A letter of credit (L/C) is a great way mitigate the risk for Logan and his distributor. A letter of credit is contract that is moderated by third party, usually a bank, where the foreign buyer´s bank (here the UK based distributor), issues a written statement that he gives the payment to his bank once the exporter (here Logan) fulfills all the necessary terms and conditions stated in the contract. This kind of arrangement is in terms of risk avoidance superior to payment options such as prepayment or consignment. The reason for this is, that in prepayment the risk is on the importer´s side, because he has to pay before the goods are shipped. Therefore, he cannot be sure, if the products shipped are the ones he ordered. Any differences in terms …show more content…
Due to the letter of credit, there is no need to make business solely based on trust. Now you have neutral parties involved. There lies as well the benefit for Logan. If he was not completely sure about his distributor´s cash flow liquidity, he can now plan more safely, because the bank will vouch for him. The most important aspect is to ensure that he fulfills every single requirement of the export document to 100%. For example:
• a description of the merchandise,
• identification marks on the merchandise,
• evidence of loading (receiving) ports,
• name of the exporter (shipper),
• name of the importer, status of freight charges (prepaid or collect), and date of shipment. The letter of credit requires very sensitive expiration dates as well. Consequently, Logan needs to be very disciplined with his cash flow liquidity and to always be aware of possible supply bottlenecks. If these requirements are not met, the importer does not have to pay Logan. Furthermore, the documentation
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A consignment agreement is usually a contract that works in the favor of the customer rather than for the vendor. The crucial problem of the consignment agreement is that Logan, not the customer, ahs ownership of all consigned inventory until it´s used and invoiced. Because of that, Logan is exposed to several risks regarding his business. First and foremost, the inventory costs are a huge burden for his business, because he is basically financing the distributer´s inventory cost, until a sell is done. The dangers of having a low inventory turnover ratio, a key performance indicator for the sports goods industry, is very high. Especially if you consider that the distributer, contrary to Logan, does not have the pressure of time and sitting on expensive inventory. Therefore, Logan´s costs are not being transferred to the distributor. Furthermore, it is very probable that Logan has used a loan to finance his inventory, since it´s common practice. The yearly interest rate Logan pays on those loans can be broken down to a daily rate of interest. This means that every day that the distributor doesn´t sell inventory, costs will arise for Logan. Both because of the holdings costs of inventory and the time value of the loan. A different but also important risk factor is, that possible damages or obsolescence of exported goods, will affect Logan´s business directly. In addition, he does not have a
First, when a creditor (ICE) extends credit to a debtor (Top Quality) and takes a security interest in some property of the debtor, Top Qualities inventory in this case, it is called a secured transaction. The inventory is then considered collateral for the financing that ICE provided for Top Quality, which was made clear in the financing statement that ICE filed. Any secured transactions where personal property is used as collateral is governed by Article 9 of the Uniform Commercial Code. The UCC was revised in 2001 to better adhere to modern times, and since this case took place from 2007 to 2009, we will be applying the revised edition. There are many sections of Article 9 that should be considered when examining this case. First, the filing of a financing statement, form UCC-1 in Article 9, should be confirmed as filed with the appropriate state office. Once this has been done, confirming the attachment of Top Quality’s inventory to ICE, we can then look to confirm that the initial sale to Chrisman was paid in full to Top Quality, which it was. If this were not the case, ICE would be entitled to the remaining sale proceeds. Now we move on to the requirements of a buyer in the ordinary course of business, per Article 9 of the UCC. According the textbook, “A buyer in the ordinary course of business who purchases goods from a merchant takes the goods free of any perfected or unperfected security interest in the merchant’s inventory, even if the buyer knows of the existence of the security interest” (Cheeseman). The textbook then continues to explain that this rule is necessary because buyers would be reluctant to purchase goods if the merchant creditors could recover the goods if the merchant defaulted on the loans owed to secured creditors. These statements come from the Revised Article 9, section 320(a). This is based on the idea that the buyer purchases in good faith, meaning that they are
Canadian Tire requires suppliers to electronically trade Forecasts, Purchase Orders, PO Changes, Ship Notices, Invoices and other documents related to transportation planning.
Grocery, Inc. uses many vendors from individuals to corporate giants. Each is engaged in moving products from the supplier to the retailor. The goal of the UCC is to provide a smooth transaction by promoting efficiency and standard procedures consumers and merchants may rely upon. Article 2 of the UCC helps fill in the gaps of missing details to help complete the sales contracts. These gaps may include a set delivery schedule, a standard order, specific types of products, guarantees for los...
- Once goods are identified, this is when UCC 2-401 is applied to the passage of tittle. In mostly all of UCC 2-401 the words “unless otherwise explicitly agree” appear, meaning that any explicit understanding between the buyer and the seller determines when tittle passes. If both parties do not come to an outright agreement than the tittle passes to the buyer at the time and the place the seller performs by delivering the goods.
This case comes in market in May 8, 2002. This case is based on mail fraud in Florida District court. Kevin Gray is a businessman.
The medical school at University of California Davis had a special affirmative action program where minority groups members or economically and/or educationally disadvantaged applicants were given a special admission process where 16 places of the class’s 100 were reserved for them. Bakke was examined under the general admissions process and denied both times he applied despite his scores being significantly higher than the special program’s admitted students in both tests and interviews. Bakke then took to court claiming that the medical school had denied him admission solely on the basis of race, violating the Equal Protection Clause of the Fourteenth Amendment and Title VI of the Civil Rights Act of 1964 which states that no person shall
How will you leverage the "organization" of CCU and the resources available to you to complete your degree?
Your credit score is one of your most important financial attributes. Fortunately for those who are unsatisfied with their credit rating, there are plenty of options available. Improving your score is an attainable goal that everyone should aim for, even those who are content with their credit rating.
Cliff A. Robb and Deanna L. Sharpe began their article “Effects of Personal Financial Knowledge on College Students’ Credit Card Behavior” with clarification regarding the study and also a succinct historical introduction to the ‘invasion’ of credit card companies on college campuses. Their study was based on the analysis of survey data composed from 6,520 students at a grand Midwestern University. This study revealed that financial knowledge was a compelling factor in the credit card decisions regarding college students.
Handy Andy, Inc., a maker of trash compactors, had a problem with how the distribution of their products was being done by distributors and retailers alike. The company made two models of trash compactors the standard and the deluxe, the latter having more capacity thus a higher price. The distribution of the trash compactor to the end user worked like this, a customer makes an order for a trash compactor through a licensed retailer, once the order is made the retailer buys from the distributor to fulfil that order and then delivers it to the customer. The initial agreement between Handy Andy Inc. and the distributors was based on delivering and installing all units in a period of 5 days after an order was made by a retailer, as compensation
...useless car to a junk yard to recover some loss, but the difference of the re-sale of the junk-car would be a significant loss. Though there were no adequate assurances to the contract, anticipatory repudiation is the only probable remedy for Jack. However, the outcome would weigh on the predominant factor test, which is met because Tom is covered as a merchant because he is operating in his usual daily business, and Jack is the buyer. The sole purpose of the contract was for Tom to sell Jack a car, and for Jack to buy a car from Tom. The UCC, though less stringent than the statute of frauds, does effectively regulate commercial transfers allowing the free market to operate without diminishing the integrity of trade.
· There is the possibility of the supplier integrating forwards in order to obtain higher prices and margins. This threat is especially high when
...el such as: purpose of the loan, maturity of the security pledged, the history of the client with the company and the unique characteristics that the bank’s customers might have.
Lean manufacturing and just-in-time processing are great business strategies that can severely stress a supply chain. The supply chain and supply chain management is a critical operations management element for any major company to succeed and remain competitive in the global market. The supply chain is one of many pieces critical to maximizing value to the end customer and requires close management to minimize external impacts. If a company is relying on another company to supply the raw materials needed for their production line, then impacts to this other company could impact their supply chain. Careful risk management is needed to optimize performance. As a company expands into global markets and global suppliers, this risk and management challenge is multiplied. The global nature of the company could impact important activities such as transportation, funds transfers, suppliers, distributors, accounting and information sharing. Disruption to the supply chain can significantly reduce revenue, cut market share, inflate costs and threaten production. A major disruption would have obvious impacts to profit, but could have additional intangible impacts to the credibility of the company if products are not delivered on time.
(1)According to the context, we can see that the purchase system is basically controlled only by the purchase manager Olga. Moreover, the purchase manager makes the purchase decision without any other monitoring. This may be a weakness of the system because the manager purchases inventories as long as she “thinks” it is time to make purchase order. As a result, the cursory purchase decision will lead to some superfluous loss. On top of that, the manager may take advantages from her position. For example, she may steal part of the inventory and sell them to another company to get money. This may be a possible explanation to the problem mentioned in the company overview that “inventory systems listing products as being on hand when they are not on the shelves at all”. So that it will be a wise decision if Sue Flanagan gives the administration authority to someone else out of the business. Besides, it is also required a security system which need the administrators to type in their user name and password for every single change of the inventory. With these done, the purchased order will be much safer and also hard to be falsified.