English Correspondence For Banking

TOPIC 1
THE INTERNATIONAL FINANCIAL WORLD
Special Terms
Barter :The trade of goods without exchange of money.
Balance of Payments : The difference between a nation’s total payments to, and receipts from,
foreign nations during a specific period.
Balance of Trade : The difference between the value of imports and exports, including in some
instances the related freight and insurance premiums.
Capital : Fund invested by individual or corporate shareholders to establish an enterprise
Exports : Goods and services that a nation sells to other nations.
Foreign Trade : The exchange of goods an services between nations.
Imports : Goods and services that a nation buys from other nations.
Investments : The flow of funds, usually for a long term, to build assets in the expectation of a
profit.
Invisible Trade : The trading of services between nations.
Quota : A restriction of the quantity of trade. It can pertain to exports as well as import.
Reserves : National fund of gold and foreign currencies acquired in the past and held for the
future needs.
Tariff: A tax on imported goods.
Visible Trade : The import and export of goods between nations.
English For Banking and Finance

Vocabulary Practice ( Oral Practice )
1. What is an import ?
2. What is an export ?
3. What is the difference between a quota and a tariff ?
4. What is visible trade ?
5. How does invisible trade differ from visible trade ?
6. What is barter ?
7. What is an investment ?
8. What is the exchange of goods between nations called ?
9. What are reserve ?
10. What is balance of trade ? When does a nation have a favorable balance of trade ?
The International Financial World

Economic activity began with the caveman, who was economically self – sufficient. He
did his own hunting, found his own shelter, and provided for his own needs. As primitive
populations grew and developed, the principle of division of labor evolved. One person was
more able to perform some activity than another, and therefore each person concentrated on
what he did best. While one hunted, another fished. The hunter then traded his surplus to the
fisherman, and thus each benefited from the variety of diet.
In today’s complex economic world, neither individuals nor nations are self sufficient.
Nations have utilized different economic resources; people have developed different skills. This
is the foundation of world trade and economic activity. As a result of this trade and activity,
international finance and banking have evolved.

For example, The United States is a major consumer of coffee, yet it does not have the
climate to grow any of its own. Consequently, The United States must import coffee from
countries ( such as Brazil, Colombia, and Guatemala ) that grow coffee efficiently. On the other
hand, the United States has large industrial plants capable of producing a variety of goods, such
as chemicals and airplanes, which can be sold to nations that need them. If nations traded item
for item, such as one automobile for 10,000 bags of coffee, foreign trade would be extremely
cumbersome and restrictive. But instead of barter, which is the trade of goods without an
exchange of money, The United States receives money in payment for what it sells. It pays for
Brazilian coffee with dollars, which Brazil can then use to buy wool from Australia, which in
turn can buy textiles from Great Britain, which can then buy tobacco from the United States.
Foreign trade, the exchange of goods between nations, take place for many reasons. The
first, as mentioned above, is that no nation has all of the commodities that it needs. Raw
materials are scattered around the world. Large deposit of copper are mined in Peru and Zaire,
diamonds are mined in South Africa, and Petroleum is recovered in Middle East. Countries that
do not have these resources within their own boundaries must buy from countries that export
them.
Foreign trade also occurs because a country often does not have enough of a particular
item to meet its needs. Although the United States is a major producer of sugar, it consumes
more than it can produce internally thus must import sugar.
Third, one nation can sell some items at a lower cost than other countries. Japan has been
able to export large quantities of radios and television sets because it can produce them
domestically. According to economic theory, Japan should produce and export those items from
which it derives a comparative advantage. It should also buy and import what it needs from those
countries that have a comparative advantage in the desired items.
Finally, foreign trade take place because of innovation or style. Even though the United
States produces more automobiles than any other country, it still imports large quantities of autos
from Germany, Japan and Sweden, primarily because there is a market for them in the United
States.

For most nations, exports and imports are the most important international activity. When
nations export more than they import, they said to have a favorable balance of trade. When they
import more than they export, an unfavorable balance of trade exists. Nations try to maintain a
favorable balance of trade, which assures them of the means to buy necessary imports. Some
nations, such as Great Britain in the nineteenth century, based their entire economy on the
concept of importing raw materials, processing them into manufactured goods, and then
exporting the finished goods. The subsequent profits enabled these nations to import the food
they needed.
In addition to visible trade, which involves the import and export of goods and
merchandise, there is also invisible trade, which involves the exchange of service between
nations.
As an example of invisible trade, Brazilian coffee is usually transported by ocean vessel

because these steamships are the cheapest method of transportation. Nations such as Greece and
Norway and the colony of Hongkong have large maritime fleets, which can provide this
transportation service. When an exporter arranges for this kind of transportation, he rents space
in the cargo compartment of a ship for one voyage.
The prudent exporter purchases insurance for his cargo’s voyage. While at sea, a cargo
is vulnerable to many dangers, the most obvious being that the ship may sink. In this event, the
exporter who has purchased insurance is reimbursed. Otherwise, he may suffer a complete loss.
There is also the danger of damage to the cargo from a collapsed or leaky pipe, which could
diminish the cargo’s value. Thus, insurance is another service in which some nations specialize.
Great Britain, because of the development of Lloyd’s of London, is a leading exporter of this
service, earning fees for insuring other nations’ foreign trade.
Some nations possess little in the way of exportable commodities or manufactured goods,
but they have a mild and sunny climate. During the winter, the Bahama attract large number of
tourists, particularly from the northeastern United States, who spend money for hotel
accommodation , meals, taxi, and so on. Tourism, therefore, is another form of invisible trade.

In the past twenty – five years, a tremendous demand has grown for the construction of
large scale development projects around the world, including dams, highway networks, and so
on. The technical skills to build these projects are purchased when a nation hires engineers and
construction supervisors, usually from another country. The commission and salaries that are
paid to these people represent another form of invisible trade.
The United States has been described as a nation of immigrants. Many Americans send
money back to families and relatives in the “old country”. In the past fifteen years, million of
workers from the countries of Southern Europe have gone to work in Germany, Switzerland,
France, the Benelux nations, and Scandinavia. The workers send money home to support their
families. These called immigrant remittances. They are an extremely important kind of invisible
trade for some countries, both as imports and exports.
Invisible trade can be as important to some nations as the export of raw materials or
commodities is to others. In both cases, the nations earn money to buy necessities.
The different kinds of trade that nations engage in are varied and complex, a mixture of
visible and invisible trade. Most nations are more dependent on export than on any other activity.
The earnings from exports pay for the imports that they need and want. A nation’s balance of
payments is a record of this complex transactions. By reflecting all of these transactions in
monetary terms, a nation is able to combine the income it receives, for example, from exports,
tourist expenditures, and immigrant remittances . This combined income is then spent on such
items as manufactured goods from other countries, travel for citizens to other countries, and the
hiring of construction engineers.
The two most important categories in any nation’s balance of payments are its visible and
invisible trade. A third very important category is investments.
Investment are the means by which nations utilize the capital of other nations to build
factories and develop mines for their own industrial base. The rail roads of the United States and
South America were built by British capital. This capital paid for the costs of construction,
including materials and the wages of the workers, and the locomotives and freight cars. More

recently, American , Japanese, and the European corporations have provided funds to explore for
oil and to build new automobile, steel, and chemical plants around the world.
Investment can have a crucial impact on a nation’s balance of payments. When an

investment is made, capital enters a country, enabling it to import manufactured materials to
build a new manufacturing plant and to pay workers to build it. Once the plant is operative, it
provides both jobs and taxes for the host country and in time, produces manufactured goods for
export. In this way, investment act as a catalyst in economic growth for the developed countries
of North America, Europe, and Asia, as well as for developing countries throughout the world.
In subsequent years, an investment should yield a profit. Dividents , sums of money paid
to shareholders of a corporation out of earnings, can then be remitted to the investing country.
From the perspective of the balance of payments, in the year the investment is made, the host
country credits income to its balance of payments and the investing country records a debit. This
is reversed in the following years. The dividends then represent an expense for the host country
and income for the investing country.
After calculating all of the entries in its balance of payments, a nation has either a net
inflow or a net outlaw of money. It should be noted that the statistics used in determining a
deficit ( shortage ) or surplus ( excess ) are inexact; information is reported by a variety of
sources, and there are bound to be mistakes and omissions. The statistical difference between
these sources is balanced by an entry entitled “ Net Errors and Omission.” The final result is
either an increase or decrease in the nation’s reserves.
These reserves may be compared to an individual’s savings. For a nation, they are
maintained in holding of gold and official deposits in foreign currencies, such as U.S. dollars,
pounds sterling, deutsche mark, and so on. A deficit in the balance of payments can be
accomodated by drawing on ( removing some of ) the reserves, that is, the previous savings.
But if nation’s balance of payments continues in deficit for some time, then the reserves will be
insufficient to cover further withdrawals, and additional measures must be taken.
The most direct means of correcting a deficit in the balance of payments and having an
immediate impact is by reducing imports. This can be accomplished by imposing tariffs ( taxes )

quotas ( import restriction ) or both. If successful, the cost of the imports rises in the local
market, and the imported goods are comparatively more expensive to the consumers than the
locally made goods. When a quota is imposed, the quantity previously imported and paid for is
reduced.
In either case, the net effect is the reduction of the nation’s outflow of money. Other
measures may limit invisible trade expenditures. For example, citizens may be prohibited from
taking more than a specified amount of money with them when they travel abroad.
Capital for investments abroad can be restricted by requiring governmental approach for
any new foreign investments. When the United States encountered serious balance of payments
problems in the 1960s, the government restricted the loans that the United States banks could
extend abroad. This was a large item in its balance of payments because of the United States’
role in world finance. The government also restricted the amount that United States corporations
could invest overseas.
If these measures are insufficient, a country may devalue its currency. This immediately
makes imports more expensive and export more competitive, since the importing country can
now pay for the first country’s import with less of their currency than previously. In time, these
advantages are eliminated. A nation must at all times combine devaluation with other effective
measures to balance its currency, resulting in a reasonable level of employment and a low rate of
inflation.
Gold, and to a lesser extent silver, have been the traditional reverses. At one time, gold
moved freely from country to country, but successive constraints have been imposed in the past
fifty years. Today, gold counts as only one among many in the reserves of a country. A number
of countries have an agreement with the Federal Reserve Bank of New York to hold their gold in
safekeeping. This makes it possible for these countries to buy gold from or sell gold to other
countries by merely moving the gold from one custodian vault to another at the Federal Reserve
Bank of New York.
The United States currently values its gold reserve at $ 42.22 per ounce, while other
countries may value their at or near the current free market price. Generally, the gold that nations

hold as reserves is separate from the gold that is traded in a free market. Today, United States
citizens can legally own gold, although very few think it worth the time or trouble. In other
countries, such as France and India, there exists a strong tradition of gold ownership.
Because all of these international activities are conducted by companies and individuals,
a need for international banking services has developed. Governments regulate and from time to
time participate in a special situations, but these are exceptions. Outside of the socialist
countries, international trade and investment is largely a private business. And although
companies in Europe like Renault and British Leyland are government – owned, They are unlike
their communist counterparts – run like private companies.
Discussion
1. Why does foreign trade take place ?
2. Why do nations try to maintain a favorable balance of trade ?
3. What is the difference in a balance of payments between visible and invisible trade ?
4. Can a nation import more than it export ? Give an example.
5. How do investments expand international trade ?
6. How will an investment made this year and one made three years ago affect a nation’s
balance of payments?
7. What is the difference between bartering and trading for money ?
8. How can countries with attractive climate earn money from other countries ?
9. What is the entry entitled “ Net Errors and Ommission ”?
10. How do tariffs and quotas help a nation control its balance of payment ?
11. What impact can devaluation have on a country’s balance of payment ?
12. How does the Federal Reserve Bank of New York help other countries in gold trading ?

TOPIC 2
BUSINESS OWNERSHIP
All business owners must decide which form of legal organization---a sole proprietorship, a
partnership, or a corporation---best meets their needs. The decision is very important because the
choice affects many managerial and financial issues, including income taxes sand the owners’
liability. In determining which legal form their business should take, owners must consider the
advantages and disadvantages of each. These will be discussed in this chapter.
The business case presented, the Frozen lglo, portrays a typical sole proprietorship and some
of the business decisions its owners face, such as “How can we increase and expand the
business? How much risk is involved?” Student must decide on the best plan of action for
expansion of the Frozen lglo. Student will also become familiar with business analysis through
the process of decision making.
PREVIEWING
Form of business Ownership
Sole Proprietorship
Typically, the sole proprietorship is the ownership form chosen for the small-town restaurant, the
neighborhood grocery store, the local auto repair shop, and the bakery. Most sole proprietorships
are small businesses, often having only one employee. However, there are some sole
proprietorships that are large businesses. Many of today’s largest companies started out as sole
proprietorships. Although the owner may employ someone to manage the business, mote
commonly the owner is the active manager of the firm. The capital necessary for operating the
business is normally provided by the sole proprietor from personal wealth, frequently aided by
borrowing. The owner usually makes all decisions personally rather than delegating them to

employees. If the business is the owner’s sole source of income, the ability to operate it at a
profit is extremely important to him or her.
Discuss the advantages and disadvantages of a sole proprietorship.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Partnership
The typical partnership is larger than the typical sole proprietorship, yet most partnerships are
relatively small businesses. There is no limit to the number of partner, and they may invest equal
or unequal amounts of money. Net profits must be shared among all partners involved. It is best,
although not necessary, that the agreement between the partners be written and signed. Such a
contract may prevent misunderstanding and ill will at a future date. The agreement should comer
the following points: (1) Who will receive what share of the profits? (2) Who does what, and
who reports to whom? (3) What happens if one of the partners dies? (4) If desired, how could the
partnership be dissolved? Of the three common types of business ownership, partnerships are the
least used.
Discuss the advantages and disadvantages of a partnership.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
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Corporation
Corporations employ large numbers of people and are owned by large numbers of investors.
Only large businesses can mass-produce and mass-market the goods and services consumers
need and want. A corporation is a legal entity which is created by the law as an artificial being
that has the rights, duties, and powers of a person. A corporation does not change its identity
with changes in ownership. A corporation is brought into existence through a charter, which is a
document issued by a state authorizing the formation of a corporation. Corporations can raise
money by selling shares in the business-called stock-to investors. These investors are known as
stockholders, or shareholders. Stockholders are the owners of a business. Business profits are
distributed among stockholders in the form of dividends. Stockholders vote in accordance with
the number of shares they own. Annual meetings are called primarily to elect a board of
directors, who represent the stockholders. Once a board is elected, it assumes final authority for
all corporate actions.
Discuss the advantages and disadvantages of a corporation.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
QUESTIONS FOR DISCUSSION
In small groups, Discuss the following questions.
1. Name some businesses that you are familiar with. Do you know what forms of ownership
they represent? Explain. Describe the products or services they offer.
____ _________________________________________________________________
____ _________________________________________________________________
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2. Which of the three form of ownership do you come in contact with most frequently? Why?
______________________________________________________________________
______________________________________________________________________
3. Where are the various forms of business located in your community?
______________________________________________________________________
______________________________________________________________________
4. Which type of business do you like shopping at the most? Why?
______________________________________________________________________
______________________________________________________________________
5. If you were to open your own business, what form of ownership would you choose? Why?
______________________________________________________________________
______________________________________________________________________
JUST IN CASE
New Vocabulary
In each set, cross out the word that isn’t similar in meaning. Discuss the relationships among the
words in each set.
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1. inventory stock product staff
2. reputation image illustration name
3. bookkeeper auditor accountant stockbroker
4. debt mortgage dividend liability
5. profit expense income revenue
6. asset drawback benefit advantage
7. flavor inedible taste seasoning
8. renovate improve destroy remodel
9. proceed progress continue stop
10. rave condemn praise compliment
11. store shop establishment infirmary
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TOPIC 3
PARTS OF A BUSINESS LETTER

1 Reference (Rujukan)
In the past letterheads used to have ‘Our ref’ and ‘Your ref’ printed in them. Today this is rarely
the case because with modern word processors and printers it is difficult to line up the printing
on such pre-printed stationery. Instead, the typist normally inserts the reference on a line on its
own. The reference includes the initials of the writer (usually in upper case) and the typist (in
upper or lower case, as preferred). A file or departmental reference may also be included).
Examples
GBD/ST GBD/st/Per1 GBD/ST/134
2 Date (Tanggal)
The date should always be shown in full. In the UK it is usual to show the date in the order
day/month/year. No commas are used.
Example
12 July 2010
In some other countries the date is typed in the order month /day /year, often with a comma after
the month included in the United States.
Example
July 12, 2010
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3 Inside address (Alamat dalam)
The name and address of the recipient should be typed on separate lines as it would appear on an
envelope. Care should be taken to address the recipient exactly as they sign their letters. For
example, a person signing as ‘Douglas Cowles’ should be addressed as such in the inside
address..
Example
Mr Douglas Cowles
General Manager
Cowles Engineering Co Ltd
12 Bracken Hill
Manchester
When writing letters overseas, the name of the country should be shown on the final line
of this section. As the letter will by airmail, this should be indicated one clear line space
above the inside addres. Again note that the appropriate courtesy title (Mr/Mrs/Miss/Ms)
should always be shown:
Example
Mr Doug Allen
Eagle press Inc
24 Sounth Bank
Toroton
Ontario
Canda M4J 7LK

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4. Special markings (Tanda Khusus)
If a Letter is confidential it is usual to include this as part of the anddress, one clear line
space above it. Example
CONFIDENTIAL
Miss Iris tan
Personel Director
Soft Toys plc
21 windsor Road
Birminghan
B2 5JT
Some decades ago an attention line was used when the writer simple wanted to ensure that the
letter ended up on a certain person’s desk, even though the letter was addressed to the company
in general, and always began ‘Dear Sirs’.
Example (contoh)
FOR THE ATTENTION OF MR JOHN TAYLOR, SALES MANAGER
Garden supplies ltd
24 Amber Streat
Sheffield
S44 9DJ
Dear Sirs
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In today’s business letter, it should rarely be necessary to use an attention line. When you
know the name of the person you are writing to, the recipient should be included in the
inside address, and a personalized salutation will be used.
5. Salutation
If the recipient’s name has been used in the inside address, it is usual to use a personal
salutation.
Example (contoh)
Dear Mr Leighton Dear Douglas Dear Miss Tan Dear Rosehannah
If your letter is addressed generally to an organization and not to a specific person, the
more formal salutation ‘Dear Sirs’ should be used.
Example
Dear Sirs
If your letter is addressed to a head of department or the head of an organization whose

name is not know, then it would be more appropritate to as shown here.
Example
Dear Sir or Madam
6. Heading (judul)
A heading gives a brief indication of the content of the letter. It is usually placed one
clear space after the salvation. Upper case is generally used, although initial capital with
underscore my be used if preferred.
Example (contoh)
Dear Mr Marshall
INTERNATIONAL CONFERENCE 24 AUGUST 20xx
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7. Complimentary close (Frasa Penutup)
It is customary to end the letter in a polite way by using a complimentry close. The two
most common closes are ‘yours faithfully’ (used only with Dear Sir/Sirs/Sir or Madam)
and ‘Yours sincerely’ (used with personalized salutions)
Example (Contoh)
Dear Sir
Dear Sirs Yours Faithfully
Dear Madam
Dear Sir or Madam
Dear Mr Leighton Yours sincerely
Dear Mrs Yap
Dear Caroline
Dear Sam
8. Name of sender and designation
After the complimentary close 4 or 5 clear spaces should be left so taht the letter can be signed.
The name of the sender should then be inserted in whatever style is preferred- upper case, or
initial capitals only. The sender’s designation or department should be shown directly beneath
his/her name. In these examples note that the title ‘Mr’ is never shown when the writer is male.
However, it is usual to add a courtesy title for a famale; this is shown in brackets after her name.
Example
Yours faithfully Yours sincerely
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John bolton Barley Davidson
Chairman General Manager
When a letter has to be signed on behalf of the sender, it is usual to write ‘for’ or ‘pp’ in front of the
sender’s printed name; ‘p’ is an abbreviation for per procurationem, which simply means ‘on behalf
of’.
Example
Yours faithfully
Shirley Johnson
EDWARD NATHAN
Chairrman
9. Enclosures
There are many different methods of indicating that an enclosure is being sent along with
a letter :
 Affix a coloured ‘enclosure’ sticker usually in the bottom left-hand corner of the
letter.
 Type three dots in the left-hand margin on the line where the enclosure in mentioned
in the body of the letter.
 Type ‘Enc’ or ‘Encs’ at the foot of the letter, leaving one clear line space after the
sender’s designation. This is the most common form of indicating enclosure.
Example
Yours sincerely
LINDA PATERSON (Mrs)
Marketing Manager
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Enc
10. Copies
When a copy of a letter is to be sent to a third party (usually someone in the sender’s
organisation) this may be indicated by typing ‘cc’ (copy circulated or courtesy copy) or
‘Copy’ followed by the name and designation of the copy recipient. If there are two or more
copy recipients, it is usual to show these in alphabetical order.
Example
Copy Ravi Gopal, General Manager
Ashley Ow Yong, Company Secretary
Candice Reeves, Accountant
If the writer does not wish the recipient of the letter to know that a thrid person is receiving
a copy of the letter, then ‘bcc’ (blind courtesy copy) is used. This should not be shown on
the top of the letter, only on the file copy and bcc copy/ies.
Example
bcc Mr Gordon Clark, Chief Executive
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TOPIC 4
INTERNATIONAL
MOVEMENT OF CURRENCY
Special Terms
Charge : A banking term for a debit
Correspondent Bank : A commercial bank with which a second commercial bank in another
area has an account relationship, and which also conduct business for the second bank.
Credit : An account deposit
Debit : An account withdrawal
To Draw on ( To draw upon ) : To direct a negotiable instrument to another bank for it to pay.
Dual Currency account : An account kept by bank with a second bank in a foreign country in
that country’s currency.
Duo from account : A bank’s deposit account maintained in another bank.
Foreign Draft: A Negotiable instrument drawn by a bank on a foreign correspondent bank.
Negotiable Instrument: A signed order by one party addressed to a second party directing the
second to pay a specified sum, or to transfer title of goods, to the order of a specific third party.
Payee : The recipient named in a negotiable instrument.
Reimbursement : Repayment of money.
Remittance Order : Non - negotiable instruments from one bank to a second cooperating bank
to make a payment.
Securities : Stocks and bonds.

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Signature Book: A book containing facsimiles of signature of a bank officers responsible for
conducting bank business.
Traveller’s Check: A special, reimbursable check with reprinted amounts issued by some
banks and companies for the convenience of tourists.
Vocabulary Practice
1. What is a Negotiable instrument ?
2. Who is payee?
3. What is the difference between a debit and a credit ?
4. What is foreign draft ?
5. What is a correspondent bank ?
6. What is reimbursement ?
7. What are securities ?
8. What is traveller’s Check ?
International Movement of Currency

The key element of international finance and trade is the correspondent banking
relationship. This enables money to be moved quickly and effeciently from one country to
another. A correspondent banking relationship between two commercial banks may involve bank
in different cities or states within a country. Internationally, the relationship of course involves
banks in different countries. Banks usually maintain a number of correspondent banking
relationships. The specific number, of course , is subject to the needs of each bank.
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When two banks agree to be correspondents with each other, they first exchange their
signature books, enabling each bank to identify authorized instructions from its correspondent
bank. The signature book includes instruction as the type and number of signatures required for
different transactions. For instance, instruction to debit an account up to a maximum amount may
require only one signature, but other transactions, such as letters of credit may require two
signatures. Such instructions are determined by each bank according to the bank’s internal
procedures.
Upon receiving a communication or instruction from a correspondent bank, the second

bank verifies the signature or signatures by comparing them with the specimen signatures in the
sending bank’s signature book. The signature book must be updated continuously to include the
signatures of officers.
Correspondent banks specify what services they will provide and the fee for each service.
The services may include clearing checks, handling collection, foreign exchange trading,
checking the credit of local customers, purchasing and selling securities, and safekeeping
securities. Thus, correspondent banks are agents in their respective local market.
The most important part of a correspondent banking relationship is the establishment of

one or several accounts. Because the United States dollar is the principal currency in
international trade and finance, most foreign bank require an account with a United States
correspondent bank. This kind of account, expressed or denominated in United States dollars,
may be compared to an individual’s checking account. Earlier in the country, when the British
Pound sterling was dominant in international trade, banks required a sterling account.
The Account that the foreign bank maintains with a United States bank is called a due to
account or a “vostro” account. Seen from the perspective of the foreign bank, this is called a due
from account. Deposits to this account result from the cashing of dollar traveler’s check in the
foreign country by tourist; personal checks that travelers write to pay for goods and services;
payments in favor of proceeds; and letter of credit negotiations. Debits to the due to account arise
when the foreign bank makes a payment in dollars.
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The United States bank may need an account in the foreign bank, denominated in the foreign
country’s currency. For the United States bank, this is referred to as a due from account or a
“nostrum” account. It is very important to realize that the designations due to and due from
depend on the bank that is referring to it. A United States bank considers the funds on deposit as
money belonging to the depositing bank, that is, money due to the foreign bank. From the
perspective of the foreign bank, this same account is exactly the opposite. Their money is on
deposit in the United States bank and therefore is money due from the United States bank. It is
often clearer in correspondence to refer to an account as “your account with us” or “our account
with you”.
The United States bank usually has substantially more due to accounts than due from
accounts. As a general rule, it is unnecessary to have more than one account in order to transfer
money from one country to the other. As long as a bank of the foreign country in question has an
account either a United States bank, it is easy to move money from one country to another. A
bank in Argentina can make a payment to a bank in Japan by requesting its correspondent bank
in the United States First to Debit its account and then credit the account of a Japanese bank-all
in United States dollars. This illustrates the convenience of the dollar as the principal currency of
international finance.
When a United States bank has established correspondent relationships with a networks
of foreign bank, and when a number of due to accounts have been established in its bank, the
United States bank then is able to assist its local customers with their transfers of money abroad
in one of the following ways: an airmail remittance order, a cable remittance order, or a foreign
draft.
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Term and condition form a U.S. bank to a foreign correspondent bank showing some of the
service available and the fees for those service.
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remittance order in U.S. dollars directed to a correspondent bank.
The simplest means of transferring funds abroad is by means of the airmail remittance order.
For example, a local customer of the bank wishes to send money to a relative in Japan. The
local customer goes to the United States bank and specifies where and to whom the money
is to be delivered. He also, of course, indicates the amount he wishes to send, for example,
$100. The bank prepares a letter to its correspondent bank in the town nearest to where the
relative lives. In this letter, the United States bank says, "Advise and pay U.S. dollars 100
to [name and address of recipient]." The letter says that this is by order of its local
customer, giving his name. Then it adds, "I n reimbursement, we credit your account
with us." This informs the Japanese bank that its account in the United States bank has
been credited $100. (The United States bank credits the Japanese bank's due to account.)
An officer of the sending bank then signs the letter-is signature on the letter can be
compared to his signature in the signature book). A small service charge is collected from
the United States customer. In many cases, the United States bank uses a preprinted form
instead of a letter, but otherwise the procedure remains unchanged. When the Japanese bank
receives the letter, it verifies the signature by comparing it to the one in the signature
book and thus assumes the letter's authenticity. The recipient is paid in local
currency.
26

A cable remittance order is identical, except that the United States bank cables the
Japanese bank and so collects a larger service fee. The advantage of a cable, of course, is its
speed.
In the case of the cable, however, it is impossible for the Japanese bank to verify the
signature, since no signature appears on the cable. The authenticity of the cable is tested
by a telegraphic code. Using this code, the United States bank positions the
appropriate code number or word at the beginning of the message. The code relates to the
amount of the order, the date on which it is given, and other elements known only to the
two banks. Such cables are called "tested cables." The receiving bank deciphers the code,
and if correct, the bank is assured that the United States bank actually sent the message. It
is particularly important, of course, that the telegraph codes are known only to the
appropriate people in each bank. Incidentally, although the above illustrations refer to money
sent from the United States to Japan, the procedures are applicable in transfers between
any two countries.
The third way to transfer money internationally is the foreign draft. This differs
from the preceding two. A foreign draft is a negotiable instrument, drawn on the
foreign correspondent bank, but signed by an officer in the buyer's bank and then handed to
the buyer. The buye r mails it to the payee; the buyer's bank airmails a
memorandum of this transaction to the foreign bank. It also provides a second signing officer's
signature, since the first officer may be a domestic banking officer and his signature may not
be included in the signature book.
If a foreign draft is intended to pay a bill or invoice, it can be attached directly to

the bill by the sender. The foreign bank verifies the draft against the memorandum and
signature book (when possible), identifies the person presenting the foreign draft as
being the true payee, and then pays him.
The disadvantage of the foreign draft is that if the buyer loses it, replacement can be
time-consuming and cumbersome. If either the airmail or cable remittance orders are lost,
the sending bank simply duplicates its message, indicating that it is a duplicate that should be
27

fulfilled only if the original was not. In all cases, the recipient bank is responsible for verifying
that the payee is the correct person. Thus, identification is always required.
When a United States bank opens a correspondent account in a foreign bank, the decision to do
so is usually made by the bank's senior management. Once opened, an account must always show a
credit balance. This, of course, involves a commitment of bank assets.
This due from account is sometimes referred to as a dual currency account. The account is
denominated in the foreign currency. It must, however, reflect the United States dollar equivalent,
since the United States bank keeps all its records in United States dollars. The due from account is
supervised by the bank's foreign exchange trader. When necessary, he can either sell the excess
balances or replenish the account through purchases of the foreign currency in the foreign
exchange. market. (This will be discussed further in the next Unit.)
Foreign bank draft (bank check) drawn on a foreign correspondent bank in foreign
currency.
28

A due from account permits the bank to issue airmail remittances, cable remittances, and
foreign drafts in the foreign currency. The United States bank follows the same
procedures as for United States dollars, except that its reimbursement
instructions read, "Charge our account with you," instead of, "We credit your
account with us."
Because conversion of United States dollars to foreign currency is effected in the
United States bank when issuing remittances and foreign drafts in the foreign currency, the
bank shows a small foreign exchange profit. For this reason, it encourages the sale of
these in foreign currency whenever possible.
As we shall see in subsequent units, the existence of a correspondent banking relationship with
an appropriate account is necessary to facilitate payments for other types of business.
Discussion
1. Why do banks establish correspondent banking relationships?
2. What kinds of assistance can a bank provide to its correspondent bank?
3. From your bank's point of view, what is the difference between a due to account and a due
from account?
4. What is the difference between sending money by an airmail remittance order and a cable
remittance order?
5. When would you use a foreign draft instead of an airmail remittance order?
6. Why would your bank want more due to accounts than due from accounts?
7. What is the importance of the signature book? the telegraphic test key?
8. Why should a bank encourage the issuance of remittance orders in foreign currency?
9. Why is the reimbursement information in a remittance order important to each bank?
10. Who supervises the due from accounts?
29

TOPIC 5
MANAGEMENT
Management is the process of planning, organizing, leading, and controlling the resources
in an organization. Some of these resources are human, some are material, and some are
financial. These resources must be managed in a way that allows a company to achieve its goals
of supplying its products or services to the marketplace while also making a profit. How
individual managers work within this managerial process is termed leadership style. Leadership
is the way in which managers interact with their subordinates in order to achieve company
objectives. The management process, leadership styles, objectives, and Japanese management
style will all be examined in this chapter.
The business case presented is about a Japanese car manufacturer, the Usagi Motor
Corporation, which has set up a manufacturing plant in the United States. The overseas operation
has brought together Japanese work values and American workers. We all know that cross-
cultural working relationships can be difficult. In this case, a young Japanese manager named
Toshiba Akatsu must gain the support of his American employees while addressing many cross-
cultural issues
Leadership Style
Describe and give an example of the different styles of managers shown in the following
pictures.
1. What are some advantages and disadvantages of each managerial style? Which would you
prefer as your manager?
30

Management Functions
Planning. Organizing, leading, and controlling are all aspects of a manager’s job.
PLANNING
Planning involves determining what the organization needs to do and the best way to achieve it.
A crucial part of this step is decision making.
ORGANIZING
The second basic managerial activity is organizing. In this portion of the manager’s job, he or
she must determine how best to arrange resources, human and material, to achieve desired goals.
31

LEADING
In this area of a manager’s job, he or she must guide and motivate employees to accomplish
company objectives. Through leadership, managers must exert influence and communicate with
their employees to ensure that employees understand and carry out assigned tasks.
CONTROLLING
The fourth managerial function, controlling, means monitoring the firm’s performance to make
sure that goals are being achieved Managers compare actual performance with planned
performance and make changes based on the results.
1. With your group. Give an example of each managerial function.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
2. Do these functions occur independently of one another or are they interdependent? Explain.
________________________________________________________________________
________________________________________________________________________
OBJECTIVES
What Are Objectives?
Managers must formulate company objectives in order for their companies to be successful.
Objectives are guidelines and goals for an organization to follow and achieve.
32

WHY USE OBJECTIVE
 Objectives give the business a direction.
 Objectives set the standards for the company
 Objectives motivate workers and managers to contribute their best efforts.
Rank the following major business objectives in order of importance. Discuss and
compare your answers with those of your classmates.
___ PROFITABILITY ___ EMPLOYEE WELFARE
___ GROWTH ___ MULTINATIONAL EXPANSION
___ QUALITY ___ SOCIAL RESPONSIBILITY
___ PRODUCTIVITY
PREVIEWING
Management
In small groups, discuss the following questions.
1. What do you think it means to be a good manager?
________________________________________________________________________
________________________________________________________________________
2. What personal qualities do you think a manager should have?
________________________________________________________________________
________________________________________________________________________
3. Have you ever worked under the supervision of a manager? is this person an effective
manager? Why or why not?
33

________________________________________________________________________
4. Have you ever supervised people? Do you think you were (are) an effective manager? Why
or why not?
________________________________________________________________________
5. What must happen to ensure that managers and employees from different culture can work
together successfully?
________________________________________________________________________
________________________________________________________________________
6. What do you know about Japanese management style?
________________________________________________________________________
________________________________________________________________________
7. Why do you think the Japanese have been so successful economically?
________________________________________________________________________
________________________________________________________________________
JUST IN CASE
New Vocabulary
Japanese Jargon
The following Japanese terms from the case have been divided into three categories: People,
Place, and Principles. Within each category, guess the match for each term. After reading
through the case go back and check your answers.
34

People
1. ___ are managers a. production workers
2. ___ technicians b. small, closely supervised groups of
production workers
3. ___ work groups c. the supervisors of the work groups
Places
1. ___ transplant a. overseas manufacturing operation
2. ___ sushi bar b. Japanese restaurant
Principles
1. ___ mission statement a. continuous, gradual improvement
2. ___ open door policy b. Before a proposal discussed at a
Meeting, it is first circulated among
Managers, who either approve of it or
Write their comments and suggestions.
3. ___ consensus building c. Workers are able to complain to
Management without fear of retaliation
4. ___ Kaizen d. the company objective
In each set of word or idioms, cross out the word that does not have a similar meaning.
Discuss the relationships between the words in each set.
1. Substitute temporary replacement permanent
2. Lean sparse abundant insufficient
3. burden freedom responsibility strain
35

4. jot down sit down write take notes
5. penalize punish discipline reward
6. calisthenics exercise aerobics inactivity
7. keep on stop continue remain
8. betray abandon loyal unfaithful
36

TOPIC 6
ENQUIRY LETTER
 Enquiries and replies
Enquiries for information about goods or services are sent and received in business all
the time. In a routine letter of enquery follow there guidelines:
1. State cleary and concisely what you want- general information, a catalogue, price list,
sample, quotation,etc
2. if there is a limit to the price at which you are prepared to buy, do not mention this
otherwise the supplier may raise the quotation to the limit you state.
3. Most suppliers state their terms of payment when replying so there is no need for you
to ask for them unless you are hoping for special rates.
4. keep your enqury brief and concice.
Enqueiries mean potensial business, they must be acknowledget promptly. If it is

from an established customer, say how much you appreciate it; if it is from a
prospective customer, say you are gald to receve it and express the hope of a lasting
and express the hope of a lasting and friendly business relationship.
REQUESTS FOR CATALOGUE AND PRICE LISTS
 Routine requests where formal reply is unnecessary
Suppliers receive many routine requests for catalogue and price lists. Unless the writer
requests information not already included, a written reply is often not necessary, and
a’with compliment’slip may be sent instead. In the following enquiries, are not necessary.
The item requested may be sent under cover of a ‘with compliments’slips.
37

Example 1
Dear sir/Madam
Please send me a copy of your catalogue and price list of notebook , together with copies any
descriptive that I could pass to prospective customers”
Yours falthfully
Example 2
Potentially large business
Dear Sir/Madam
I have seen one of your language laboratory in the English Language Course and they passed on
your address to me.
Please send me a copy of your current catalogue. I am particularly Interested in laboratory which
suitable for a small class.
Yours falthfully
 Potentially Large Business
Where an enquiry suggests that large or regular orders are possible, a ‘with compliments’
slip is not enough. Instead write a letter and take the opportunity to promote your
products.
38

(a) Enquiry
Dear Sir/Madam
I have a large hardware store in Balikpapan and am Interested in the air conditioners which
are advertising in the Kaltim Post
Please send me your illustrated catalogue and a price list.
Yours falthfully
(b)Reply (Jawaban)
Dear Mrs Johnsons
Thank you for your letter enquiring about air condioners . I am pleased to enclose a copy
of your latest illustrated catalogue.
You may be particularly interested in our newest air conditioner , the RX model. Without
any increase in fuel consumption, it gives out 15% cooler than earlier models. You will
find details of our terms in the price list price on the inside front cover of the catalogue.
Perhaps you would consider placing a trial order to provide you with an opportunity to
test its efficiency. At the same time this would enable you to see for yourself the high
quality of material and finish put into this model.
If you have any question please contact me on 6234917
Yours sincerely
39

Requests for advice (Permintaan Saran)
A written reply is necessary when the enquiry suggest that the writer would welcome advice or
guidance.
(a) Enquinry
Dear Sir/Madam
Please send me a copy of your current tyewriter catalogue and price list. I am particularly
interested in purchasing an electronic typewriter with a memory and single-line display.
Yours Faithfully
(b) Reply (Jawaban)
Dear Mr. Freeman
Thank you for your enquiry dated 8 February.
I have pleasure in enclosing the catalogue of typewriters as you requested. This includes details
of a number of electronic typewriters.
As you mention your requipment for a memory, have you considered a dedicated word
processor?
You will find details on pages 3- 5, and will see from the prices of the smallers models compare
very reasonably with electronic typewriters.
If you would like demonstrations of any models in the catalogue, I would be happy to arrange for
our representative to call on you whenever convenient.
Yours sincerely
40

Enquries through recommendations
When writing to a supplier who has been recommended, it may be to your advantage to
mention the fact.
(a) Enquiry
Dear Sir/Madam
My neighbour, Mr. Abimanyu of 209 Malmesbury Street, Bornmouth, recently

bought an electric lawnmower from you. He is delighted with the machine and has
recommended that I contact you.
I need a similar machine, but smaller, and should be glad if you would send me a
copy of your catalogue and any other information that will help me to get best choice
for my purpose.
Yours faithfully
(b) Reply
Dears Mrs Garson
I enclose a catalogue and price list of our lawnmowers, as requested in your letter of
18 May.
The machine bought by your friends was a 38 cm RANSOME which is an excellent

machine. You will find details of the smaller size of 30 cm shown on page 15 of the
catalogue. Alternatively, smaller than this is the PANTHER JUNIOR shown on page
17
We have both these models in stock and should be glad to show them to you if you
would care to call at our showroom.
Please contact me 2314679 if I can provide any further help.
Yours sincenely
41

5 Requests for samples
A request for a sample of goods provides the supplier with an excellent opportunity to
present products to advantage. A reply should be convincing, giving confidence in the
products.
(a) Enquiry (Permintaan)
Dear Sir
We have received a number of enquiries for floor coverings for use on the rough
floors which seem to be a feature of much of the new building taking place in this
region
It would be helpful if you could send us samples showing your range of suitable
coverings. A pattern-card of the designs in which they would are supplied would also
be very useful.
Yours faithfully
(b) Reply (Jawaban)
Dear Mrs King

Thank you for your enquiry for samples and a pattern-card of our floor coverings.
We have today sent to you separately a range of samples specially selected for their
hard-wering qualities. A pattern-card is enclosed.
For the purpose you mention we recommend sample number 5 which is specially
suitable for rough and uneven surfaces.
We encourage you to test the samples provided. When you have done this if you feel
it would help to discuss the matter we will arrange for our technical representative to
arrange to come and see you.
Meanwhile, our price list is enclosed which also shows details of our conditions and
terms of trading.
Please contact me on 3456891 if I can of further help.
Your sincerely
42

GENERAL ENQUIRIES AND REPLIES
When writing a general letter of enquiry be sure to be specific in the details required, e.g. prices,
delivery details, terms of payment. When replying to an enquiry, be sure you have answered
every query in the letter of enquiry.
6. An enquiry for office equipment
(a) Enquiry
Dear Sir/Madam
Please send me details of fax machines which you supply, together with prices.
We need a model suitable for sending complex diagrams and printed messages,
mostly within the UK.
Yours faithfully
(b) Reply
Dear Mrs Rawson
In reply to your enquiry I have pleasure in enclosing a leaflet showing our latest Note
book
All the models illustrated can be supplied from stock at competitive prices as shown on
the price last inside the catalogue.
May I suggest a visit to our showrooms where you could see demonstrations of the
various types and at the same time view our wide range of office equipment.
Yours sincerely
43

(c) Request for demonstration
Dear Mr Jenkinson
I have studied with Interest the literature you sent me with your letter of 28April.
Our Administration Manager, Mr Gordon Tan, would like to visit your showrooms to
see a demonstration and report on which machine would be most suitable for our
purpose. Can we arrange this for next Friday 6 May at 3.30 pm? If this is Inconvenient
please call me on 2916347.
Yours sincerely
7. An enquiry with numbered points (Permintaan informasi rinci)
When you have many point on which information is required, it may be useful to number
the various points.
(a) Enquiry
Dear Sir/Madam
During a recent visit to the Ideal Home Exhibition I saw a sample of your plastic tile
flooring. I think this type of flooring would be suitable for the ground floor of may
house, but I have not been able to find anyone who is familiar with such tiling.
Would you please give me the following information:
1. What special preparation would be necessary for the underflooring?

2. In what colours and designs can the tiles be supplied?
3. Are the tiles likely to be affected by rising damp?
4. Would it be necessary to employ a specialist to lay the floor? If so, can you
recommend one in my area?
I should appreciate your advice on these matters.
Yours faithfully
44

(b) Reply
Dear Mr Fratelli
Thanks you for the Interest shown in our products In your letter of 22 August.
A copy of our illustrated catalogue is enclosed, together with samples of some the skins
we regularly use in our manufacture. Unfortunately we cannot send you Immediately full
range of represented in the parcel, are of the same high quality.
Mr Frank North, our Overseas Director, will be visiting Rome early next month. He will
be pleased to visit you and bring with him a wide range of our goods. When you see them
I think you will agree that the quality of materials used and the high standard of the
craftsmanship will appeal to the most selective buyer.
We also manufacture a wide range of handmade leather handbags in which you may be
Interested. They are fully illustrated in the catalogue and are of the same high quality as
our gloves. Mr North will be able to show you samples when he calls.
Please let me know if you have any further questions.
Yours sincerely
45

REQUEST FOR GOODS ON APPROVAL
Custumers often ask for goods to be sent on approval. They must be returned within the time
stated, otherwise the customer is presumed to have bought them and cannot return them
afterwards.
Custumer requests goods on approval (Pelanggan meminta barang on approval)
(a) Request (Permintaan)
Dear Sir/Madam
Several of my custumer have recently expressed an interest in your waterproof garments, and
have enquired about theirs quality.
If quality and price are satisfactory there are prospects of good sales here. However before
placing a firm order I should be glad if you would send me on 14 days’ approval a selection of
men’s and children’s waterproof raincoat and leggings. Any of the items unsold at the end of this
period and which I decide not to keep as stock would be returned at my expense.
I hope to hear from you soon.
Yours faithfully
46

(b) Reply (Jawaban)
Dear Mrs. Turner
I was very pleased to receive your request of 12 March for waterproof garments on
approval.
As we have not previously done business together, you will appreciate that I must request
either the usual trade references, or the name of a bank to which we may refer. As soon
as these enquiries are satisfactorily settled we shall be happy to send you a good
selection of the items mentioned in your letter.
I sincerely hope that our first transaction together will be the beginning of a long and
pleasant business association.
In this reply the supplier seeks protection by asking for references. Some suppliers request a
returnable deposit or a third-party guarantee. While safeguarding oneself, it is important not to offend
customers by implying lack of trust.
47

(c) Despatch of goods (Pengiriman barang)
Having received satisfactory references, the supplier sends a confident, direct and helpful letter. The
reason for the low prices is given in order to dispel any suspicion the customer may have that the goods
are poor quality.
Dear Mrs. Turner
I have now received satisfactory references and am pleased to be able to send you a generous
selection of our watergroof garment as requested in your letter of 12 March.
This selection includes several new and attractive models in our methods of manufacture, it has
also been possible to reduce our prices which are now lower than those for imported waterproof
garments of similar quality.
When you have had an opportunity to inspect the garments, please let us know which you have
decided to keep and arrange to return the remainder as early as possible.
I hope this first selection will meet your requirements. If you would like a further selection, please
do not hesitate to let me know.
Yours sincerely
48

(d) In this letter the customer inform the supplier of the goods to be kept and encloses Customer returns
surplus
Dear Mrs. Robinson
A few weeks ago you were good enough to send me a selection of waterproof garments on
approval
Quality and prices are both satisfactory and I have arranged to keep the items shown on
the attached statement. My cheque for £ 1209.55 is enclosed in settlement.
Thank you for the prompt and considerate way in which you have handled this
transaction.
Yours Sincerely
VISIT BY REPRESENTATIVES
Costomers often from their opinions of a company from the impressions created by its representatives.
This stresses the need for careful selection and proper training of sales staff . Apart from being specialists
in the art of persuasion, such representatives must also fulfil the following requirements :
 They should have an exellent knowledge of the goods to be sold and the uses to which they can
be put.
 They should be able to anticipate the costomer’s needs.
 They should be able to give sound advice and guidance to costomers.
49

Request for representatives to call
Dear sir/ madam
I read with interest your advertisement for plastic kitchenware in the current issue of the
House Furnishing Review.
I hope you can arrange for your representative to call when next in this district. It would
be helpful if he could bring with him a good selection of items for your product range.
This is a rapidly developing district and if prices are right your goods should find a ready
sale.
I look forward to hearing from you soon
Yours faithfully
REQUESTS FOR CONCESSIONS
Customers sometimes ask for goods that are no longer available, or special terms which cannot
be granted. Such request need to be handled carefully to avoid giving offence or losing business.
 .Request for special terms
 (a) Enquiry
Note the excellent use of the 4 point plan in this letter.
50

Perhatikan manfaat besar dari penggunaan keempat butir rencana dalam surat ini.
Dear Sir or Madam
Please send us your current catalogue and price list for bicycles. We are interested in models for
both men and women, and also for children.
We are the leading bicycle dealers in this city where cycling is popular, and have branches in five
neighbouring towns. If the quality of your products is satisfactory and the prices are reasonable, we
expect to place regular orders for fairly large numbers.
In the circumstances please indicate whether you will allow us a special discount. This would enable
us to maintain the low selling prices which have been an important reason for the growth of our
business. In retuen we would be prepared to place orders for a guaranteed annual minimum number
of bicycles, the figure to be mutually agreed.
If you wish to discuss this please contact me on 6921671
Yours faithfully
51

(b) Reply (Jawaban)
In this reply the manufacturer is coutious, offering allowances on a sliding scale basis.
Dalam jawaban ini pabrikan bersikap hati-hati, dan menawarkan persyaratan dengan sliding scale basis.
Dear Ms Denning
I was glad to learn from your leter 18 July of your interest in our products. As requested our
catalogue and price list are and price list are enclosed with details of our conditions of sale and terms of
payment.
We have considered your proposal orders for a guaranteed minimum number of machines
In return for a special allowance. However after careful consideration we feel it would be better to
Offer you a special allowance on the following sliding scale basis.
On purchases exceeding an annual total of:
$ 1,000 but not exceeding £3,000 3%
$ 3,000 but not exceeding £7,500 4%
$ 7,500 and above 5%
No special allowance could be given on annual total purchases below $ 1,000.
I feel that an arrangement on these lines would be more satisfactory to both our companies.
Orders will be subject to the usual trade references.
I look forward to working with you and hope to hear from you soon.
Yours sincerely
52

 Letter declining special terms
In this letter a supplier tactfully refuses a request to reduce prices. Instead a counter-suggestion is
made.
Dear Mr Ellis
We have carefully considered your letter of 18 December.
As our companies have done business with each other for many years, we would like to grant your
request to lower the prices of our sportswear. However our own overhead have risen sharply in
the past 12 months, and to reduce prices by the 15% you mention could not be done without
considerably lowering our standards of quality. This is something we are not prepared to do.
Instead of a 15% reduction on sportswear, we suggest a reduction of 5% on all our products for
orders of £800 or more. On orders of this size we could make such a reduction without lowering our
standards.
I hope that you will agree to this suggestion and look forward to continuing to recelve regular orders
from you
Yours sincerely
53

TOPIC 7
FOREIGN EXCHANGE
Special Terms
Arbitrage : The simultaneous purchase and sale of the same foreign

exchange (see below) in different markets to profit from rate
differentials.
Broker : An intermediary who matches up those interested in buying a

currency with those interested in selling.
Cross-rate : The exchange rate between each of three or more currencies.
Floating Rate : The absence of fixed rates of exchange. Each currency rate is
determined solely by supply and demand.
Foreign Exchange : (a) The currency of foreign countries; (b) The process of
converting the currency of one country to that of a second
country.
Futures Trading : Purchasing or selling commodities, articles of trade or commerce,

for future receipt or delivery.
Hedging : The purchase or sale of foreign exchange in the future (for

instance, three 'or 'six months from now) in order to avoid a loss
due to any change in the rate of exchange during that period.
Interest Rate Arbitrage : The movement of funds from one country to another through the
foreign exchange market to obtain a higher interest rate on an
investment.
54

Par Value : The amount declared by a country as the basic exchange
rate for its currency. It is expressed in gold or dollars.
Position : The net balance of a bank's purchases and sales in a foreign
currency at the end of the business day.
Rate of Exchange : The price relationship between the currencies of two countries
quoted in terms of either currency.
Reciprocal : A rate of exchange calculated by dividing a unit of one currency

into 1 for the purpose of relating it to one unit of another currency.
The reciprocal of x is 1/x. For example, $1. French francs 4.70. Thus,
French francs 1. = $0.212.
Settlement : The delivery of and payment for foreign exchange.
Speculating : Purchasing or selling foreign exchange whereby the individual or

bank assumes risks in keeping an open position in expectation of
greater gain. An open position is a situation in which a speculator
buys or sells foreign exchange without offsetting the purchase
contract with a sale,- contract or vice versa.
Spot Trading : The trading of foreign exchange for settlement in two business
days. It is also called spot.
Swap : The simultaneous purchase and sale of foreign exchange with

different settlement dates for the purchase and sale transactions.
Treasury Bill : A borrowing vehicle of a government. The bill matures within one
year and is backed by the full faith and credit of the government. It
is an attractive short-term investment.
55

Vocabulary Practice
1. What is the difference between spot trading and futures trading?
2. What is a rate of exchange?
3. What is arbitrage? Interest-rate arbitrage?
4. Give the reciprocal of 5.
5. What is the difference between hedging and speculating?
6. Explain the par value of a currency.
7. Who is a broker and what does he do?
8. What does floating rate mean?
9. What is a cross-rate?
10. What is meant by settlement?
11. What is a swap?
12. What is a Treasury bill?
13. What are the two meanings of foreign exchange?
14. What is meant by position?
Foreign Exchange
Centuries ago, when gold coins exclusively were used as the money of nations
and city-states, the comparative value of each nation's money was determined by the
ratio of the gold content of each coin. Today, gold coins are "used" only by collectors.
National money is printed on paper. Each country has its own currency, with names such
as pound, mark, peso, lira, peseta, krona, dollar, franc, and so on. Deciding the rate for the
international exchange of money is one of the most complex and, to many observers,
56

one of the most fascinating aspects of international banking.
Each major currency has a par value that is usually defined, officially, in terms of
gold. In practice, however, little or no trading occurs at this rate.
Until a few years ago, countries were required to maintain the rate of exchange of
their currencies within a few percentage points of the par value. They have since adopted
floating rates. The rates of exchange are determined by market trading based on
demand for specific currencies. As demand fluctuates, the rate fluctuates too —rising
when demand is greater than supply and declining when supply exceeds demand.
The state of a nation's trade balance of payments helps determine the rate of exchange for its
currency. When a nation's trade balance of payments is in deficit, its imports exceed its
exports and therefore do not earn enough foreign exchange from its imports. The demand for a
nation's products dictates the quantity of its exports. Each country competes with others, and
the price or cost of the goods converted to the foreign buyer's currency affects sales.
The long-term outlook for a country affects
investments within the country. During periods of serious inflation, uncertain political
outlook, and domestic economic dissatisfaction, investments by foreigners and
citizens decline, and domestic investors seek opportunities for investment elsewhere.
Many people participate in the foreign exchange market. It is an international market
with no central trading place, a market in which business is conducted by foreign
exchange traders around the world linked by telephones and cables. The trading day never
ends. It begins in Europe when the business day opens and follows the sun westward, as
each country's business day in turn begins and ends. The major activity is centered in
the money centers of Europe, London, Frankfurt, Zurich, as well as in Japan and Hong
Kong. In the United States, the trading is concentrated in New York, but it does occur
elsewhere.The participants in the market include the major international banks (trading
primarily for the accounts of their customers); brokers, central banks, and large corporations
with international activities (trading usually to protect their currency from short-term
fluctuations); and individuals (trading as speculators and investors).A trade occurs when a
buyer and seller agree on the price for exchanging two currencies. For example, a
57

United States manufacturer sells a piece of machinery to a company in Great Britain
and receives pounds sterling in payment. At the same time, another United States
company plans to invest money to build a new plant in Great Britain, and it requires
pounds sterling for capital. The first company sells the pounds sterling that it received
for the machinery to the second company at a mutually agreed upon price: £100,000 for
3185,000. In this transaction, the rate of exchange was £1 = $1.85. When a bank's foreign
exchange trader is one of the participants, he arranges for the settlement to be effected
through his due from accounts. When he purchases foreign exchange, he instructs the other
party to credit his due from account; when he sells, he sends a cable instructing the other party to
debit his due from account.While any of the above participants can trade directly with each
other, it is often more convenient to use a broker. The broker brings both sides of the
transaction quickly together by telephoning the buyer and seller and arriving at a mutually
acceptable rate. Only at this point does be reveal the identity of each party to the other. The two
sides make the final settlement arrangements while paying the broker his commission. The
broker rarely trades for his own account because be usually lacks the capital to do so. The broker
is also a useful source picture of the supply and demand fluctuations of currencies during the
trading day. Any bank or company with money to sell or a need to buy may contact a broker.
58

59

Foreign exchange trading room of a New York bank. The traders are grouped around the
octagonal trading table.
Rates fluctuate constantly during a trading day. A foreign exchange trader must make
quick decisions based on rapid mathematical calculations. Because so much trading is effected
over the telephone, the trader is bound by his word and must therefore honor his verbal
commitments.
Except for the pound starling, all currencies are quotable either in terms of the value of
one unit of currency. A or one unit of currency B, a situation that often confuses the outsider. For
example, one
Mexican peso may be worth eight United States cents, and one United States dollar is
simultaneously worth 12.50 Mexican pesos. When the value of the Mexican peso changes to a
value of 7.95 United States cents, then one United States dollar is worth 12.57 Mexican pesos.
Each rate quotation is the reciprocal of the other.
The foreign exchange trading market traditionally deals in large quantities of a currency,
such as 100,000 pounds or 1,000,000 Japanese yen. Small decimal changes in the exchange rate
60

are important, because each trader wishes to buy another currency at as low a cost as possible
and sell it for the maximum amount at any given moment.
Trading for prompt delivery is called spot trading or spot, which means that settlement
occurs in two business days. At that time, the seller of a foreign currency delivers it to the bank
account of the buyer, who at the same time pays for it by crediting the bank account of the seller.
Contract for a futures sale of foreign exchange.
Trading may also occur for settlement on delivery at any future date. This transaction
result in a futures or forward contract. A businessman who know he will be paid for the sale of
machinery within thirty days can arrange with his banker today to settle the rate of exchange at
which the bank will buy the foreign currency when it is
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delivered. Trading for future delivery is very common. It reflects the planning time for exports,
imports, and investments.
The prudent businessman who signs a contract for the future delivery of machinery or an
investment commitment may wish to settle his cost in his own currency immediately by signing a
futures contract with his bank. He is then said to have hedged his position. He knows that no matter
what happens to the daily fluctuations in the foreign exchange rate between now and his settlement
date, his rate of exchange is set.
During a trading day, a bank's foreign exchange trader executes orders on behalf of his
bank's customers by buying and selling spot deliveries in any of the dozen or so major world
currencies. The foreign exchange trader also buys and sells for future delivery. Trading is often hectic,
involving quick decisions and providing little time for reflection. As the trading progresses, the
trader must be aware of his position in each currency. His bank's senior management limits the
exposure in each currency. The trader must also be certain that he has a sufficient balance in his due
from accounts to make delivery on spot sales and maturing futures contracts. He often trades to
balance his position better. This may involve a purchase or sale of spot, or it may involve evening out
his position by swaps. If the trader has excess cash in his due from account that he does not need until a
forward contract matures in thirty days, he can swap the surplus cash and buy it back for delivery in
thirty days. In this way, his bank's money is not tied up in a non-interest-bearing account during the
thirty-day period.
Rates of exchange differ; the rate for spot will be one amount, futures for thirty days a
different amount, and those for sixty days yet another amount. This multiplicity of rates reflects
supply and demand, as well as future expectations for the currency.
The bank's trader must always be alert for opportunities to make a quick profit by arbitrage
when the cross-rates are favorable. The trader might discover that the rate being quoted in London
for Italian lira is such that he can buy pounds in New York, simultaneously sell these pounds in
London for lira, sell the lira in Zurich for dollars, and end up with more dollars than he began with.
This action must, of course, be effected very quickly before rates fluctuate again.
The investor likewise seeks opportunities to earn a higher rate of return. A corporate
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treasurer in the United States, for instance, may decide to invest some temporary surplus funds. He
may find that he can earn a higher rate of return by investing in a British government
bill than a United States Treasury bill. To obtain this, he must purchase pounds and then
hedge his position by selling the pounds forward through a futures contract with has bank. If-after
deducting the hedging cost and any out-of-pocket expenses such as cable costs-he finds that the
rate of return is still higher than the United States bill, he may then make the short-term
investment in Britain. This is known as interest-rate arbitrage
United States Treasury bill, a short-term borrowing instrument offered and backed by the U.S.
Government. Since the bill pays no interest, it is sold at a discount, thereby giving the investor
the equivalent of interest on his money. (Courtesy U.S. Department of the Treasury)
In addition to trading in large quantities of a currency by means of cablegrams and the

telephone, a bank’s foreign exchange trader also buys and sells the actual banknotes and coins.
This service is usually offered to accommodate tourists. The rate of exchange for such paper
money and coins is less favorable to the customer than the rate of exchange for cable transfers of
a large quantity. This is because of the expense involved in handling and storage (since this
foreign money is in the form of cash).
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Every nation restricts resident on the use of its currency outside the country. Such
restrictions became very common during and immediately after World War II. Specific control
might include Limitations on the availability of exchange for overseas investments, for non-
essential or luxury imports, and for out-of-the-country travel. Some countries maintain a system
of multiple exchange rates to encourage particular exports and to limit imports. Under the
prodding of the International Monetary Fund, these restrictions have been substantially reduced,
and currencies in recent years have become more freely convertible
Discussion
1. How is a nation’s rate of exchange determined?
2. Why do countries have different money from each other?
3. How does a nation’s balance of payments affect its exchange rates?
4. What is the difference between the spot rate and a futures rate?
5. What is the difference between a hedger and a speculator?
6. Where does the foreign exchange market meet?
7. What role does the broker play in trades?
8. Can a trade be made without a broker?
9. Do only United States banks trade in the New Your market?
10. Why is foreign exchange trading needed?
11. Who uses the foreign exchange market?
12. Why do rates fluctuate?
13. Why are exchange controls imposed?
14. Why would a businessman want to hedge?
15. Does the foreign exchange trader make profits?

64

16. Why would a trader conduct arbitrage?
17. Why would a trader conduct arbitrage?
18. How would interest-rate arbitrage be of interest to corporations?
19. Hoe are rates quoted?
20. Who determines the rate of exchange?
65

TOPIC 8
HUMAN RESOURCES
The emphasis in this chapter is on people and their importance in accomplishing an

organization’s goals. The acquisition, training, motivation, and retention of qualified personnel is
a critical factor in determining the success of any business. Human resources specialists, or
personnel managers, are employed by even the smallest firms. They help plan for future
personnel needs. They recruit, train, and develop employees. They arrange employee evaluation,
compensation, and benefits programs.
But, in fact, all managers are personnel managers. Managers from all areas – marketing,
finance, and accounting – help select prospective employees, train new workers, and evaluate
employees’ performance. Therefore, all managers must be cognizant of the basics of good
human resource management. In this chapter, students will have to choose and hire a director of
publicity to rescue the tourism industry of a small Middle Eastern country named Dhuma-
Dhuma. Emphasis is also put on the interviewing process from the perspective of both the
interviewer and the interviewee.
PREVIEWING
Human Resources
The Right Person for the Right Job
In order for a company to hire the right person for the right job, the human resources manager
must do many tings.
The human resources manager must first write a job description of the position which
outlines the objectives, responsibilities, and key tasks in a job. It also describes the conditions of
the job and its relationship to other positions. In addition to the job description there is the job
66

specification. This describes the necessary skills, education, and experience needed to fill the
position. A human resources manager also needs to forecast the demand for labor.
Why is a food employee-job match important?
________________________________________________________________________
________________________________________________________________________
Getting the Job
As a first step, a company must gather a large number of interested and qualified applicants for a
position. This is the recruitment phase. Managers must then sort through the applicants and select
the best candidate for the job.
What are some ways in which a company many recruit qualified applicants?
________________________________________________________________________
________________________________________________________________________
Starting the Job
When an employee is hired, some form of orientation is usually given. This helps the employee
learn more about the job, the company’s policies, and its programs. At this time, new employees
usually meet people with whom they will be interacting.
Next, an employee is given some sort of training. This could be either on-the-job training
or off-the-job training. On-the-job training occurs while an employee is actually at work,
whereas of-the-job raining takes place at a location away from the work site, usually a
classroom.
Which form of training is better for both the employee and the company? Explain.
________________________________________________________________________
________________________________________________________________________
On the job
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Every company needs to assess the performance of its employees in some way. This assessment
is called performance appraisal. It is an evaluation of how well workers are doing in their jobs.
Workers must first formulate goals and performance expectations with their managers. Then
expectations are compared with actual performance. This comparison is used in making decision
about training, promotions, compensation, and dismissal of the employee
Explain why performance appraisals are necessary and an important aspect of business.
______________________________________________________________________
______________________________________________________________________
Compensation for the job
Wages and salaries are the amounts paid to employees for their work. Wages are sums that are
paid according to the number of hours worked or the number of units produced; a salary, on the
other hand, is paid at regular intervals in return for doing a job, regardless of the amount of time
or output involved.
Aside from wages and salaries, companies may also offer incentive programs to their
employees. These programs are designed to motivate improved performance and productivity by
offering additional pay over and above the normal wage or salary level. A common example of
this is a sales bonus. In a bonus arrangement, it an employee sells a certain number of dollar
amount, he will receive a special payment in addition to his wage or salary. Those employees
who do not reach this goal will earn no bonus.
Another type of incentive is profit sharing. This is based on profit levels of the firm. Profits
earned above a certain level are distributed to employees. Stock ownership by all employees
serves as an incentive to lowering costs and increasing productivity and profits, and thus
increasing the value of the employees stock.
In addition to incentives, wages, and salaries, firms offer their workers benefits in return for
their work. Example of these include health insurance, retirement benefits, and paid vacations
and holidays.
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What benefits do you consider most and least important in attracting workers? In keeping
workers? In motivating workers?
______________________________________________________________________
______________________________________________________________________
In small groups. Discuss the following questions.
1. How did you find out about the availability of your present job?
______________________________________________________________________
______________________________________________________________________
2. Describe how you were selected for your present position.
______________________________________________________________________
______________________________________________________________________
3. Once you were hired, how were you oriented to your new position and to the company?
______________________________________________________________________
______________________________________________________________________
4. How is your performance evaluated at your job?
______________________________________________________________________
______________________________________________________________________
5. What types of benefits does your company offer? Which do you consider the most and the
least important?
______________________________________________________________________
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______________________________________________________________________
6. Select your job or that of someone in your group. Write a job description and a job
specification for this position.
______________________________________________________________________
______________________________________________________________________
JUST IN CASE
Writing Your Resume
Before you can go on a job interview and be hired by a company, it is important to have a
resume highlighting your background and experience. Fill in the following information about
yourself to help organize your resume.
70

NAME _______________
ADDRESS _______________
TELEPHONE _______________
EDUCATION
(What kind of degree, diploma, or certificate did you received)
________________________________________________________
________________________________________________________
(Where did you receive it?)
________________________________________________________
________________________________________________________
(When did you receive it?)
________________________________________________________
________________________________________________________
WORK EXPERIENCE
(Position or job title)
________________________________________________________
________________________________________________________
(Name of company or organization)
________________________________________________________
________________________________________________________
(When and how long were you employed there?)
________________________________________________________
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________________________________________________________
(What did you do?)
________________________________________________________
________________________________________________________
OUTSTANDING ACCOMPLISHMENTS
(What honors or award have you received? OR What special skills do you possess?)
________________________________________________________
________________________________________________________
LANGUAGE SKILL
(Which languages do you speak, read, or write? List only if fluent.)
________________________________________________________
72

TOPIC 9
QUOTATIONS AND ESTIMATES

A quotations is a promise to supply goods on the terms stated. The prospective
buyer is under no obligation to buy the goods for which a quotation is requested, and
suppliers will not normally risk their reputations by quoting for goods they cannot or do
not intend to supply. A satisfactory quotation will include the following :
 An expression of thanks for the enquiry
 Details of prices, discounts and terms of payment
 A clear indication of what the prices cover, eg packing, carriage, insurance
 An undertaking regarding date of delivery
 The period for which the quotations is valid
 An expression of hope that the quotation will be accepted.
TERMINOLOGY
When requesting a quotation the buyer must be careful to establish clearly whether the
prices are to include such additional charges as carriage and insurance. Failure to do
this may, if not specified in the supplier’s quotation, lead to serious disagreement,
especially where such charges are heavy as in foreign trade dealings. Some
terminology associated with quotations is shown here :
 Carriage paid. The quoted price includes delivery to the buyer’s premises.
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 Carriage forward. The buyer pays the delivery charges.
 Loco, ex works, ex factory, ex warehouse. The buyer pays all expanses of

handling from the time the goods leave the factory or warehouse.
 For (free on rail). The quotation covers the cost of transport to the nearest railway
station and of loading on to truck.
 Fas (free alongside ship). The quotation covers the cost of using lighters or
barges to bring the goods to the ship, but not the expense of lifting the goods on
board.
 Fob (free on board). The quotation covers the cost of loading the goods on to the
ship, after which the buyer becomes responsible for all charges.
 Ex ship. The quoted price includes delivery over the side of the ship, either into
lighters or barges or, if the ship is near enough, on to the quay.
ROUTINE QUOTATIONS
Request for quotations for printing paper.
(a) Request
This request complies with the requirements of a satisfactory letter of enquiry.
 It states clearly and concisely what is required.
 It explains what the paper is for, and thus helps the supplier to quote for paper of the
right quality.
 It states the quantity required, which is important because of the effect of quantity
upon price.
 It states when delivery is required – an inportant conditiion in any contract for the
purchase of goods.
74

 It states what the price is to cover – in this case ‘delivery at our works’.
Dear Sir
We will soon be requiring 200 reams of good quality white poster paper suitable poster works
generally. We require paper which will retain its white appearance after pasting on walls and
hoardings.
Please let us have some samples and a quotation, including delivery at our works within 4 weeks
of our order.
Your faithfully
(b) We will Quotation (Penawaran)
This supplier’s reply should be sent promptly and it shouldm the be equally businesslike,
ensuring that all points from enquiry are answered.
Jawaban pemasok harus segera dikirim dan bersifat bisnis dengan kepastian bahwa semua butir
dalam permintaan terjawab
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Dear Mr Keenan
Thank you for your enquiry dated 21 June
As requested we enclose samples of different qualities of paper suitable for poster work.
We are pleased to quote as follows:
A1 quality Printing Paper white $ 2.21 per kg

These prices include delivery at your works.
All these papers are of good quality and quite suitable for poster work. We guarantee that they
will not discolour when pasted.
We can promise delivery within one week from receiving your order, and hope you will find
both samples and prices satisfactory.
Please give me a call on 2634917 if you have any questions.
Yours sincerely
76

Request
Dear Sir,
You have previously supplied us with crockery and we should be glad if you would now quote
for the items named beelow, manufactured by rRidgeway Pottery Company of Hanley. The
pattern we require is ‘number 59 Conway Spot (Green)’.
300 Teacups and Saucers
300 Tea Plates
40 1-litre Teapots
When quoting prices please include packing and delivery to the above address. Please also state
discounts allowable, terms of payment and earliest date of delivery.
I hope to hear from you soon.

Yours sincerely
 Fas (free alongside ship). Penawarn mencakup biaya penggunaan tongkang untuk
mengangkut barang ke kapal, tetapi tidak mencakup ongkos mengangkat barang ke
kapal.
 Fob (free on board). Penawaran mencakup biaya pemuatan barang ke kapal, setelah
itu pembeli bertanggung jawab atas semua biaya.
 Ex ship. Penawaran harga mencakup pengiriman setelah keluar dari kapal, mungkin
ke tongkang, atau ke dermaga jika kapal cukup dekat.
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(b) Quotation
Dear Mr Clarke
CONWAY SPOT (GREEN) GILT RIMS
Thank you for your enquiry of 18 April for a further supply of our crockery, We are pleased to quote as follows:
Teacups $ 83,75 per hundred
Tea Saucers $ 76,00 per hundred
Tea Plates $ 76,00 per hundred

QUOTATIONS SUBJECT TO CONDITIONS
Teapots, 1-Litre
OF ACCEPTANCE
$ 4,20 each
(PENAWARAN YANG DISESUAIKAN DENGAN SYARAT PENERIMAAN)

These prices include packing and delivery, but a charge is made for crates, with an allowance for their return in good
condition.
Very often a quotations is made subject to certain conditions of acceptance. These conditions
Delivery can be made from stock and we will allow you a.5% discount an items ordered in quantities of 100 or more.
vary according to the circumstances and the type of business. They may relate to a stated time
There would be an additional cash discount of 2% on total cost of payment within one month from date of invoice.
within the quotation must be accepted, or to goods of which supplies are
We hope that you will find these satisfactory. Please give me a call on 3614917 if you have any questions.
Yours sincerely
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Foreign buyer’s request for quotation
Dear Sirs
We have recently a number of request for your lightweight raincoat and believe that we could
place regular orders with you, as long as your prices are competitive.
From the description in your catalogue we feel that your LEATHER range would be most
suitable for this region. Please let me have a quotation for men’s and women’s coats in both
small and medium sizes deliverd cif Jakarta
If your prices are right, we will place a first order for 400 raincoat, namely 100 of each of the 4
qualities. Shipment would be required within 4 weeks of order.
I look forward to a prompt reply.
Yours sincerely
79

Dear Mrs Barden
LEATHER RAINWEAR
Thank you for your letter.of 15 June. I was pleased to learn about the enquiries you have received for our
raincoats.
Our AQUATITE range is particularly suitable for warm climates. During the past year we have supplied this
range to dealers in several tropical countries. We have already received repeat ordera3 from many of
those dealers. This range is popular not only because of its light weight but also because the material
used has been'sp'ecially treated to prevent excessive condensation on the Inside surface.
We are pleased to.quote as follows :
100 WEATHER coats men's medium £17.50 ea 1.750.00
100 WEATHER coats men's small £16.80 ea 1.680.00
100 WEATHER coats women's medium £1 6.00 ea 1.600,00
100 WEATHER coats women's small £1 5.40 ea 1.540,00
6.570,00
less 33 1/3 % trade discount 2.187,81
Net price 4.382,19
Freight, (London to Alexandria) 186,00
Insurance 122,50
TOTAL 4.690,69
Terms: 2½ % one month from date of invoice
Shipment: Within 3-4 weeks of receiving order
For acceptance within one month.
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We feel you maybe interested in some of our-other products, and enclose descriptive booklets and a
supply of sales literature for issue to your customers.
We hope to receive your order soon.
Yours sincerely
TABULATED QUOTATIONS
Many quotations are either tabulated or prepared on special forms. Such tabulated quotations are :
 clear, since information is presented in a form which is readily understood
 complete, since essential information is unlikely to be omitted.
Tabulated quotations are particularly suitable where there are many items. Like quotations on
specially prepared forms, they should be sent with a covering letter 4 which:
 expresses thanks for the enquiry
 makes favourable comments about the goods themselves
 draws attention to other products likely to interest the buyer
 expresses hope of receiving an order.
Such treatment creates a favourable impression and helps to build goodwill.
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 Covering letter with quotation on specially prepared form (surat pengantar dengan
penawaran pada formulir yang telah dipersiapkan).
(a) Covering letter (Surat pengantar)

Dear Mrs Greenway
Thank you for your enquiry of 15 August. Our quotation shoes and handbags is enclosed. All items can be
delivered from stock.
These items are made from very best quality leather and can be supplied in a range of designs and
colours wide enough to meet the requirements of a fashionable trade such as yours.
Also enclosed is a copy of our catalogue in which you will find details of our other products. These include
leather purses and gloves, described and illustrated on pages pages 18-25.
The catalogue gives all the essential facts about our goods, but if you have any queries pleases do not
hestitate to give me a call on 9635117.
Your Sincerely
(b) Quotation (Penawaran)
In this quotation, not the following points :

 It is given a serial number to assist future reference.
 Used of catalogue numbers identifies items with precision and avoids

misunderstanding. Individual shapes and sizes are also given their own serial
numbers.
 For acceptance within 21 day’s protects the supplier should the buyer order goods
at a later date when prices may have risen.
82

 ‘4% one month’ indicates that a discount of 4% will be allowed on quoted prices
if payment is made within one month ; for payment made after one month but
within two months, the discount is reduced to 2%.
CENTRAL LEATHERCRAFT LTD
85-87 Cheapside, London EC2V 6AA
Date 20 August 200-
Quotation no JBS/234
Smith Jenkins & Co
15 Holme Avenue
SHEFFIELD
S6 2LW
Catalogue Item Quantity Unit

Number
Price
S 25 Men’s Box Calf Shoes (brown) 12 pairs 65.75
Men’s Box Calf Shoes (black) 36 pairs 65.50
S 27 Ladies’ Glace Kid Tie Shoes (various colours) 48 pairs 64.80
S 42 Ladies’ Calf Colt Court Shoes 24 pairs 64.35
H 212 Ladies’ Hanbags – Emperor 36 66.50
H 221 Ladies’ Hanbags – Paladin 36 78.75
H 229 Ladies’ Hanbags – Aristocrat 12 80.00
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FOR ACCEPTANCE WITHIN 21 DAYS
Delivery ex works
Terms 4% one month 21 ¼ 2% two months
(signed)
For Central Leathercraft Ltd
 A Covering letter enclosing a quotation
Dear Miss Richardson
Thank you for your Interest In Star Way
I am pleased to enclose our quotation for the StarWay laptop system that you require. This gives details
of a standard specification and also outlines the cost of configuring the system to meet your needs.
As one of the world’s leading direct marketers of personal computers, we believe our success is primarily
due to putting our clients first. We want to custom-build the right personal computer for you as well as
ensure that you get the ongoing service and support that you need.
Please call me on 0800 345234 to finalise your purchase. If you have any questions at all, please do not
hesitate to give me call.
Your sincerely
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TOPIC 10
THE BASIC LETTER OF CREDIT
Special Terms
Bill of Lading: A steamship company document that includes a contract for

delivery of the merchandise, conveys title to the goods, and is a receipt for the
merchandise. It indicates details of weight, freight costs, and size of cargo.
C.I.F. (Cost, Insurance, and Freight): A shipping term under which a seller
quotes a price that includes the cost of goods, the marine insurance, and all
transportation charges to the named point of destination.
Consignee: The person or company to whom the merchandise is to be

delivered.
Credit Risk: The chance a bank takes in lending money to a par ticular
borrower.
Discrepancy: A situation where the documents presented under a letter of

credit do not provide all the information called for in the letter of credit
Endorse: To sign the back of a check or other document, written by the party
to whom the check or other document names as payee. The purpose of an
endorsement is to verify identity.
Endorse in Blank (blank endorsement): To endorse an item without naming

the party to whom title is transferred.
F.O.B. (Free on Board): A shipping term under which the price quoted by the
seller only covers the costs of goods and loading the merchandise on board the
vessel at a named port of embarkation.
General Average: A marine insurance concept whereby all the shippers on a

given voyage reimburse those shippers whose cargo was jettisoned (discarded and
85

abandoned) in bad weather to save the ship.
Inspection Certificate: A document issued by an independent agency attesting to the

presence, quantity, or quality of goods being shipped.
Invoice: A detailed statement showing goods sold or shipped, along with an

itemization of amounts.
Letter of Credit: A document issued by a bank, usually in connection with

international trade, whereby the bank replaces the buyer as the paying party. The
exporter is basing his risk of getting paid on the bank rather than on the importer.
The bank will have to be reimbursed by the importer.
Negotiate: To verify that the documents presented under a letter of credit conform
to requirements and then, when the documents are in order, to pay the exporter.
Packing List: An itemization of the contents of each container in an entire shipment.
Stale: Documents can be considered stale when submitted to the opening bank
after the merchandise has already arrived. A letter of credit can be considered stale if
submitted after the expiration date.
Transshipment: Transferal of merchandise from one vessel to another during shipment,

usually at an intermediate port.
Weight List: A statement attesting to the total or partial weight of a shipment of

merchandise.
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Vocabulary Practice
1. What is a letter of credit?
2. What is the difference between a weight list and an inspection certificate?
3. When are document stale? Can a letter of credit become stele?
4. What is the difference between a document that has been endorsed and one that has
been endorsed in blank?
5. What is general average?
6. What happens when documents are negotiated?
7. What is transshipment?
8. What do the initial C.I.F. and F.O.B. stand for?
9. Explain the difference between C.I.F. and F.O.B.
10. Who is the person or company to whom merchandise is to be delivered?
11. What is a credit risk?
12. What is a bill of lading?
13. What is an invoice?
14. Is a packing list the same as a weight list?
15. What is a discrepancy?
The Basic Letter of Credit

The letter of credit is the most widely used instrument of international banking. It has had a
long and successful history as a means of facilitating international trade, particularly during
times of economic and political uncertainty.
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The letter of credit is the bank instrument that assures the person selling merchandise of
payment if he makes the agree-upon shipment. On the other hand, it also assures the buyer that
he is not required to pay until the seller ships the goods. It is thus a catalyst that provides the
buyer and the seller with mutual protection in dealing with each other.
An international trading transaction begins when a buyer and a seller sign a contract that
records all the elements of the transaction: The merchandise, price, delivery date, and method of
shipment, as well as specifics of color, size, an so on. The buyer and seller may have contacted
each other through the office of a trade development agency, such as the United States
Department of Commerce, or through the trade development section of their bank
Letter of credit issued for import into the United State
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Customer’s application for the letter of credit
Having worked out an agreement, the buyer and seller must arrange payment.
The buyer will want possession before paying, and the seller will want payment before
making delivery. Since each party often has an incomplete knowledge of the other, there
is a certain caution to their dealings.
At this point, the letter of credit can be extremely useful. The buyer requests his
bank to issue a letter of credit in favor of the seller. Assuming that the credit risk is
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acceptable to the bank, it issues its letter of credit. The letter says, in essence, to the
seller: "We, the bank, promise that we will pay you when you submit certain
documents evidencing that you have made the agreed -upon shipment." The bank has
thus substituted its credit for that of the buyer, which might also be good but probably
is not as well known. The letter of credit also protects the buyer, for he knows that he
will not be called upon for payment by his bank until the evidence shows that the shipment
has actually been effected.
The letter of credit specifies the documents to be submitted, the shipping requirements,
and the expiration date. The seller then assembles the goods, prepares the documents,
and makes the shipment. Then the seller draws a draft, as required in the letter of credit,
attaches the documents to it, and presents everything to the bank for payment.
The amount of the letter of credit depends on whether the buyer or the seller is paying for
the freight and insurance. If the price is quoted F.O.B., then the seller is obliged to
pay only the charges (freight and insurance) necessary to put the goods on board the
vessel; freight and insurance from then on are to be paid by the buyer. If the price is
quoted C.I.F., then the seller must prepay the freight and insurance costs to the
delivery port. He of course adjusts his price accordingly in the underlying contract.
The documentary requirements are designated by the buyer in his bank application for the
letter of credit. The bank follows these in preparing its letter of credit.
A typical letter of credit may call for the following documents: an invoice, a bill of
lading, marine insurance, a packing list, a weight list, an inspection certificate, and a
certificate of origin (a consular statement of the country of origin).
Not all of these documents are required in every letter of credit transaction. Sometimes,
other documents must be used. For example, food shipments coming into the United States
require clearance by the Pure Food and Drug Administration. Multiple copies of each
document are required, since the bank retains a set for its own records and the buyer needs
copies for his records.
The ocean bill of lading is often considered to be the most important document
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required by a letter of credit. Uniformity of the law for ocean bills of lading was
achieved at an international convention held at The Hague in 1921 and resulted in what are
known as "The Hague Rules."
The customary letter of credit calls for a "full set on board ocean bills of lading to order
shipper, blank endorsed." Each of these phrases will now be examined.
Full Set. Steamship companies issue more than one original bill of lading. This custom arose
from the practice of airmailing two identical sets of documents to the issuing bank or
importer in two mails, each a day apart, to ensure that one set would get through if
something happened to one of the airplanes. In issuing a bill of lading, the
shipping company indicates that it is being issued in "three originals." This constitutes
the full set. The steamship company at the receiving port only honors the first original
bill of lading that is presented. Since the bill of lading conveys title to the goods, the
bank must be certain that it holds all of the issued originals until the buyer pays, at
which time they are turned over to the buyer.
On Board. This written notation on the bills of lading indicates that the goods have
actually been put on board the named vessel. Otherwise, the merchandise may be
overlooked. The "on board" notation is proof that the goods are actually on the ship.
Ocean Bills of Lading. Airlines, trucks, and railroads also issue bills of lading. The
designation of "ocean" confirms that the shipment is by sea, which is considerably less
expensive than air shipment. However, if the buyer and seller agree on air, truck, or
rail shipment, the bill of lading reflects that fact.
To Order Shipper, Blank Endorsed. This provides protection to the bank that issues
the letter of credit during the time between the bank's payment to the exporter and the
repayment to the bank by the buyer. The bill of lading can indicate that the goods are to be
shipped and delivered to a designated party. However, by requiring that the consignee be the
shipper and by requiring the shipper to endorse the Bills of lading in blank, the document
becomes a negotiable instrument wherein the title to the merchandise goes with possession of the
bills of lading. The shipping company agent at the receiving port can deliver the goods only
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when someone presents an endorsed bill of lading. In the interim, the bank retains possession of the
bills of lading. If the buyer goes into bankruptcy, the bank takes possession of the merchandise. In
this way, it has a source of repayment for the ex-tension of credit.
The letter of credit usually requires evidence that the shipment is insured, either by the buyer or
the seller. Marine insurance is a very specialized business. The prime risk, of course, is that the ship
may sink and the cargo lost completely. Or pipes may leak, rupture, or sweat and thus damage the
cargo. The vessel and cargo may also be damaged at an intermediate port during a strike, riot, or
other civil commotion.
There is also the principle of maritime law which states that all of those who put cargo on board
a vessel are joined in a common venture. If the vessel encounters a storm at sea and is in danger
of sinking, the captain may decide to lighten the vessel by jettisoning cargo. If the vessel then
survives and arrives at port, each shipper whose cargo arrives safely is assessed a common fee to
reimburse those Shippers whose cargo was jettisoned. This procedure is called general average and it
can be insured against.
The letter of credit specifies whether the order is to be shipped as a unit or whether partial
shipments are permitted. It likewise indicates whether the goods must go from the exporting
port to the importing port on one vessel or whether transshipment at some intermediate port is
permitted. The buyer may take a risk by permitting this, since the cargo must await another vessel
and serious delays may occur.
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Bill of lading for a U.S. export. (Courtesy Zima Container Service)
The letter of credit specifies the latest date, the expiration date, on which the
documents can be presented. The shipment may take place at any time prior to that, but as soon as it
does, the shipper must assemble the documents promptly and forward them to the bank. If he delay, the
documents can be considered stale, and the bank can refuse to pay him.
Once the seller has made the shipment, he assembles the documents, prepares the draft drawn
on the issuing bank, and presents it for payment.
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The issuing bank examines the draft and documents upon receipt, to ensure that the
documents conform to the letter of credit. If anything is wrong, the discrepancies are subject to
acceptance by buyer.Many discrepancies are minor, but the fundamental rule is that the
document must conform exactly to requirements in the letter of credit
Banks deal only in documents. They have no legal obligation to inspect the actual
merchandise. If the buyer discovers that the merchandise has been mislabeled or
the cartons are empty, he must sue the seller, not the bank.
The letter of credit negotiator must be extremely careful in his examination of the
documents, since the bank pays the seller only when he complies with the terms in the
letter of credit.
In order to promote worldwide uniformity of practices and terminology, the major

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trading countries have agreed on certain definitions and rules for letters of credit.
This is stated on the face of the letter of credit in the sentence, "This credit is
subject to the Uniform Customs and Practice for Documentary Credits (1974 revi -
sion), International Chamber of Commerce Publication 290." As a consequence, a bank can
easily negotiate a foreign bank's credits.
Once the documents are verified, the bank pays the sight draft presented by the seller
and then notifies its customer, the buyer, that the documents have been successfully
negotiated and that he must pay the bank in accordance with his application. After the
payment has been completed, the bank releases the documents to the buyer,
retaining only such copies as are needed for its files. The buyer now has the bill of
lading, which he can present to the shipping company to receive his goods.
Discussion
1. Why is the bill of lading considered the most important document in the letter of
credit?
2. Why would an invoice, packing list, weight list, and inspection certificate be
asked for by the buyer when he applies for his letter of credit?
3. Why is it important to insure the cargo?
4. If the letter of credit requires a packing list, but none is presented by the seller, what
does the negotiator do?
5. What is the relationship between the underlying contract and the letter of credit?
6. Why is the “on board” notation important?
7. What is a full set of bills of lading?
8. Who issues bills of lading?
9. Why should the bank issuing a letter of credit know its customer?
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10. What are The Hague Rules?
11. If the price is quoted C.I.F. San Francisco, who pays for the insurance and freight?
12. “Banks deal in document.” Why is this important?
13. What protection is provided by the letter of credit to the buyer?
14. When the goods are consigned to the order of the shipper, how does the buyer obtain
possession of the merchandise?
15. Why would a bank want to have title to the merchandise?
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TOPIC 11
M A R K E T I NG
Marketing is the link between the organization and the consumer. All organizations must serve
consumer needs it they are to succeed. Marketing begins with the identification of consumer
needs and the development of a product to meet those needs. Marketing managers develop a
marketing strategy based on the four principle elements of marketing. These four elements, often
called the four P’s of marketing, are product (including goods, services, and ideas), price,
promotion, and place (distribution). Together, these elements are known as the marketing mix
In this chapter, emphasis is put on the four P’s of marketing. Students must develop a
marketing strategy using the best marketing mix for the Grandma Jones Company. Grandma
Jones, a frozen food company is planning to introduce a new product to the market. Emphasis is
also put on giving a business presentation. After student develop their marketing strategies, they
will deliver them in a presentation to the class.
PREVIEWING
Marketing
Marketing in Our Lives
1. Discuss how the following element influence the product, services or ideas that are a part of
your lifestyle.
a. TV c. packaging e. coupons
b. billboard d. store windows f. your peers
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2. How do you find out abut certain products or sales? What entices you to buy these
products?
______________________________________________________________________
______________________________________________________________________
Marketing Behind the Scenes
1. Discuss what a company must do in the following areas before a product can reach your
hands.
a. product research and development
b. market research
c. an advertising campaign
d. quality control
e. managing the relationship between manufacturer and distributor
2. What are the steps that a company takes to introduce a new product?
______________________________________________________________________
______________________________________________________________________
In small groups. Discuss the following questions.
Think about yourself as a consumer and discuss the following
1. When you shop. Are you more concerned with price or with quality?
______________________________________________________________________
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2. Do you buy only things that you really need or do you buy things that are the latest fad?
______________________________________________________________________
3. Do you plan your purchases carefully or do you buy on impulse?
How do the following influence you when you shop?
1. Shopping alone or with someone else
______________________________________________________________________
2. Salespeople
______________________________________________________________________
3. Your mood
______________________________________________________________________
4.. Promotion
______________________________________________________________________
5. Price
______________________________________________________________________
6. Location of store
______________________________________________________________________
7. time of day
______________________________________________________________________
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TOPIC 12
Business Plans
If you are setting up a new business or want people to invest serious money in your business,
you need a business plan. A business plan defines your business and identifies your operation
and your aims. It provides specific and organized information about your company it’s like a
resume of your company. A business plan has two main purposes:
1. To provide you with a detailed plan to help you as you make your new company grow.
2. To convince investor that you are the sort of person and that this is the sort of business in
which they sould invest.
COMPONENTS OF A BISUNESS PLAN
Before writing your business plan it will help to look at as many example as possible. This will
not be difficult because there are many of sites on the internet giving sample business plans for
all types of a companies. Most of them contain similar components.
1. Executive summary
This is the first section of your business plan, and it is exactly what is sound like-a compact,
concise outline of the whole plan. In this section you should state:
 The nature of the company
 The products / services you will offer
 What’s special about your products / services
 Who the managers are

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 How much money you need and what you will use it for
Mose people only the read summary so you need to generate axcitement in your excekutive
summary, showing how unique your business and your team are.
2. Table of contents
Try to keep this to one page, listing everything your plan includes along with page numbers.
3. Company description
 How did you get started?
 How has the company grown?
 Provide a history of sales, profits and other important information.
 Where are you now?
 What plans do you have for the future?
4. Products / Services
Put yourself in the investor’s shoes and ask yourself what you would want to know before
investing money in your business. Questions like these:
 What products or services do you offer?
 What makes them different from others?
 How does it make people’s lives better?
 What kind of equipment do you need?
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5. Market analysis
This section shows all the research you have done, such as distribution problems, government
regulations, technological opportunities, industry characteristics and trends, projected growth,
customer behaviour, complementary product/services, etc.
6. Marketing plan
After discussing what the market is like, you have to show how you and your fellow managers
intend to capture the market. List the steps you will take to ensure that customers know about
your product/service and why they will prefer it over the competition. List all the tactics you will
use, from the cheapest to the most expensive.
7. Operations plan
This is the nuts and bolts of you business plan. You have to give precise information about what
is involved in running your business – the location, the bricks and cement , the equipment you
will need, the staff requirements, etc.
8. Financial plan
In this section you will need to include details of sales forecasts, profit-and-loss statements
cashflow projections, balance sheets, etc.
9. Management
Include details of the management of your company, who is on the board, who will manage each
department and why
10.Appendices
There will probably be lots of appendices attached to your business plan – managers’ resumes,
promotional materials, product photographs and descriptions, financial details, etc.
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For sample business plans online, check out: (Untuk online contoh perencanaan bisnis, kunjungi)
www.bplans.com
CHEKLIST
 Read lots of sample business plans – just put in a search on any search engine and you will
find lots of useful sites.
 Check out the bookshelves too – there are lots of books providing excellent detailed advice
on how to write your business plan.
 Don’t wait until the last minute to start writing. If you have ideas for your business, a solid
plan will enable you to formulate all your thoughts better.
 Concentrate on strengths rather than originality. Investors usually pay more attention to the
strength of the management team than to looking for a truly original idea.
 Try to be as concise as possible. Business plans are, of essence, very long documents,
probably 40-60 pages.
 Keep focused. Stick to the essential facts, and cut out any padding.
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TOPIC 1

THE INTERNATIONAL FINANCIAL WORLD

Barter :The trade of goods without exchange of money.

Capital : Fund invested by individual or corporate shareholders to establish an enterprise

Exports : Goods and services that a nation sells to other nations.

Foreign Trade : The exchange of goods an services between nations.

Invisible Trade : The trading of services between nations.

Tariff: A tax on imported goods.

Visible Trade : The import and export of goods between nations.

English For Banking and Finance

3. What is the difference between a quota and a tariff ?

4. What is visible trade ?

5. How does invisible trade differ from visible trade ?

8. What is the exchange of goods between nations called ?

9. What are reserve ?

The International Financial World

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English For Banking and Finance

As an example of invisible trade, Brazilian coffee is usually transported by ocean vessel

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English For Banking and Finance

Investment can have a crucial impact on a nation’s balance of payments. When an

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English For Banking and Finance

1. Why does foreign trade take place ?

2. Why do nations try to maintain a favorable balance of trade ?

4. Can a nation import more than it export ? Give an example.

5. How do investments expand international trade ?

7. What is the difference between bartering and trading for money ?

9. What is the entry entitled “ Net Errors and Ommission ”?

11. What impact can devaluation have on a country’s balance of payment ?

English For Banking and Finance

Form of business Ownership

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Discuss the advantages and disadvantages of a sole proprietorship.

Discuss the advantages and disadvantages of a partnership.

English For Banking and Finance

Discuss the advantages and disadvantages of a corporation.

QUESTIONS FOR DISCUSSION

In small groups, Discuss the following questions.

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3. Where are the various forms of business located in your community?

4. Which type of business do you like shopping at the most? Why?

English For Banking and Finance

2. reputation image illustration name

3. bookkeeper auditor accountant stockbroker

4. debt mortgage dividend liability

5. profit expense income revenue

6. asset drawback benefit advantage

7. flavor inedible taste seasoning

8. renovate improve destroy remodel

9. proceed progress continue stop

10. rave condemn praise compliment

11. store shop establishment infirmary

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PARTS OF A BUSINESS LETTER

GBD/ST GBD/st/Per1 GBD/ST/134

July 12, 2010

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Cowles Engineering Co Ltd

Eagle press Inc

Canda M4J 7LK

English For Banking and Finance

_ PROFITABILITY _ EMPLOYEE WELFARE

_ GROWTH _ MULTINATIONAL EXPANSION

_ QUALITY _ SOCIAL RESPONSIBILITY