Read the following mini case carefully and answer all questions that follow. Usaha Tegas Sdn Bhd (UTSB)
Question:
Read the following mini case carefully and answer all questions that follow.
Usaha Tegas Sdn Bhd (UTSB) currently enjoys the following credit facilities from a bank:
Type of facilities | Limit (RM) | Pricing |
Overdraft (O/D) | 3,000,000 | BLR + 2.0% p.a. |
Overdraf | ||
Letter of credit (L/C) | 5,000,000 | 0.1% per month |
Surat Kredit | ||
Trust receipt (T/R) | 5,000,000 | BLR + 2.0% p.a. |
Resit Amanah | ||
Banker’s acceptance (B/A) | 5,000,000 | 2.0% p.a. acceptance commission |
Penerimaan Jurubank | ||
Shipping guarantee (S/G) | 5,000,000 | 0.1% flat |
Jaminan Perkapalan | ||
Export credit facilities (ECR) | 5,000,000 | EXIM bank rate + 1% p.a. |
Kemudahan Kredit Eksport | ||
Foreign bills purchased (FBP) | 2.500,000 | FCR + 1.5% p.a. |
Pembelian bil asing | ||
UTSB imports 1,000 metric tonnes of refined sugar worth AUD1,254,250 from an Australian supplier against a 3-month letter of credit. It is considering utilizing the available banking facilities for a 90-day financing. Based on the latest additional information below, and as the Trade Finance Manager of Bank UUM Berhad, the banker for UTSB, you are to advise your client whether to choose an OD or a BA or a TR financing. In determining which financing to choose, you do the following analysis as per given format.
BLR/ BLR | 6.0 % p.a. | |
BA discount rate for 90 days/ Kadar pendiskaunan BA untuk 90 hari | 5.2 % p.a. | |
AUD/RM spot exchange rate/ Kadar pertukaran spot AUD/RM | 2.9650 |
A. Compute the value of imports in RM
B. Based on available information, compute the cost of L/C to UTSB
C. ALTERNATIVE I : Cost of using Overdraft (O/D) Financing
D. ALTERNATIVE II : Cost of using Trust Receipt (TR) Financing
E. ALTERNATIVE III : Cost of using Banker’s Acceptance (BA) Financing
F. Your recommended alternative and why?
Business Law Principles and Practices
ISBN: 978-1133586562
9th edition
Authors: Arnold J. Goldman, William D. Sigismond