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

_____ refers to a method of foreign currency translation in which items in the subsidiaries' financial statements are translated at the current exchange rate into the currency of the parent corporation.

Which of the following statements about the GAAP rules and IFRS is true?

On January 1, 2009, Company X signs an agreement to import 100 pounds of coffee from Company Y on April 1, 2009 at a price of $5.00 per pound. On April 1, 2009, the market price of coffee is $6.00 a pound. Instead of having to pay $6.00 a pound for coffee, the importer needs to pay $5.00. However, the importer's gain is the exporter's loss. The exporter must now sell 100 pounds of coffee at only $5.00 per pound even though it could have sold it in the open market for $6.00 per pound if it had not signed the agreement. The above is an example of a(n):

Adopting different accounting standards makes it easier for investors or lenders to compare the financial health of two companies.

An American aircraft manufacturer has a subsidiary in Indonesia. The subsidiary needs funding to expand its operations. The parent company deposits the required funds in a London based international bank. The money is then transferred to the subsidiary by the bank. The above serves as an example of:

_____ refers to a central location where the cash balances of a parent and its subsidiaries are pooled.

Which of the following statements holds true for "musharakah," an investment partnership approved by the Sharia?

Which of the following statements holds true for "mudarabah," an investment partnership approved by the Sharia?

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

When a subsidiary obtains funding through a _____ it allows both the subsidiary and the parent eliminate paying transaction costs to an outside entity such as a bank, which would charge fees to make the transaction.

What are the advantages of centralized depositories?

Which of the following statements holds true for equity financing?

_____ refers to Islamic law which, in terms of finance, prohibits charging interest on money and other common business activities, including short selling.