The MNEs engage in foreign or international trade which involves the exchange of goods and services across national frontiers. Globalization has encouraged more firms to participate in trading at the international level. Financial resources are required to finance this exchange of good and services and the choice of finance depends on the firms and the environment the trade is taking place.
2. Literature Review
The choices available to the MNEs in financing international trade include cash in advance, letter of credit, documentary collection and open account terms (Shenkar and Luo, 2008, pp. 379). The decision on the selection of any of the above methods of payment must be informed by factors surrounding both the exporter and importer of the goods and services. The choice of selection will depend not only on the prevailing economic and environmental circumstances in the importer’s country but also on the negotiated method mutually agreed upon by both partners in the international trade.
Cash in advance involves the buyer paying in advance for the product...
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