International Bus 19

50 terms by leondflowers 

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A foreign exchange exposure that arises because of a change in the value of exposed assets or liabilities of foreign currency financial statements is a(n) ________.

translation exposure

What is LIBOR?

the deposit rate that applies to interbank loans within London

At the end of 2002, Dell Mercosur was facing the following dilemma: ________.

Dell wasn't sure if the Brazilian real would continue to strengthen or weaken

Foreign branch income is ________.

directly included in the parent's taxable income in the year in which it is earned

One way to account for the challenge of the variability of future cash flows is to ________

adjust the hurdle rate for the project

Which of the following statements accurately describes the recent trend in equity markets?

More and more companies are looking at equity markets as an alternative to debt financing

The market for shares sold outside the boundaries of the issuing company's home country is the ________.

Euroequity market

A Japanese company exports merchandise to a U.S. importer for ¥1,000,000 when the exchange rate is ¥107 per dollar. Payment is not due until the end of the month. At the end of the month, the exchange rate has moved to ¥105 per dollar, and the U.S. importer pays the Japanese exporter for the merchandise. From the standpoint of the U.S. importer, ________.

the Japanese exporter will be paid $9,524

Assume that a Canadian exporter sells to a French importer and denominates the sale in euros, which opens the exporter up to foreign exchange risk. Also, assume that the exporter goes to its investment bank and enters into a contract with the bank to gain the right but not the obligation to deliver euros for Canadian dollars at an agreed-upon exchange rate. This is an example of a ________.

foreign currency option

A negotiable certificate issued by a U.S. bank to represent the underlying shares of a foreign corporation's stock is called a(n) ________

American Depositary Receipt

The market for shares sold outside the boundaries of the issuing company's home country is the ________.

Euroequity market

The best way for a Euroequity to get a listing in the United States is to issue a(n) ________.

American Depositary Receipt

f a U.S. company has operations in Japan during a period when the yen is rising against the dollar, ________.

translated earnings would be higher than before the strengthening of the exchange rate

The process of coordinating cash inflows and outflows among subsidiaries so that only the balance in cash is transferred is known as ________.

multilateral netting

A city or country that provides large amounts of funds in currencies other than its own is a(n) ________.

offshore financial center

Brooke buys shares of stock in a small bakery in a foreign country in return for an ownership position and promised capital gains. This is an example of ________.

equity financing

A bond issue floated by a U.S. company in dollars in London, Luxembourg, and Switzerland by a syndication of bonds is an example of a(n)

Eurobond

Which of the following statements explains why a company may want to borrow money in the international bond market?

It allows a company to diversify its funding sources

The OECD is concerned about transfer pricing practices because ________

companies use transfer prices to manipulate prices and therefore taxes

Foreign source income that is derived from the active conduct of a trade or business and therefore subject to U.S. taxation is known as ________

active income

If a U.S. company exports to Canada and the sale is denominated in Canadian dollars, which of the following is true?

The U.S. company would report a loss if the Canadian dollar falls against the U.S. dollar.

Which of the following is not a characteristic of most offshore financial centers?

They provide large amounts of their own currency for international transactions.

An international organization that has set transfer pricing guidelines to eliminate the manipulation of transfer prices is the ________.

OECD

Which of the following is a characteristic of the Eurocurrency market?

The Eurocurrency market is both short and medium term

A major problem with MNEs using offshore financial centers is that _______

they may give unfair tax advantages to companies, which is a concern to the OECD

According to U.S. tax law, if a foreign subsidiary earns income, _______

active income is taxable to the parent when it is remitted as a dividend

The degree to which a firm funds the growth of a business by debt is known as

leveraging

London is an example of an offshore financial center that _______

provides a large foreign-currency (Eurocurrency) market for deposits and loans

A hedging instrument that allows one to establish a fixed exchange rate for future transactions where delivery is required is a(n)

forward contract

Assume a U.S. exporter sells to a British importer and denominates the sale in dollars. If the dollar rises over time against the British pound, what types of economic exposure and/or possible strategies could the exporter or importer face?

The U.S. exporter could lower prices in order to reduce the cost to the importer and thereby keep up sales volume.

MNEs often use offshore debt markets or borrow in foreign currencies ________

to take advantage of their ability to access capital in different countries

What are the advantages of Eurocurrencies?

They provide the lender with better yield

The long-term financing dimension of cash management

deals with the selection, issuance, and management of long-term debt and equity

A tax credit is ________

a dollar-for-dollar reduction of tax liability when it recognizes foreign-source income

The concept of leveraging in finance refers to ________.

the degree to which a firm funds the growth of a business by debt

A transaction exposure for a U.S. company _

is where the dollar value of a receivable or payable from exports or imports changes as the exchange-rate changes

If a foreign subsidiary is located in a low tax country, the parent company would probably use a ________.

high transfer price on goods sold by the subsidiary to the parent

Multilateral netting in global cash management is ___

coordinating cash inflows and outflows among subsidiaries

A formal agreement between two or more countries to prevent double taxation is

a Tax Treaty

Global Positioning Solutions Inc. is a Utah-based company that __

focuses on companies that have significant foreign-exchange needs but that don't have their own foreign-exchange team in house

A price on goods and services sold by one member of a corporate family to another is known as a(n) ____

transfer price

Which of the following is not a major internal source of funds available to MNEs?

raising equity capital internal to the country where the subsidiary is located

The global bond was issued by the World Bank in 1989 and is a combination of a(n) ________ and a(n) ________.

domestic bond; Eurobond

Which of the following statements about the mix of debt and equity to fund operations is true?

Companies from France and Japan rely more on debt than equity to fund operations.

A U.S. importer buys merchandise from a German manufacturer worth 100,000 when the exchange rate is 0.6451 per dollar with payment due in 30 days. The importer decides to enter into a forward contract to deliver dollars for euros for 0.6329. At the time the payment is due, the spot rate is 0.6711. Based on this, which of the following is true?

The exporter will receive 100,000 for the sale

An example of an operational hedging strategy against foreign exchange risk is

using local debt to balance local assets

A situation in which several banks pool resources in the Eurocurrency market to extend credit to a borrower and spread the risk is known as _______

syndication

An economic exposure __

occurs when the sourcing and costs of parts and components change as exchange rates change

Capital budgeting is ____

the process that determines which projects and countries will receive capital investment funds

Which of the following is unique to foreign project assessment in the capital budgeting decision?

Local tax issues affect the determination of free cash flows and the remittance of earnings.

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