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Final Exam FIN 300
Terms in this set (15)
Unit Sales Price / Unit VC
Unit Sales Break-even (using CM)
FC / CM
Unit Sales Price * Unit Sales Break-even
An aggressive working capital policy would have which of the following ratios (assuming a profitable company)?
A low current ratio and a low-average ROE
A corporation with operations in more than one country is called:
a multinational corporation
Maximizing shareholder value may create what ethical issue for corporations with plants in developing countries?
The low wages paid to workers, often children, plus the environmental costs to the local country where environmental laws may be nonexistent
If the foreign currency/dollar exchange rate for the Japanese yen is 115 yen/$, what does a yen cost in terms of US currency?
If, in the last month, the foreign currency/$ exchange rate has increased from 115 yen per dollar to 120 yen per dollar, the dollar has:
If the foreign currency/ dollar exchange rate has moved from 10 Mexican pesos to 7, which of the following is likely to be true?
The quarterly earnings of American companies with extensive Mexican operations have been decreased.
If you, in the United States, have purchased a million Canadian dollars worth of auto parts, payable in 90 days in Canadian dollars, how could you hedge your foreign exchange risk?
Buy a forward contract for $1 million Canadian dollars, payable in 90 days.
If a Big Mac from McDonald's costs $3 in the United States and 360 yen in Japan, what theory of exchange rate pricing explains this pricing if the yen/dollar exchange rate is 120 yen per U.S. dollar?
Purchasing power parity theory
The common stock of major foreign companies is put into a trust and traded on U.S. stock exchanges, denominated in dollars. These units, representing claims on common stock, are called:
American depository receipts.
What are the three different types of exchange rate risk?
1) Translation Exposure (assets, liabilities, and profits)
2) Transactions Exposure (fixed price contract)
3) Economic Exposure (firm value)
Purchasing Power Parity (PPP) Theory
Discusses goods and materials
International Fisher Effect (IFE) Theory
Discusses interest rates
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