B5-M4 International Business Operations

Question 1

what is country risk with engaging business with foreign countries?

Answer 1

includes political risk, economic risk, transfer risk, sovereign risk, and exchange risk

Question 2

what is principal risk?

Answer 2

relates to risk of losing an investment (money)

Question 3

what is interest rate risk?

Answer 3

relates to the fluctuation in value of an investment as a result of changes in interest rates

Question 4

what is commodity price risk?

Answer 4

relates to market values and future cash inflows that are affected by fluctuations in commodity prices

Question 5

what is transfer pricing?

Answer 5

Transfer pricing involves setting prices for a product or service when exchanges occur between different units within the same organization. One of the goals of transfer pricing is to minimize the amount of taxes paid by the overall organization. Shifting more cost to the country with the highest tax burden will reduce profitability for the entity in that country, which in turn will reduce taxes owed.