CITF EXAM
Supply Chain Finance (SCF)
techniques, categorized into:
1️⃣ Receivables Purchase-Based (Factoring,
Invoice Discounting, Forfaiting)
2️⃣ Loan/Advance-Based (Loan/Advance Against
Receivables, Inventory, Confirmed Purchase Orders, Payables Finance)
3️⃣ Enabling Framework-Based (Dynamic
Discounting, Payment Terms Extensions, Digital SCF Platforms)
📌 SECTION 1: Receivables Purchase-Based
Techniques
Q1: What is the primary difference between invoice discounting and
factoring?
A) Factoring involves selling receivables, while invoice discounting
keeps them on the supplier’s balance sheet.
B) Invoice discounting requires collateral, while factoring does not.
C) Factoring is always non-recourse, while invoice discounting is always
recourse-based.
D) Invoice discounting is only used for domestic trade, while factoring is used
internationally.
(Answer: A – Factoring involves selling receivables, while invoice
discounting keeps them on the supplier’s balance sheet.)
Q2: Which receivables purchase technique is best for an exporter who
wants to receive immediate payment for a large, long-term contract with a
foreign buyer?
A) Invoice Discounting
B) Factoring
C) Forfaiting
D) Pre-Shipment Finance
(Answer: C – Forfaiting)
Q3: In factoring, who assumes the credit risk in a non-recourse
agreement?
A) The supplier
B) The buyer
C) The factoring company (financial institution)
D) The supplier’s bank
(Answer: C – The factoring company (financial institution))
Q4: Which of the following is NOT a characteristic of forfaiting?
A) It is used for medium- to long-term receivables.
B) It provides financing without recourse to the exporter.
C) It is primarily used for domestic short-term trade transactions.
D) It transfers the risk of non-payment to the forfaiter.
(Answer: C – It is primarily used for domestic short-term trade
transactions.)
📌 SECTION 2: Loan/Advance-Based Techniques
Q5: What type of SCF technique allows a company to receive funds
before goods are shipped, using a confirmed purchase order as collateral?
A) Loan Against Receivables
B) Loan Against Inventory
C) Loan Against Confirmed Purchase Order
D) Payables Finance
(Answer: C – Loan Against Confirmed Purchase Order)
Q6: Which of the following SCF techniques is most useful for
companies with large stockpiles of unsold goods?
A) Invoice Factoring
B) Payables Finance
C) Loan Against Inventory
D) Dynamic Discounting
(Answer: C – Loan Against Inventory)
Q7: In Payables Finance (Reverse Factoring), who initiates the
financing process?
A) The supplier
B) The buyer
C) The financial institution
D) The logistics provider
(Answer: B – The buyer)
Q8: A supplier delivers goods to a buyer but needs funds before the
payment due date. The buyer has a strong credit rating and agrees to an SCF
program where the supplier can receive early payment from a financial
institution at a lower cost. What is this called?
A) Invoice Discounting
B) Pre-Shipment Finance
C) Payables Finance
D) Trade Credit Insurance
(Answer: C – Payables Finance)
Q9: Which of the following SCF techniques is MOST suitable for a
business that has strong receivables but lacks sufficient cash flow to meet
short-term obligations?
A) Loan Against Receivables
B) Dynamic Discounting
C) Pre-Shipment Finance
D) Forfaiting
(Answer: A – Loan Against Receivables)
📌 SECTION 3: Enabling Framework-Based
Techniques
Q10: What is the primary purpose of Dynamic Discounting?
A) Allow suppliers to receive early payment in exchange for a discount
B) Extend payment terms without financial penalties
C) Secure financing for large capital investments
D) Reduce dependence on financial institutions
(Answer: A – Allow suppliers to receive early payment in exchange for
a discount)
Q11: Which SCF technique helps suppliers receive early payment
directly from the buyer, without using a bank or third-party financial
institution?
A) Payables Finance
B) Dynamic Discounting
C) Invoice Factoring
D) Loan Against Inventory
(Answer: B – Dynamic Discounting)
Q12: Which of the following is NOT a benefit of an SCF digital
platform?
A) Improved visibility and transparency in supply chain transactions
B) Reduction in the need for financial intermediaries
C) Elimination of payment risk
D) Faster processing of invoices and payments
(Answer: C – Elimination of payment risk)
Q13: A small supplier wants to offer longer payment terms to a large
buyer but is concerned about cash flow. Which SCF solution can the supplier use
to sell its invoices to a bank at a discount and receive early payment?
A) Factoring
B) Dynamic Discounting
C) Loan Against Inventory
D) Open Account
(Answer: A – Factoring)
📌 SECTION 4: Case-Based MCQs
📌 Scenario 1: Invoice Discounting vs.
Factoring
A company sells goods to multiple buyers on credit terms and
needs funds to meet daily operational expenses. However, it prefers to retain
control over collecting payments from customers while using its invoices as
collateral for a loan.
Q14: Which SCF technique is most suitable for this company?
A) Invoice Discounting
B) Factoring
C) Reverse Factoring
D) Forfaiting
(Answer: A – Invoice Discounting)
📌 Scenario 2: Reverse Factoring
A global electronics manufacturer sources components from
multiple suppliers. To support suppliers' cash flow, the company collaborates
with a financial institution to set up an SCF program that allows suppliers
to receive early payment on approved invoices at lower financing costs.
Q15: What SCF technique is being used?
A) Loan Against Receivables
B) Reverse Factoring (Payables Finance)
C) Dynamic Discounting
D) Pre-Shipment Finance
(Answer: B – Reverse Factoring (Payables Finance))
📌 Scenario 3: Forfaiting in International
Trade
An exporter ships heavy machinery to a foreign government
project and is offered payment in installments over five years. To
receive immediate payment and transfer the risk of non-payment to a
financial institution, the exporter sells the receivable to a forfaiter.
Q16: Which SCF technique is being used?
A) Factoring
B) Forfaiting
C) Invoice Discounting
D) Payables Finance
(Answer: B – Forfaiting)
Here’s an expanded set of multiple-choice questions (MCQs)
that dive deeper into Supply Chain Finance (SCF) techniques and cover core
concepts for CITF exam preparation. These questions address a wide range of SCF
topics, ensuring thorough understanding and coverage.
📌 SECTION 1: Receivables Purchase-Based Techniques
Q1: In a non-recourse factoring agreement, who assumes the
credit risk if the buyer defaults on payment?
A) The supplier
B) The factoring company
C) The financial institution providing the loan
D) The buyer
(Answer: B – The factoring company)
Q2: Which of the following involves the outright sale of
receivables to a financial institution at a discount, without transferring the
collection rights to the seller?
A) Factoring
B) Forfaiting
C) Invoice Discounting
D) Reverse Factoring
(Answer: C – Invoice Discounting)
Q3: A company needs immediate payment for a long-term export
contract and decides to sell the receivable to a financial institution without
recourse. This is an example of:
A) Invoice Discounting
B) Factoring
C) Forfaiting
D) Payables Finance
(Answer: C – Forfaiting)
Q4: What is the main advantage of factoring for suppliers?
A) Lower cost of financing
B) Offloading the credit risk of the buyer
C) Retaining control over receivables
D) Guarantee of receiving 100% of the invoice value
(Answer: B – Offloading the credit risk of the buyer)
📌 SECTION 2: Loan/Advance-Based Techniques
Q5: In Pre-Shipment Finance, the financial institution
provides a loan to the exporter based on:
A) A confirmed order and delivery details
B) The quality of the product being shipped
C) The exporter’s financial statements
D) The buyer’s ability to pay
(Answer: A – A confirmed order and delivery details)
Q6: Post-Shipment Finance is typically provided based on:
A) Receivables after shipment
B) The buyer’s financial standing
C) The supplier’s creditworthiness
D) The buyer’s acceptance of goods
(Answer: A – Receivables after shipment)
Q7: Which technique allows buyers to extend payment terms
while enabling suppliers to receive early payment at a lower cost through the
involvement of a financial institution?
A) Pre-Shipment Finance
B) Reverse Factoring (Payables Finance)
C) Forfaiting
D) Loan Against Inventory
(Answer: B – Reverse Factoring (Payables Finance))
Q8: A company offers short-term financing to suppliers by
using inventory as collateral. What SCF technique is being used?
A) Invoice Discounting
B) Loan Against Inventory
C) Factoring
D) Payables Finance
(Answer: B – Loan Against Inventory)
📌 SECTION 3: SCF Risk Management
Q9: In a non-recourse factoring agreement, the factoring
company assumes the credit risk, which can be mitigated by:
A) A bank guarantee from the supplier
B) A credit insurance policy
C) A strong trade relationship with the buyer
D) A long-term contract agreement
(Answer: B – A credit insurance policy)
Q10: What is one of the primary risks of using payables
finance (reverse factoring)?
A) Risk of non-payment by the buyer
B) Risk of loss of supplier relationships
C) Risk of inventory damage during transportation
D) Risk of changes in tax laws
(Answer: A – Risk of non-payment by the buyer)
Q11: Which of the following is NOT a typical risk associated
with forfaiting?
A) Political risk in foreign countries
B) Risk of non-payment by the buyer
C) Exchange rate risk
D) Risk of poor supplier creditworthiness
(Answer: D – Risk of poor supplier creditworthiness)
📌 SECTION 4: Enabling Framework-Based Techniques
Q12: What is the key advantage of dynamic discounting for
buyers and suppliers?
A) It allows buyers to delay payments without penalties.
B) It provides a fixed interest rate for early payments.
C) It allows suppliers to offer discounts in exchange for early payment.
D) It eliminates the need for credit checks.
(Answer: C – It allows suppliers to offer discounts in
exchange for early payment.)
Q13: Which of the following involves buyers and suppliers
agreeing to a discount for early payment of invoices without a third-party
financier?
A) Payables Finance
B) Dynamic Discounting
C) Factoring
D) Forfaiting
(Answer: B – Dynamic Discounting)
Q14: Which SCF technique allows buyers to negotiate extended
payment terms, improving their cash flow while improving supplier liquidity
through early payment options?
A) Reverse Factoring
B) Dynamic Discounting
C) Bank Guarantees
D) Pre-Shipment Finance
(Answer: A – Reverse Factoring)
📌 SECTION 5: SCF in International Trade
Q15: Forfaiting is particularly useful for exporters in
international trade who want to:
A) Reduce the risk of non-payment by buyers
B) Extend payment terms to customers without interest
C) Purchase raw materials at a lower cost
D) Receive payments for domestic contracts without delay
(Answer: A – Reduce the risk of non-payment by buyers)
Q16: A supplier is unable to finance the production of goods
before shipping to an international buyer. What is the most suitable SCF
solution for this situation?
A) Invoice Discounting
B) Pre-Shipment Finance
C) Payables Finance
D) Dynamic Discounting
(Answer: B – Pre-Shipment Finance)
Q17: Which SCF technique is typically used by a multinational
corporation to finance a large supplier base across multiple countries, where
payments are due after an extended period (e.g., 90 days)?
A) Forfaiting
B) Reverse Factoring (Payables Finance)
C) Invoice Discounting
D) Loan Against Receivables
(Answer: B – Reverse Factoring (Payables Finance))
Q18: What type of SCF technique would be appropriate for a
small business supplier to secure early payment on approved invoices, with the
buyer’s credit rating ensuring a low interest rate?
A) Invoice Factoring
B) Pre-Shipment Finance
C) Reverse Factoring (Payables Finance)
D) Loan Against Inventory
(Answer: C – Reverse Factoring (Payables Finance))
📌 SECTION 6: Advanced Case Study Questions
📌 Scenario 1: Factoring vs. Forfaiting
A manufacturer sells goods to an international customer on credit
terms of 180 days. The company faces cash flow issues and wants to receive
early payment for the sale.
Q19: Which technique is more suitable for the manufacturer to
sell the receivable to a financial institution for immediate payment?
A) Factoring
B) Forfaiting
C) Invoice Discounting
D) Pre-Shipment Finance
(Answer: B – Forfaiting)
📌 Scenario 2: Payables Finance and Supplier Liquidity
A retail giant wants to extend payment terms to 120 days for
its suppliers. However, it is aware that some suppliers may face cash flow
challenges. The company offers a Payables Finance program where the suppliers
can receive early payment at discounted rates through a financial institution.
Q20: What is the main benefit for the suppliers in this
situation?
A) Extended credit from the buyer
B) Early payment without requiring additional bank loans
C) A higher price for goods
D) Lower transportation costs
(Answer: B – Early payment without requiring additional bank
loans)
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