MIdterms Flashcards
When a US firms tha produce domestically and sell only to domestic customers can be affected if they compete against imports
Exchange rate changes
The link between exchange rates and stock prices is that exchange rate can systematically affect the value of the firm by??
- Influencing operating cash flow
- Influencing the domestic currency values of its assets and liabilities
The extent to which the firm’s operating cash flows will be affected by unexpected changes in exchange rates
Operating Exposure
When you have undertaken a hedging strategy that gives the asset a constant dollar value is called
Redenominated asset
What are the strategies for managing operating exposure
- Selecing low cost prod. rates
- Flexible sourcing policy
- Diversification of market
- Product differentiation and R&d efforts
- Financial Hedging
The sensitivity of realized domestic currency alues of the firm’s contractual cash flows denominated in foreign currencies to unexpected exchange rate changes
Transaction Exposure
When your losses on one side are equal to gains on the other
Hedge
Why is it difficult to conduct international trade transaction in comparison to domestic trades?
The costs of international trade outweight the benefits
The 3 basic documents in a foreign trade transaction
- Letter of credit
- Time Draft
- Bill of lading
Involves technology transfervia the sale of manufaturing plant; as part of terms that the selller of the plant agrees to purchase certain portion of the plant output
Buy-Back transaction
It can be viewed as a countertrade agreement involving the aerospace/defense industry
Offset Transacation
The benefits of arguments on favor of countertrade
- Conservation of cash or hard currency
- improvement of trade imbalances
- maintenance of export prices
The larget recipient of FDI is?
United States
HOw have MNCs invested in China
- Lowe material costs
- lower labor costs
- desire to preemp entry of rivals into China pontentially huge market
WHy do firms locate production overseas rather than exporting finished good
- Shipping costs
- Firms seeks to control corporate control overseas
- Imperfect factors markets
The worls larget foreign exchange trading center is
London
The difference between a broker and a dealer
- Brokers bring together buyers and sellers, no inventory
- Dealers stand ready to buy and sell from their inventory
The standat size foreign transaction are for
10 million USD
Involves the almost immediate purchase or sale of foreign exhange
Sport Market
A US based MNC with exposure to the Swedish krona could best cross hedge with
forward contract in euro
HOw can and exporter shift exchange rate risk to their customers
Invoicing in hteir home currency
When an exportes is faced to an appreciating currency it can reduced transaction exposure with ??
Paying early, collecting late
Why do governments regulate internationa ltrade?
- Raise revenue
- protect domestic industries
- pursue other economic objectoves
Honda’s investmen tin Ohia in an example of __________
Trade barrier motivated FDI
When FDI involves industry abroad that produces INPUTS for MNCs is a
Backward Vertical Integration
Overtime US switches from an exporting country of new product to an importing country
Product Life cycle theory
Document issued by the common carrier specifying that it has received the food for shipment; it can serve as title of the good
Bill Lading
It can be viewed as direct foreign investment in the PURCHASING country
Buy-Back transaction
The potential losses to the parent firm of an MNC resulting from adverese polical developments in the host country
Political Risk
The level in which most trading flows over Reuted and EBS plantforms
Wholesale level
Eximbank’s purpose is to provide financing in situations where private financial institutions are unable or unwilling to because
- The loan maturity is too long.
- The amount of the loan is too large.
- The loan risk is too great.
- The importing firm has difficulty in obtaining hard currency.
