Assessed summative assignment
Answer both questions below.
Swaddling Clothes Ltd was started five years ago by your customers Rachel and William Ward. They design and sell maternity clothing through retailers in the UK, Netherlands and Belgium and through an online platform. This is all on open account terms. They have a thriving business with turnover last year of £20m and net profits of £1.5m. Goods are purchased in USD, but priced in domestic currency for each market.
Two years ago the company decided to expand its business to sell baby clothes and products which were made from organic cotton. They are sourcing their manufactured goods from Fairfabrics, Uttar Pradesh, India on CPT London terms with payment due 90 days from invoice date in USD.
Swaddling Clothes Ltd has been approached by a well-established clothing chain, Good for U (based on the US East coast), whose unique selling point is ethically-sourced goods. Good for U want to sell Swaddling Clothes Ltd’s baby clothes.
As you are the account manager, you request a meeting with Rachel and William to review their personal and business accounts, all of which have operated well within limits for the past 12 months. You have noticed some unusually large transactions going through their personal accounts. They are not using their business overdraft facility. Rachel and William raise a number of issues:
1. Rachel and William ask about a way of shipping directly to America from India that would provide a secure source of payment for Swaddling Clothes Ltd, on CIP, 120 day credit terms. They are concerned about the goods meeting US standards and want your advice on the kind of documentation that could offer adequate security and how this payment method would operate in practice.
2. Rachel and William currently use forward contracts to hedge their European sales and ask what currency management solutions you would recommend to deal with the USD proceeds.
3. There have been a number of payments from European buyers that have been delayed and a fee charged. They ask you about the significance of IBAN codes.
4. Another family member wants to invest in Swaddling Clothes Ltd and this is the source of the large transactions you have observed. The couple ask why you are interested in these transactions.
As the account manager:
produce a briefing document for Rachel and William Ward that identifies and assesses the issues facing Swaddling Clothes Ltd and their business partners; and
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produce a report for your manager that evaluates the solutions your bank can provide and its obligations to other parties.
(Total – 50 marks)
Word count: Maximum 4,000 words including quotations and in-text citations.
The following resources are available to assist you with your assignment preparation. They can all be found through your course website:
Guide to referencing; Note: It is important that you familiarise yourself with all elements of this guidance.
Guidance for how to approach your assignment – in the study skills area;
Submission information; and
Understanding your similarity report.
The following reading section is provided as a pointer to students in starting their research, which should be much broader than the guidance articles suggested. Although the examiners take every care in providing relevant articles and the links are checked before release of the assignment, we are not able to guarantee that a link will remain viable for the duration of the research phase of the assignment. The readings may be specific, for example, a journal article or a chapter of a book or more general, in terms of a whole book where you are required to determine key areas that link to your assignment and use this as a basis to broaden your own independent research.
Cowdell, P. and McGregor, P. (2013) Finance of international trade. Canterbury: ifs School of Finance.
especially Chapters 6, 11,14, 23 and 24.
The following references can be accessed via KnowledgeBank:
Bhogal, T. S. and Trivedi, A. K. (2008) International trade finance: a pragmatic approach. Palgrave Macmillan. EBSCO ebook collection [online].
Grath, A. (2008) Handbook of international trade and finance: The complete guide to risk management, international payments and currency management, bonds and guarantees, credit insurance and trade finance. Kogan Page. EBSCO ebook collection [online].
Teeling, W. (2008) ABL opportunities in an age of Asian export development. Secured Lender, 64, 1, p54-58, EBSCOhost: Business Source Corporate Plus [online].
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Ecocert (no date) Organic farming [online].
ifs KnowledgeBank, your e-library, is a collection of resources available to students and is accessible through www.myifslearning.com
You should use this e-library to find additional books, journal articles and other information to support your studies. To begin your search:
log in to https://kb.ifslearning.ac.uk with your ifs University College username and password;
select ‘Library Resources’ from the link on the right of the home page