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

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 indirect tax?

The purpose of accounting is to communicate the organization's financial position to company managers, investors, banks, and the government.

Companies face currency risk because they typically price their products and services in the local currency of each country in which they operate.

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.

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

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:

A company needs to buy US dollars in 90 days time. Therefore it signs a contract with a US bank to buy US dollars in exchange for euros 90 days from now at a specified exchange rate. The company would most likely use the _____ as a way to reduce exchange-rate risk if the value of the euro decreases substantially relative to the US dollar.

What are the advantages of a fronting loan?

Which of the following statements holds true for hedging?

_____ refers to a country that has very advantageous (i.e., low) corporate income taxes.

Governments use financial statements to ensure that the companies are paying their fair share of taxes.

Which of the following statements holds true for forward exchange rates?

What are the reasons for adopting one global accounting standard across the financial world?

The consolidated financial statement must reconcile all the investment and capital accounts as well as the firms' assets, liabilities, and operating accounts.

_____ refers to the organized trading of securities through exchanges.

Adhering to GAAP as well as IFRS helps companies in creating globally shared service center for accounting, rather than having accounting departments in different regions.

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

The _____ is the most widely used currency-translation method.

The disadvantage of raising capital in equity markets is that the firm has to repay the money at a specific time and at a specific interest rate.