Exam 10: Financial Management and Accounting in the Global Firm

EZ Lawn Currency Risk (Scenario) The EZ Lawn Corporation manufactures lawn equipment such as lawn mowers, blowers, and trimmers. The lawn equipment is assembled in the U.S. at a facility in Florida, but the firm outsources inputs from a number of countries, each with varying degrees of economic stability. Given the importance of the firm's sourcing activities, EZ Lawn managers are discussing methods that might reduce the currency risk faced by EZ Lawn. -Which of the following would most likely minimize the currency risk of EZ Lawn?

With a futures contract, the purchaser agrees to buy or sell a currency ________.

Which of the following statements is TRUE of the global money market?

How much debt a firm should hold depends partly on the nature of its industry and its target markets. Which of the following firms can sustain a higher debt ratio?

International firms operating within the Eurozone are less concerned about currency risk than international firms operating outside the Eurozone mainly because of the ________.

Describe the three types of currency exposure, and explain the benefits of the consolidation of financial statements.

Through a ________ the parent company deposits a large sum in a foreign bank, which transfers it to a subsidiary as a loan.

________ is the strategic reduction of cash transfers within the MNE family through the elimination of offsetting cash flows.

Currency swap is an agreement to exchange one currency for another, according to a specified schedule.

Chile, Costa Rica, and the Czech Republic have attracted greater FDI by increasing the transparency of their regulatory systems.

Capital budgeting is intended to ________.

Describe three methods used to transfer funds within an MNE.

Currency arbitragers are currency traders who seek to minimize their risk of exchange-rate fluctuations, often by entering into forward contracts or similar financial instruments.

Which of the following terms is used to refer to compensation paid to the owner of intellectual property?

In terms of financial management tasks that are key to MNE success, which of the following comes immediately after the task of raising funds for the firms?

Transaction exposure is currency risk that firms face when outstanding accounts receivable or payable are denominated in foreign currencies.

The last task in international financial management is to manage the diversity of international accounting and tax practices.

Explain the differences between a forward contract and a futures contract.

________ is the currency risk that results from exchange-rate fluctuations affecting the pricing of products, the cost of inputs, and the value of foreign investments.

Net present value is defined as the ________.