Question

Which of the followings is right for a vietnamese exporter:

a. cash in advance provides the greatest risk with documentary collection d/a
b. the exporter is safe and this mode of payment could be applied when the two parties becomes partners for the first time hedging
c. instruments are obviously crucial if it is very likely that the receivable foreign currency will depreciate against vietnam dong.

Answer 1

Cash in advance provides the greatest risk, while documentary collection and hedging offer safety and protection for Vietnamese exporters.

Step-by-step explanation:

When considering the right mode of payment for a Vietnamese exporter, it is important to take into account the risks associated with each option.

A. Cash in advance provides the greatest risk because the exporter receives payment upfront but carries the risk of delivery and performance obligations.

B. Documentary collection offers some safety for the exporter, especially when the two parties are establishing a new partnership. It ensures that the exporter receives payment before releasing the goods.

C. Instruments, such as hedging, are crucial when there is a possibility of the foreign currency depreciating against the Vietnamese dong. This protects the exporter from potential losses due to currency fluctuations.

Overall, each mode of payment has its advantages and risks, and the choice should be based on the specific circumstances of the exporter.