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BEC Custom 5 Flashcards

1
Q

Import Quota

A

restricts the quantity of goods that can be imported

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2
Q

Import Tariff

A

Taxes on imported goods that increases cost in domestic market

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3
Q

Currency Exchange Rate

A

price of one unit of a country’s currency expressed in units of another country’s currency

  • $1.00 = .80 Euro
  • 1.00 Euro = $1.25
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4
Q

Balance of Trade

A
  • difference between money value of imports and exports
  • exports > imports = trade surplus
  • exports < imports = trade deficit
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5
Q

Balance of Payments Issue

A
  • summary accounting of U.S.-base transactions with all other countries during a period of time
  • balance of payments accounts: current account, capital account, and financial account
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6
Q

Current Account (Balance of Payments)

A

net dollar value for period of:
- amounts earned from export of goods and services
- amounts spent on import of goods and services
- income from foreign investments - dividends and interest
- net factor flow from foreign aid and grants
SUM = Net Balance

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7
Q

Capital Account (Balance of Payments)

A

net dollar value for period of:

  • inflows from investments and loans by foreign entities
  • outflows from investments and loans by U.S. entities made abroad
  • reflects net change in foreign ownership of U.S. assets and U.S. ownership of foreign assets
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8
Q

Financial Account (Balance of Payments)

A

net dollar amount of:

  • U.S. owned assets located abroad
  • Foreign-owned assets in the U.S.
  • shows accumulated amount of investments:
  • both government and private
  • monetary and non-monetary
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9
Q

Direct exchange rate

A

Expresses the domestic price of one unit of a foreign currency

1 Euro = $1.10

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10
Q

Indirect exchange rate

A

Foreign price of one unit of a domestic currency

$1.00 = .909 Euro

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11
Q

Free-floating currency

A

exchange rate is determined by market forces of supply and demand for a currency

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12
Q

Pegged or Movable currency

A

exchange rate is fixed by the government, with frequent revisions

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13
Q

Transaction Risk

A

The possible unfavorable impact of changes in currency exchange rates on transactions that are denominated in a foreign currency

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14
Q

Foreign Currency Exchange Rate Hedging

A

Hedging is a risk management strategy that involves using offsetting or contra transactions so that a loss on one would be offset by a gain on the other

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15
Q

Translation Risk

A

The possible unfavorable impact of changes in currency exchange rates on financial statements of foreign operation that are converted from a foreign currency to the domestic currency

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16
Q

Economic Risk

A

The possibility that changes in exchange rates will alter value of future revenues and costs

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17
Q

How can a firm mitigate economic risk?

A
  • distribute productive assets in different countries with different currencies
  • shift sources of revenues and expenses to different locations with different currencies
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18
Q

Foreign currency forward exchange contract

A

A contract to buy or sell a specified amount of a foreign currency at a specified date at a specified rate

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19
Q

Foreign currency option contract

A

A contract that gives the right to buy or sell a specified amount of a foreign currency for a specified time at a specified rate

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20
Q

In practice, what may transfer price be based on?

A
  • cost to the selling unit - either variable or full cost
  • market price - the price of such goods or services in the market, if available
  • negotiated price - between buying and selling units
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21
Q

Globalization

A

The movement toward a more integrated and interdependent world economy

22
Q

World Bank

A

promotes general economic development

23
Q

International Monetary Fund (IMF)

A

maintains order in the international monetary system by providing funds to economies in financial crisis, including - currency crisis, banking crisis, and financial debt crisis

24
Q

World Trade Organization (WTO)

A
  • oversees the implementation, administration, and operation of covered trade agreements
  • provides a forum for negotiations and for settling international trade disputes
25
5 largest export countries in order
1. China 2. Germany 3. U.S. 4. Japan 5. France
26
5 largest import countries in order
1. U.S. 2. China 3. Germany 4. Japan 5. France
27
Outsourcing
Acquiring goods or services from a separate or external provider under contractual terms
28
Outsourcing Risks
- quality - goods or services do not meet buyer's standards - security - provider misappropriates intellectual property, trade processes, data, etc. - export/import - home country or source country restricts the transfer of goods - currency exchange - the cost of goods and services in domestic currency increases - legal - possible violation of a country's laws
29
Capital Markets
Bring together providers of capital (investors) and users of capital (borrowers)
30
Global Capital Market
Interconnected set of financial institutions and national markets that permit the trading of securities and other financial assets between and among investors and borrowers world-wide
31
Eurodollar market
provides short and intermediate-term loans world-wide denominated in U.S. dollars
32
International bond market (Eurobonds)
- long-term loans outside borrower's home country - offered in most major currencies - avoids most government regulation
33
What are the two major reasons for movement of services world-wide?
- internet and global communications | - relocation of services necessary to support foreign trade and production
34
Foreign Licensing
- Granting a foreign entity the right to use an asset: patent, trademark, formula, etc. - licensee makes royalty payments to the licensor
35
Foreign Franchising
- special form of licensing in which the franchisor typically mandates strict operating procedures - used primarily in foreign retail and service markets
36
Foreign Joint Venture
- an entity established in a foreign location and jointly owned by two or more otherwise unrelated entities - one of the owners is typically located in the foreign country
37
Foreign Subsidiary
- entity acquires or establishes a foreign subsidiary - a controlled, but legally separate entity
38
Strategic Planning
Sequence of interrelated procedures for determining an entity's long-term goals and objectives and identifying the best approaches for achieving those goals and objectives
39
Mission Statement
provides expression of the purpose and range of entity activities
40
Values
Establish the underlying beliefs that govern operations and how relationships with other parties are conducted
41
Goals
- general purposes towards which entity endeavors are directed - typically mid-to-long-term in outlook - may encompass multiple objectives
42
What are the three generic business strategies from Michael Porter?
- cost leadership - differentiation - focus
43
PEST analysis
A macro-assessment of - - Political - Economic - Social - Technological elements of an environment
44
Porter's Five Forces
- threat of new entrants into the market - threat of substitute goods or services - bargaining power of buyers - bargaining power of suppliers - intensity of rivalry
45
SWOT Analysis
- develops a profile of the internal Strengths and Weaknesses and external Opportunities and Threats
46
What are Porter's three generic strategies?
- cost leadership - differentiation - focus - cost leadership or differentiation applied to a narrow market
47
Cost Leadership strategy points
- seek to minimize costs - invest significantly in production and distribution assets - have high levels of expertise in product design, manufacturing, and distribution
48
Differentiation strategy points
- highly skilled and creative product or service development personnel - leading edge research capabilities - strong and dedicated marketing and sales personnel - reputation for innovation, quality, and service
49
Focus strategy points
- outstanding market research and understanding of target group - ability to tailor strengths in product or service development to target group - high degree of customer satisfaction and loyalty
50
Alternative Resources-Based Model (RBM)
- alternative strategic planning model - assesses resources and capabilities of an entity - bases strategy on collection of resources and capabilities to take advantage of opportunities in the market

CPA (16 decks)

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