Tóm tắt bài đọc English IV-HVNH

Unit 1: Factoring

   Reading 1

·                   Free market is a place where there are many suppliers competing to supply one product or service.

·                   Trade credit is a credit offerred by one company when trading with another

·                   Consumer credit is a credit given by a shops, banks, and other financial institutions to consumers so that they can buy goods

   Reading 2

·                   Factoring is a way of raising money from unpaid invoice (Supplier’s point of view)

·                   Factoring is a business of buying the invoices of the suppliers at a discount ( Factor’s point of view)

·                   Factoring process:

1.      Supplier sells goods for their customers and receives unpaid invoices.

2.      Factor agrees to buy the invoices of the supplier at a discount.

3.      Supplier receives money (M₂) from the factor

4.      The factor makes money by getting the full value of the invoices ( M₁ ) from the customers on maturity date.

v               M₁ is bigger than M₂

v               M₁ is called face value or full value

v               M₁ – M₂ = discount = factor’s frofits

   Reading 3

·                  3 main forms of factoring:

Ø                Full factoring

Ø                Agency factoring

Ø                Confidential invoice discounting

·                  2 ways to buy unpaid invoice

Ø                Without recourse: Pay to suppliers without getting money back

Ø                With recourse: pay money to suppliers and can get money back if customers don’t pay it  

·                  Full factoring:

Ø               Sales ledger administration

v       Checking the creditworthiness and credit status of the customers of their customers

v       Sending out invoices

v       Collecting payment

v       Chasing slow payers

Ø               Credit management

v       The  factoring company uses its information about the creditworthiness and credit status of the companies which want to buy from its customer.

v       The factor decides to buy the unpaid invoices or not

-          With good risk customers: buy invoices without recourse

-         With poor risk customers: buy invoices with recourse

-         With bad risk customers: refuse to buy the invoices

v       The factor buys unpaid invoices from the suppliers at a discount

v       The suppliers receive money

Ø               Advance payment

v       The factor pays the customer, in advace, 80% of the value of the invoice as soon as the invoice is raised

v       This is equivalent to borrowing from the bank using one’s invoices as security and banks will charge 2 -4% over their base rate.

Ø               Regulation of cash flow

v       The factor agreed to discount invoices

v       The supplier receives unpaid invoices from their customers

v       The factor pays the value of the invoices ( M₁ ) on an agreed date, say 30 days after the issurance of the invoices.

v       At maturity date, the suppliers collects money from their customers

v       The suppliers gives money (M₂) back to the factor

-          M₂ is bigger than M₁

_-          Advantage: the customer knows in advance when the money is coming in and can use this money to pay wages, salaries or other debts which have to be paid at fixed times.

·                  Agency factoring

Ø               Provide for large companies which have their own computer system

Ø               Factors may provide advance payment and advice

·                  Confidential invoice discounting

Ø               Provide for large companies

Ø               Factors offer 80% of all or part of invoices selected by suppliers

Unit 2: Advising a business

             Reading 1

·                  Budgeting

Ø               Income

Ø               Costs

-          Variable costs: changed depending on the output (e.g. Raw materials, transport, energy…etc)

-         Fixed costs: not depend on the output (e.g. Upkeep machinery, wages and salaries, office services…etc)

→ Costs must be related to income

·                  Cash flow forecasting

Ø               Current expenses: costs which have to be paid  in a short time, included costs of materials, wages, salaries, overheads.

·                  Pricing

Ø               Cash discount: is a discount given for payment is cash ( for early payment)

Ø               Trade discount: is a reduction in price given to a customer in the same trade ( for bulk purchases)

              Reading 2

·                  Stock control

Ø               Stock consists of raw materials, work in progress and finished goods.

Ø               The amount of stock depends on: Process of product, quality of raw materials, and quantity of materials.

→ The rate of turnover at each stage should be calculated and related to expected sales.

·                  Management accounting

Ø               There’re at least 4 types of accounts: Account of costs, account of sales, account of credit and account of profitability

Ø               There should be a consolidated credit account for all trade debtors.

Ø               Basic account of sales and purchases should be kept up to date by an account clerk

·                  Costing

Ø               There are 2 types of costs: Real costs of production (including the costs of assets and costs of materials) and opportunities costs.

·                  Credit control

Ø               This is an aspect of management which will become more important in the future

Ø               Much of work in credit control depends on information about credit status or creditworthiness of existing and potential customers.

              Reading 3

·                  Short- term finance

Ø               Loan, overdraft or factoring (offered when enough credit information on the debtors is available)

·                  Medium – term finance

Ø                Leasing is a form of renting. At the end of a leasing agreement the lessor still owns the equipment, though it may be sold to the lessee for a small sum

Ø                Lease purchase is a form of renting and buying at the same time. At the end of a lease purchase, the lessee owns the equipment.

·                  Long – term finance

Ø               Provided by banks

Ø               Used for major expansion

Ø               Suitable for buying large capital assets

Ø               Gearing could be raise

Ø               Share flotation

1.     The bank could arrange for the company to sell equity shares to the public.

2.     In return of buying a share, the shareholder will have equity, or participate, in the profit of the company, according to the whole of the share capital.

Ø               Venture capital

1.     Merchant banks or other organizations could be interested in investing venture capital

2.     They invest in a company in return for part – control of the investment.

v              Different between Borrowing and Seeking new investment

Borrowing	Seeking new investment
Ø                Interest is paid Ø                Principal is paid on time → it’s easy to be declared bankrupt if no profit is made. Ø                “Tax shield” can be obtained → save costs Ø                More responsible for the money Ø                Be preferred by investors	Ø                Dividend is paid when profit are made only. Ø                Share capital doesn’t have to be paid. Ø                The ownership is dividend into small parts → difficult to make business decisions Ø                Less responsible using money Ø                Not be preferred by investors

Unit 3: International payment

             Reading 1

·                   A bill of exchange ( B/E) is an order sent by the drawer to the drawee stating that the drawee will pay unconditionally on demand or at a specified time the amount shown on the bill

·                   Tenor draft ( time bill) and Sight draft ( sight bill)

Sight draft	Tenor draft
·                   Paid on presentation ·                   Used in a Documents against Payment (D/ P) transaction. Presented to the importer with the shipping documents	·                   Paid on or within the number of day specified on the bill ·                   Used in a Documents against Acceptance ( D/ A) transaction

·                   The accepting bank is the bank which accepts the bill, honor the bill when it matures and take on the risk and working of collecting payment plus the commission from the importers

·                   The acceptance bill  is the bill whose value is guaranteed by the accepting bank

·                   Discount the tenor bill

Ø                Discounting means that the buyer pays the face value minus the discount

Ø                Discount is the interest on the bill for the remainder of its life. The longer the remainder of the bill’s life, the less interest to be paid.

Ø                The discount depends on:

v               The status of the accepting house. The more well known the accepting house, the lower the interest rate, the smaller the discount and the bigger the value of the bill on the market

v               The interest rate prevailing in the discount market at the time.

                Reading 2

·                   Process

1.      The exporter and the importer sign an export contract

2.      The exporter ship the goods ordered by the importer

3.      The importer sends payment either immediately or monthly, according to the agreement

·                  Banker’s Draft

Ø                Banker’s draft is a cheque drawn by a bank on itself

Ø                Process

1.                The payer brings money to the bank

2.                The payer receives Banker’s Draft (BD)

3.                After signing an export contract, the payer sends BD by post to the payee

4.                The payee represents the BD to the payer’s bank

5.                The bank gives the payee money

v               In reality, the payee represents the BD to the correspondent bank which has the correspondent relation with the bank of the payer and receives money from the correspondent bank.

Ø                Advantages

-          Little paperwork

-          Simple

-          Time – and money- saving

Ø                Disadvantages

-          To the importer: The exporter may not ship goods, or may not ship goods on time or may not ship the right goods

-          To the exporter: after receiving goods, the importer may not pay or is enable to pay or delay payment.

             Reading 3

·                  Process

1.      The exporter ships the goods to the port

2.      The exporter receive shipping documents (from the transporter)

3.      The exporter sends the shipping documents an B/E to his bank

4.      The bank (remitting bank) sends them to a bank in the exporter’s country known as collecting bank for collection

5.      The collecting bank present the collection order together with B/E to the importer

6.      The importer pays the bill immediately or finds a bank to accept the bill

7.      The collecting bank delivers the shipping documents to the importer to get goods

8.      The collecting bank sends money or the acceptance bill back to the remitting bank

9.      The remitting bank sends money or acceptance bill back to the exporter

10.  The importer brings the shipping documents to the port to receive goods

·                   If the banks has provided in advance, it should have a letter of hypothecation from the exporter which gives the bank the right to sell the goods if the importer defaults.

·                  Advantages

-          Quick, simple and cheap

-          The exporter have control over the goods until the draft is paid or accepted

·                  Disadvantages

-                    If the importer defaults, the exporter has the expense of selling the goods, storing them until later or bringing them back to their own country.

                Extra reading

·                   Types of L/C

-                    Revocable credit

-                    Irrevocable credit

-                    Confirm credit

-                    Unconfirm credit

·                  Revocable credit

Ø               The opener can instruct his bank to amend or cancel credit at any moment without notice to the beneficiary.

Ø               Usually unacceptable to the seller

Ø               Rarely in use in international trade unless the partners is a transaction are well known to each other

·                  Irrevocable credit

Ø               Most commonly in use in international trade

Ø               Cannot be amended or cancelled unless all parties concerned are agreeable.

·                  Confirmed credit

Ø                Process

1.      The exporter and the importer sign a contract

2.      The importer asks his bank to issue L/C

3.      The importer’s bank asks a bank in the exporter’s country about L/C and asks them to confirm L/C

4.      That bank advises the exporter about L/C

Ø                The importer’s bank is the issuing bank

Ø                The bank is the exporter’s country is advising bank, confirming bank and it can be exporter’s bank

Ø                Both the issuing bank and the confirming bank will be jointly responsible to the beneficiary

·                   Unconfirmed credit

Ø                Process

1.      The exporter and the importer sign a contract

2.      The importer asks his bank to issue L/C

3.      The importer’s bank asks a bank in the exporter’s country about L/C

4.      That bank advises the exporter about L/C

Ø                The importer’s bank is the issuing bank

Ø                The bank in the exporter’s country is advising bank and it can be exporter’s banks

                Reading 4

·                  Process

1.     An export contract between exporter and importer is made

2.     The importer applies for a L/C and sends the application form to his bank to open a L/C in favour of the exporter

3.     The issuing bank issues a L/C and sends it to the advising bank

4.     The advising bank sends the L/C to the exporter

5.     The exporter agrees to the L/C or asks for amendment

6.     The exporter ships goods to the port and receives shipping documents

7.     The exporter sends a B/E and shipping documents to his bank

8.     The advising bank sends the B/E and shipping documents to the issuing bank to collect payment

9.     The issuing bank pays money immediately if it is a sight draft or accepts payment if it is a tenor draft

10.                        The issuing bank collects money from the importer

·                  The bank of the exporter can be the advising bank

·                  The issuing bank issues the credit on behalf of the importer

·                  Advantages

-                   It’s the safe method of payment

-                   The buyers and sellers are protected

-                   Additional protection is provided for the importers by transit insurance

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