University Finance Case Study: International Trade and Finance

This case study analyzes the financial challenges faced by an India textile exporter involved in international trade. It explores the impact of exchange rate fluctuations and the constraints of delayed payments on exporters. The study evaluates various financing options, including bank finance, factoring, and forfeiting agreements, to meet both short-term and long-term capital needs. The conclusion emphasizes the importance of a strategy that mitigates foreign exchange risks while securing necessary capital. Recommendations are made for the company to opt for factoring agreements, specifically with a recourse option, to manage counterparty default risks and ensure financial stability. The case study also includes a bibliography referencing relevant literature on factoring and international trade finance.

Running head: INTERNATIONAL TRADE AND FINANCE
International Trade and Finance
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Conclusion:......................................................................................................................................2
Recommendation:............................................................................................................................2
Bibliography:...................................................................................................................................3

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Conclusion:
From the whole case study, it can be concluded that, every international trade and
transactions are subject to exchange rate fluctuation risks as it involves various foreign
currencies. The fund is also a constraint for the exporters as most of the exports are on a delayed
payment basis. However, financed can be raised in various ways for meeting the short term and
long-term needs of the company. Lastly, the Latest Fashion Company should form such a
strategy, which will meet their capital needs with lower degree foreign exchange fluctuation
risks.
Recommendation:
There are various options available to the company to raise fund for their working capital
and long term capital to finance the machinery purchase. As it can be noticed from the case
study, they can go for either the bank finance or factoring or forfeiting agreements to raise
capital. They need to consider the best alternative for such a capital requirements. The bank’s
offers and terms and conditions are favourable for the company, but they do not assume anny
counter party risks in the whole process. On the other hand, the Factoring agent is also offering
finance with favourable terms and conditions in addition they are assuming the counter party
default risks. They are also taking the responsibility of collecting the receivables from the
customers. After analysing both the options, it can be suggested that the company should go for
the factoring agreement to raise the finance for their short term and long-term requirements.
They should select the factoring with resource option, because it will assume the full buyer’s
default risk.

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Bibliography:
Eva, Koišová, and Ivanová Eva. "DEVELOPMENT AND TENDENCIES OF FACTORING
MARKET." Management (16487974) 26, no. 1 (2015).
Hoefele, A., Schmidt‐Eisenlohr, T. and Yu, Z., 2016. Payment choice in international trade:
Theory and evidence from cross‐country firm‐level data. Canadian Journal of Economics/Revue
canadienne d'économique, 49(1), pp.296-319.