Final Exam (Part 3) Flashcards
A(n) ________ is a system that allocates financial resources in the form of debt and equity according to their most efficient uses.
B. capital market
Which of the following is a debt instrument that specifies the timing of principal and interest payments?
A. bond
________ refers to shares of ownership in a company’s assets that give shareholders a claim on the company’s future cash flows.
A. Stock
The ease with which bondholders and shareholders may convert their investments into cash is called ________.
A. liquidity
An expanded money supply ________.
D. reduces the cost of borrowing
________ are usually located on small island nations or territories with favorable tax and/or secrecy laws.
C. Booking centers
A bond issued by a Venezuelan company, denominated in U.S. dollars, and sold in Britain, France, and Germany is an example of a ________.
D. Eurobond
Rates that the world’s largest banks charge one another for loans are called ________.
C. interbank interest rates
The rate at which one currency is interchanged for another is called the ________.
D. exchange rate
The practice of insuring against potential losses that result from adverse changes in exchange rates is called currency ________.
B. hedging
Scenario: ABC Software
ABC Software is a producer of educational software for children below the age of twelve. The company has operations in Switzerland and would like to expand its foreign operations with a new facility in China.
ABC Software has had difficulty obtaining funds to expand. A friend of the CEO recommends that the company should explore an offshore financial center, which ________.
D. is a country or territory whose financial sector features very few regulations and few, if any, taxes
Scenario: ABC Software
ABC Software is a producer of educational software for children below the age of twelve. The company has operations in Switzerland and would like to expand its foreign operations with a new facility in China.
If ABC Software simultaneously purchases and sells foreign exchange for two different dates, the company is said to be involved in ________.
D. conducting a currency swap
Scenario: ABC Software
ABC Software is a producer of educational software for children below the age of twelve. The company has operations in Switzerland and would like to expand its foreign operations with a new facility in China.
If ABC Software holds a currency option to purchase Swiss francs at SF 1.67/$ in 30 days, at the end of which the exchange rate is SF1.70/$, then ABC Software ________.
B. would not exercise its currency option
ABC Software is a producer of educational software for children below the age of twelve. The company has operations in Switzerland and would like to expand its foreign operations with a new facility in China.
The company’s financial advisors recommend that ABC Software conduct most of its business in a vehicle currency. Which of the following is true of vehicle currencies?
D. The U.S. dollar became a vehicle currency after World War II when all of the world’s major currencies were tied indirectly to the dollar because it was the most stable currency.
Which of the following is the most common method of buying and selling goods internationally?
C. exporting and importing
Which of the following occurs when a company sells its products to buyers in a target market without going through intermediary companies?
B. export through local distributors
________ take ownership of the merchandise when it enters their country and accept all the risks associated with generating local sales.
B. Distributors
Which of the following occurs when a company sells its products to intermediaries who then resell to buyers in a target market?
C. indirect exporting
A(n) ________ exports products on behalf of an indirect exporter.
A. export management company
Selling goods or services that are paid for, in whole or part, with other goods or services is called ________.
C. countertrade
Which of the following refers to the exchange of goods or services directly for other goods or services without the use of money?
D. barter
Which of the following allows a country to earn back some of the currency it pays out for imports?
B. counterpurchase
A company proposes that in exchange for a hard-currency sale, it will make a hard-currency purchase of an unspecified product from the buyer nation in the future. Which of the following is the company proposing?
A. an offset
________ is a countertrade whereby one company sells to another its obligation to make a purchase in a given country.
A. Switch trading
Buyback is defined as ________.
D. the export of industrial equipment in return for products produced by that equipment
Which of the following is a method of export/import financing?
D. documentary collection
A document ordering the importer to pay the exporter a specified sum of money at a specified time is called a ________.
D. bill of exchange
Which of the following refers to a contract between the exporter and shipper that specifies merchandise destination and shipping costs?
C. bill of lading
Which of the following is a method of export/import financing in which the importer’s bank issues a document stating that the bank will pay the exporter when the exporter fulfills the terms of the document?
C. letter of credit
Which of the following is a contractual entry mode?
B. turnkey projects
Which of the following is a contractual entry mode in which a company owning intangible property grants another firm the right to use that property for a specified period of time?
B. licensing
Which of the following is a contractual entry mode in which one company supplies another with intangible property and other assistance over an extended period?
B. franchising
A ________ is a separate company created and owned by two or more independent entities to achieve a common business objective.
A. joint venture
Which of the following types of joint ventures involve parties investing together in downstream business activities?
D. forward integration
