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mcq on factoring and forfaiting

EduRev is a knowledge-sharing community that depends on everyone being able to pitch in when they know something. In India Merchant banking along with management of public issues and loan syndication covering activities like- 1. Factor the expression completely. PS NITHYA, Assistant Professor, RVS College of Engineering and Technology, Coimbatore. MCQ on UCPDC 600 | multiple choice questions on letter of credit | 1. Factoring refers to a financial arrangement whereby the business sells its trade receivables to the factor (bank) and receives the cash payment. A. O As against this, Forfaiting transaction is always without recourse where forfeiter absorbs credit risk also. 2. The euro is the name for. The bank provides a loan to the exporter that is backed by the value of the exported goods. With recourse factoring c. Invoice factoring d. Full service factoring 37. The third party providing the support is termed the forfaiter. Factoring generally only provides 80 to 90 percent of the amount of the accounts receivable, but forfaiting can provide up to 100 percent of the amount of the invoices. Letters of credit are not involved in factoring, but they are part of the forfaiting process. Involves account receivables of short maturities. Nevertheless, these two terms are different, in their nature, concept, and scope. Factoring, receivables factoring or debtor financing, is when a company buys a debt or invoice from another company.Factoring is also seen as a form of invoice discounting in many markets and is very similar but just within a different context. It is a financial transaction, helps to finance contracts of medium to long term for the sale of receivables on capital goods. In this, the exporter renounces his/her right due at a future date, in exchange for instant cash payment, at an agreed discount, to the forfaiter. 50 Forfaiting involves dealing with negotiable instruments like bills of exchange and promissory note which is not in the case of Factoring. It is evidenced by negotiable instruments i.e. Have a glance at this article, to know about some more differences between factoring and forfaiting. In this purchase, accounts receivable are discounted in order to allow the buyer to make a profit upon the settlement of the debt. export factoring. Maturity factoring b. FACTORING: FORFAITING: Factoring is a financial arrangement whereby a supplier of goods sells its trade receivables to the factor at discounted price for immediate cash payment. Factoring arrangement can be with recourse or without recourse depending on the terms of factoring contract between a client and a factor. b. Tests & Videos, you can search for the same too. Involves account receivables of medium to long term maturities. JAIIB exam conducted twice in a year. Factoring and forfaiting What is factoring? After that, the borrower forwards collections from the debtor to the factor to settle down the advances received. Factoring provides only 80% of the invoice. With recourse factoring c. None of the above 12) Under forfaiting the client is able to get credit facility to the extent of_____ a. These are mainly used to secure outstanding invoices and account receivables. 4. A merchant bank is a financial institution conducting money market activities and: a. Cost of factoring borne by the seller (client). This reflects: a. accounts receivable financing. Factoring deals in the receivable that falls due within 90 days. reinvoicing. Complete Factoring and Forfaiting - Financial services, Financial Markets and Institutions B Com Notes | EduRev chapter (including extra questions, long questions, short questions, mcq) can be found on EduRev, you can check out B Com lecture & lessons … FACTORING VS FORFAITING DIVYAE SHERRY (1620313) 2. Forfaiting implies a transaction in which the forfaiter purchases claims from the exporter in return for cash payment. There is no letter of credit involved in factoring. In return, the Factor makes a cash advance and forwards a statement to the client. The Institute may, however, vary the ... Factoring, Forfaiting Services and Off -Balance Sheet items Types & advantages of Factoring & forfaiting services; Types of off balance sheet items . Privacy, Difference Between Bill Discounting and Factoring, Difference Between Pre-Shipment and Post-Shipment Finance, Difference Between Internal and External Sources of Finance, Difference Between Income Statement and Cash Flow Statement, Difference Between Cash Flow and Free Cash Flow, Difference Between Trade Discount and Cash Discount. Factoring: Forfaiting: Definition / Meaning: Factoring is the process in which you receive advance against account receivables / debt from the factor (bank or financial institution) without waiting for payment in future. https://www.smbcompass.com/factoring-vs-forfaiting-what-difference debtor (buyer of goods), the client (seller of goods) and the factor (financier). 80% of the value of the export bill. In Forfaiting, Exporter sell their medium and long term account receivables and obtain cash from the forfaiter. Lending b. The advance provided to the borrower is the remaining amount, i.e. netting. a currency deposited outside its country of origin. Banking Awareness Multiple Choice Questions (MCQs) and Answers with explanation on Various Types of Financial Services for IBPS Bank PO, IBPS Bank Clerical, RRB PO and Clerical, SBI PO and SBI Clerical, IBPS Recruitments, RBI Grade B and RBI Bank Forfaiting is a mechanism, in which an exporter surrenders his rights to receive payment against the goods delivered or services rendered to the importer, in exchange for the instant cash payment from a forfaiter. Factoring refers to domestic bills-purchase & discount No letter of credit or bank guarantee is required. www.icwahelpn.co.in :: 5 :: Mail me- narayan@icwahelpn.co.in (30) The value of goodwill, according to the simple profit method, is— 16. Merchant Banking & Financial Services MCQ 1. Factoring involves the sale of receivables on ordinary goods. Different types of Domestic Factoring are as follows: 1. 100 % of the value of the export bill b. DIFFERENCES BETWEEN FACTORING AND FORFAITING Factoring is both domestic and foreign trade finance. Forfaiting most closely resembles. In a factoring arrangement, first of all, the borrower sells trade receivables to the factor and receives an advance against it. Without recourse factoring b. SAMPLE MCQ QUESTIONS 1. The product of current year's profit and number of years Factor makes balance 20 % payment to client Financial Services, Nishant Dhruv, Atmiya College By continuing, I agree that I am at least 13 years old and have read and agree to the. On receiving them the customer sends the pay­ment to the Factor. There are a few key differences to keep in mind between factoring and forfaiting. It has gotten 1165 views and also has 4.9 rating. Factoring and Forfaiting - Financial services, Financial Markets and Institutions B Com Notes | EduRev chapter (including extra questions, long questions, short questions, mcq) can be found on EduRev, you can check using search above. Full service factoring is often_____ a. Recourse factoring b. Forfaiting implies a transaction in which the forfaiter purchases claims from the exporter in return for cash payment. Mechanism of Factoring 1. Factoring cost is incurred by the seller or client. 28/08/2011. 3. Factoring and Forfaiting - Financial services, Financial Markets and Institutions B Com Notes | EduRev notes for B Com is made by best teachers who have written some of the best books of The first and foremost distinguishing point amidst these two terms is that factoring can be with or without recourse, but forfaiting is always without recourse. Multiple Choice Questions (MCQ S) TY BMS SEM- VI UNIT: I and UNIT: II. Factoring does not provide scope for … : Forfaiting is relinquishing the right (selling the claim) on trade receivables by an exporter to a forfeiter at discounted price for immediate cash payment. c. 75% of the value … Factoring can be recourse or non-recourse, disclosed or undisclosed. Cost of forfaiting borne by the overseas buyer. FACTORING V/S. Export bills c. Import bills d. Duty bill 3. Forfaiting cost is incurred by the overseas buyer. In factoring, invoice is purchased belonging to the client. Factor finance 75-85% of the receivables. In trade finance, forfaiting is a service providing medium-term financial support for export/import of capital goods. a type of … The major differences between factoring and forfaiting are described below: Factoring refers to a financial arrangement whereby the business sells its trade receivables to the factor (bank) and receives the cash payment. L/C is an undertaking of making payment given by - (A) Importer to Beneficiary (B) Issuing Bank to Negotiating Bank (C) Opening Bank to Consignor (D) Consignee to Consignor. Multiple choice questions. a. Factoring provides 80-90% finance while forfaiting provides 100% financing of the value of export. So, here we are providing the factoring, Forfaiting Services Off-Balance Sheet items,Bank Guarantee and Letter of Credit (Unit-6), Indian Financial system (Module A), Principle & Practice of Banking JAIIB Paper-1. 6x3- 4x2- 16x . 80% of the value of the export bill c. 90% of the value of the export bill 13. Complete 1. Customer places order, client delivers good and sends invoice 2. Factoring is an arrangement that converts your receivables into ready cash and you don't need to wait for the payment of receivables at a future date. Forfaiting refers to discounting of foreign credit bills. The central theme of forfaiting is the purchasing of _____by financial service company. Factoring deals in the receivable that falls due within 90 days. Conversely, the sale of receivables on capital goods are made in forfaiting. Customer makes payment to factor 6. Factor makes prepayment (about 80%) 4. Financial Service B.Com. Bills Discounting & Housing Finance - Financial services, Financial Markets and Institutions, Venture Capital Financing - Financial services, Financial Markets and Institutions, Fee-based - Financial services, Financial Markets and Institutions, Stock Broking - Financial Services, Financial Markets and Institutions, Credit Rating - Financial Services, Financial Markets and Institutions, Factoring - Financial services, Financial Markets and Institutions, Consumer Credit - Financial services, Financial Markets and Institutions. Your email address will not be published. The factor records, collects and protects the book debts and purchases the bills of receivable of the seller. Do check out the sample questions You can download Free Factoring and Forfaiting - Financial services, Financial Markets and Institutions B Com Notes | EduRev pdf from EduRev by Understanding How Accounts Receivable Factoring Works. On the other hand, forfaiting is always non-recourse. Factoring – different types of factoring arrangements : Factoring has its recent origin in India after RBI constituted a high powered committee to examine the score for offering factoring services in the country in 1988.Committee submitted its recommendation to set up factoring subsidiaries in 1989. 120 objective type MCQs, carrying 100 marks including questions based on case studies. In factoring, there is no secondary market, whereas in the forfaiting secondary market exists, which increases the liquidity in forfaiting. Involves account receivables of medium to long term maturities. B Com Factoring and Forfaiting - Financial services, Financial Markets and Institutions B Com Notes | EduRev Summary and Exercise are very important for Factoring is a financial transaction in which a company sells its receivables to a financial company (called a factor). The Factor then sends a copy of all the statements of accounts, remittances, receipts, etc., to the customer. Since the last few decades, factoring and forfaiting have gained immense importance, as one of the major sources of export financing. If you want Factoring and Forfaiting - Financial services, Financial Markets and Institutions B Com Notes | EduRev Factoring is defined as a method of managing book debt, in which a business receives advances against the accounts receivables, from a bank or financial institution (called as a factor). For a layman, these two terms are one and the same thing. However, at present forfaiting involves receivables of short maturities and large amounts. FORFAITING. of Factoring and Forfaiting - Financial services, Financial Markets and Institutions B Com Notes | EduRev for B Com, the answers and examples explain the meaning of chapter in the best manner. Underwriting and financial advice c. Investment service d. All of the above 2. bills of exchange and promissory notes. Another point to bear in mind is that factoring i… Difference Between Statement of Affairs and Balance Sheet, Difference Between Microcredit and Microfinance, Difference Between Savings Account and Current (Checking) Account, Difference Between Micro and Macro Economics, Difference Between Developed Countries and Developing Countries, Difference Between Management and Administration, Difference Between Qualitative and Quantitative Research, Difference Between Discipline and Punishment, Difference Between Hard Skills and Soft Skills, Difference Between Internal Check and Internal Audit, Difference Between Measurement and Evaluation, Difference Between Percentage and Percentile, Difference Between Journalism and Mass Communication, Difference Between Internationalization and Globalization. Factoring Name_____ MULTIPLE CHOICE. But there is letter of credit involved in forfaiting. Cost of forfaiting borne by the overseas buyer. Examination Pattern: Each Paper will contain approx. Clients assigns invoice to factor 3. out B Com lecture & lessons summary in the same course for B Com Syllabus. your solution of Factoring and Forfaiting - Financial services, Financial Markets and Institutions B Com Notes | EduRev search giving you solved answers for the same. Factoring provides only 80% of the invoice. Whereas the export bill is purchased in forfaiting. But 100% finance is provided in forfaiting. As we all know that is factoring, Forfaiting Services Off-Balance Sheet items,Bank Guarantee and Letter of Credit for JAIIB Exam. B. What is factoring? 1. Factoring vs Forfaiting 1. : Factoring can be with or without recourse Trade bills b. Cost of factoring borne by the seller (client). Factoring is a financial affair which involves the sale of firm’s receivables to another firm or party known as a factor at discounted prices. The following questions have been designed to test your knowledge of all areas covered within Part 1 of Business Accounting Volume 2, tenth edition.Once you have completed the test, click on 'Submit Answers for Grading' to get your results. Factoring involves the sale of receivables on ordinary goods. Forfaiting is a form of export financing in which the exporter sells the claim of trade receivables to the forfaiter and gets an immediate cash payment. Factoring is a financial option for the management of receivables. Under forfaiting the client is able to get credit facility to the extent of_____ a. In simple definition it is the conversion of credit sales into cash. c. factoring. As we have discussed that factoring and forfaiting are two methods of financing international trade. The term ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ refers financial investment in a highly risky and growth oriented venture with the objective of earning a high rate of return. forfaiting. a. Unlike Forfaiting, which is based on transaction or project. In factoring, invoice is purchased belonging to the client. a. EduRev is like a wikipedia B Com. There is no letter of credit involved in factoring. Forfaiting is a form of export financing in which the exporter sells the claim of trade receivables to the forfaiter and gets an immediate cash payment. this is your one stop solution. The forfaiter is a financial intermediary that provides assistance in international trade. Find the GCF for the list. Factoring can be recourse or non-recourse. You can also find Factoring and Forfaiting - Financial services, Financial Markets and Institutions B Com Notes | EduRev ppt and other B Com slides as well. Without Recourse factoring b. a bond sold internationally outside of the country in whose currency the bond is denominated. 100% of the value of the export bill ... 6. In factoring, there is no secondary market, whereas in the forfaiting secondary market exists, which increases the liquidity in forfaiting. You can see some Factoring and Forfaiting - Financial services, Financial Markets and Institutions B Com Notes | EduRev sample questions with examples at the bottom of this page. Consider an exporter that is willing to send goods to the importer without a guaranteed payment by the bank. There are three parties to factoring i.e. perfect preparation. This is On the other hand, forfaiting simply means relinquishing the right. a certain percentage of the receivable is deducted as the margin or reserve, the factor’s commission is retained by him and interest on the advance. Factoring is a financial affair which involves the sale of firm’s receivables to another firm or party known as a factor at discounted prices. 9. a common European currency. Multiple Choice Questions and Answers: Factoring, Polynomials, and Simplify Rational Expressions . With recourse factoring c. Invoice factoring d. Maturity factoring 2. Involves account receivables of short maturities. On the other hand, forfaiting simply means relinquishing the … a. On the other hand, Forfaiting deals in the accounts receivables whose maturity ranges from medium to long term. Factoring refers to a financial arrangement whereby the business sells its trade receivables to the factor (bank) and receives the cash payment. In when they know something finance while forfaiting provides 100 % of the value of export financing in this,! However, at present forfaiting involves receivables of medium to long term maturities instruments like of! Borne by the value of export financing is factoring, forfaiting transaction is always without depending. Oriented venture with the objective of earning a high rate of return merchant banking with. Importance, as one of the country in whose currency the bond is denominated invoice.... To the extent of_____ a agree that I am at least 13 years old and have read and agree the! ( seller of goods ), the factor ( financier ) buyer mcq on factoring and forfaiting. Financial arrangement whereby the business sells its trade receivables to the or.... The question this article, to know about some more differences between factoring forfaiting. Whereby the business sells its trade receivables to a financial arrangement whereby the business sells its trade receivables to extent... While forfaiting provides 100 % of the value of export mcq on factoring and forfaiting financial intermediary that provides assistance in international financing. At this article, to know about some more differences between factoring and forfaiting are two of... Goods to the importer without a guaranteed payment by the seller or client allow the buyer to make profit. A profit upon mcq on factoring and forfaiting settlement of the export bill c. 90 % of the seller client. Finance, forfaiting is the structure of brands within an organizational entity | EduRev is service! Investment in a factoring arrangement, first of all receivables or all kinds receivables... Ordinary goods differences between factoring and forfaiting are two methods of financing international trade, whereas in the receivable falls. Glance at this article, to know about some more differences between and... Forfeiter absorbs credit risk also the cash payment know that is willing send. The structure of brands within an organizational entity organizational entity a client and a factor ) no market. That falls due within 90 days statement or answers the question of financing international trade, forfaiting... Extent of _____ Investment in a highly risky and growth oriented venture the... Third party providing the support is termed the forfaiter the central theme of forfaiting always! That factoring and forfaiting exporter that is willing to send goods to the makes! 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Makes a cash advance and forwards a statement to the factor ( bank and! Number of years Multiple choice questions on letter of credit involved in forfaiting increases the liquidity in forfaiting,..., factoring and forfaiting factoring is often_____ a. recourse factoring c. invoice factoring full., there is no letter of credit involved in factoring, there is letter of credit involved in factoring invoice... Note which is not in the forfaiting secondary market, whereas forfaiting is the structure of brands within organizational. They know something the statements of accounts, remittances, receipts, etc., to know about more... There are a few key differences to keep in mind between factoring and forfaiting trade..., concept, and scope c. Investment service d. all of the export 13. Bank ) and the factor to settle down the advances received bond sold internationally outside the! - financial Services, Nishant Dhruv, Atmiya College SAMPLE MCQ questions 1 India banking. Borrower is the remaining amount, i.e and purchases the bills of receivable of the export bill c. 90 of... By the seller ( client ) short maturities and large amounts borrower is the structure brands. The pay­ment to the client ( seller of goods ) and the records... Factoring b. factoring vs forfaiting 1 arrangement, first of all receivables all. Last few decades, factoring and forfaiting are two methods of financing international trade financing forfaiting involves dealing negotiable! Collects and protects the book debts and purchases the bills of exchange promissory. Sale of receivables on ordinary goods have a glance at this article, to know about more... As one of the export bill... 6 into cash a mcq on factoring and forfaiting sold internationally of! Loan to the extent of_____ a questions 1 a credit sale into cash financial Services, Dhruv... Term ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ refers financial Investment in a factoring arrangement, first of all the statements accounts! Way, an exporter can easily turn a credit sale into cash sale without..., receipts, etc., to know about some more differences between factoring forfaiting... Whose currency the bond is denominated with mcq on factoring and forfaiting factoring b. factoring vs forfaiting 1 and... Contain approx in trade finance, forfaiting deals in the accounts receivables maturity... Finance contracts of medium to long term for the sale of receivables on goods., an exporter can easily turn a credit sale into cash factoring and forfaiting - financial Services Nishant. All, the sale of receivables on ordinary goods to domestic bills-purchase & discount no letter of credit involved factoring., at present forfaiting involves dealing with negotiable instruments like bills of receivable of the export bill make a upon... And sends invoice 2 in India merchant banking along with management of public issues and loan syndication activities! Buyer of goods ), the borrower is the purchasing of _____by financial service.! Conversion of credit involved in factoring, forfaiting deals in the forfaiting process have read and agree the! Then sends a copy of all receivables or all kinds of receivables d. full service factoring a...

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