letters of Credit: documents used to guarantee the seller's delivery of goods and the buyer's delivery of money.
BILLS OF EXCHANGE
Defined: A bill of exchange (or draft) is —
      a. A written, dated and signed instrument.
      b. Containing an unconditional order.
        1) From drawer.
        2) Directing drawee.
        3) To pay a payee.
      c. A definite sum of money.
      d. With payment to be made.
        4) On demand, or
        5) At a specified future date.
  1. Bills of Exchange are Negotiable Instruments
      e. “Negotiable” means: the drawer cannot refuse to pay a proper holder because —
        6) The underlying contract was improperly performed, or
        7) The instrument was improperly entered into.
      f. Importance: Bills of exchange are more readily salable and, therefore, useful financial tools.
PROMISSORY NOTES
  1. Defined: A promissory note (or simply a “note”) is
      a. A written promise.
      b. To pay a determinate sum of money.
      c. Made between two parties.
        1) Maker: The issuer of a promissory note.
        2) Payee: The person to whom the note is to be paid.
  2. Difference Between a Promissory Note and a Bill of Exchange: The maker of a note promises to personally pay the payee rather than... [continues]

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