ACCA Financial Management (F9) Certification Practice Exam

Lagged payments in international finance are best described as:

1. Payments made in advance of goods delivery

2. Payments made at the same time as the invoice

3. Payments made after the agreed delivery timing

4. Payments that do not involve currency exchange

The correct answer is: Payments made after the agreed delivery timing

Lagged payments in international finance refer to the timing of when a payment is made in relation to the delivery of goods or services. Specifically, these are payments that occur after the agreed delivery timing, meaning that the buyer settles the invoice at a later date than when the goods were received or the service was rendered. This arrangement can be influenced by various factors, including payment terms negotiated between the buyer and seller, as well as the creditworthiness of the buyer. This concept is particularly important in international trade, where various currencies, exchange rates, and country-specific regulations can impact the timing and method of payment. Lagged payments can potentially introduce currency risks and affect cash flow, making it essential for financial managers to understand and manage these aspects effectively. The other options describe payment arrangements that do not align with the definition of lagged payments. Payments made in advance of goods delivery (the first choice) or at the same time as the invoice (the second choice) represent different timing scenarios, and payments that do not involve currency exchange (the fourth choice) do not focus on the timing aspect at all. Each of these alternatives fails to capture the essence of lagged payments, which is fundamentally about delayed payment after the agreed delivery.