Exam 15: Understanding the Roles of Finance and Accounting in Global Competitive Advantage

_____ refers to the company-generated forecast of future spot exchange rates.

_____ financial statements demonstrate that firms, although legally separate from the parent and each other, are in fact economically interdependent.

Some large Chinese companies report results in both Chinese accounting standards and the IASB's standards to facilitate the Easy financial assessment of the companies by the investors.

Which of the following statements holds true for a spot exchange rate?

The advantage of the _____ agreement between the parent and foreign subsidiaries is that if the exchange rate changes, the subsidiary will be not be blamed or credited for the change.

The process of _____ budgeting helps a firm decide which major investment projects will be most economically advantageous for the firm by assessing each project's benefits, costs, and risks.

An ice cream vendor signs a franchising agreement with the distributor.Under the agreement the distributor agrees to provide ice cream stock with a 10% discount on payment within 30 days, and a 20% discount on payment within 10 days.The distributor allows the operator 90 days to pay for the ice cream stock in full.The above serves as an example of:

Two friends consider opening a driving range for golfers.They estimate such a range could generate rentals of 20,000 buckets at $3 a bucket in the first year, and expect rentals to grow at 750 buckets a year thereafter.The equipment requirements include ball dispensing machines, the ball pick-up, and the vehicle tractor that will cost $8,000, $2,000, and $8,000 respectively.The net working capital is $3,000 to start with, and is expected to grow at 5% per year.The annual fixed operating cost for balls and baskets will initially be $3,000 and is expected to grow at 5% per year.The fixed costs of leasing the land and its upkeep will be $53,000 per year.The above is an example of:

Some companies may gain greater efficiencies and stronger controls by making a move from the GAAP to the IFRS.

The Indian subsidiary of a US-based MNC purchased three Caterpillars for its mining work.At the end of the financial year, the financial statements of the subsidiaries need to be translated into the currency of the parent corporation.When the Caterpillars were purchased, the exchange rate was 50 INR= 1USD.The present exchange rate is 60 INR= 1USD.The financial statement of the Indian subsidiary is translated into the currency of the parent corporation at the exchange rate of 60 INR= 1USD.The above serves as an example of the _____ of foreign-currency translation.

Which of the following statements holds true for hedging?

The current-rate method avoids the paper gains or losses problem of the temporal method.

Which of the following statements holds true for debt financing?

Some governments court foreign borrowers by offering low-interest loans or by offering lower corporate income tax to attract investment in their countries.

Which of the following statements is true about bilateral netting?

How is Indonesia making itself attractive to foreign investors?

What are the tax advantages of fronting loans by a subsidiary located in a tax haven?

In the case of _____ financing, firms can borrow money from banks or by selling bonds.

What are the advantages of a fronting loan?

Consolidating financial statements of subsidiaries located in different countries poses problems because of the different currencies used in different countries.