WGU_FVC1_Ch12_Global Marketing, WGU_FVC1_Ch13_Global Operations and Supply-Chain Management, WGU_FVC1_Ch14_Global Financial Management, WGU_FVC1_Ch15_Accounting and Taxation in Global Business

A subsidiary manufactures a product that will ultimately sell for $500 in the parent country. The subsidiary country has a tax rate of 15 percent. The parent company has a tax rate of 35 percent. Which of the following would be the best transfer rate to set for the product?

$400.00

Extensive tests by Fama and FrenchFootnote have shown that estimates of the cost of equity can be improved by adding two other variables to these models:

(1) the return on a portfolio of small firm stocks minus the return on a portfolio of large firm stocks (SMB), and (2) the return on a portfolio of high book-equity to market-equity ratio stocks minus the return on a portfolio of low book-equity to market-equity ratio stocks (HML).

If the company's stakeholders requested to be shown a financial statement that would identify the Williams Company's assets, liabilities, and equity for a given period of time, which one of the following statements would they most likely be requesting?

Balance sheet

Which of the following statements is NOT true about corporate income tax rates and economic activity

Before the Great Depression, state and local government expenditures in the U.S. were much lower than federal expenditures.

Of the following, which is NOT true about international financial reporting standards?

Board members of the IASB come from 25 countries.

Brininger Enterprises conducts extensive internal audits to insure the reliability and accuracy of its accounting records. Which one of the following is least likely a step in its internal auditing process?

Brininger Enterprises conducts extensive internal audits to insure the reliability and accuracy of its accounting records. Which one of the following is least likely a step in its internal auditing process?

Materials used to produce components are called ________.

RAW MATERIALS

One of your biggest customers is a manufacturing facility in Germany. Which of the following is the most likely way you would receive payment on a shipment?

The importer would electronically transfer funds to a correspondent bank in the United States and then that bank would use Fedwire to transfer the funds into your bank.

The financial experts of the Gayla Corporation are very much aware of the organization's cost of debt. Which of the following best identifies what cost of debt means to the corporation?

Weighted average of different interest rates paid on long-term borrowings

Which of the following would provide the most useful information about each shop to prospective investors?

a trend analysis of net income

Selling a currency in a currency futures contract and profiting on a decrease in the value of the currency over time is called _____.

a short position

open account

a simple agreement wherein the exporter sends an invoice with the goods and the exporter pays upon the receipt

exchange rate sensitivity

a stock value measured with the coefficient obtained by regressing the stock's return on a currency's return over time

accounting information system (AIS)

a system which has two principal objectives: (1) to provide all the financial information needed internally by management for business decision making, known as management accounting, and (2) to provide financial information to various external users concerned with the financial activities of the organization, known as financial accounting

international CAPM (ICAPM)

an asset pricing model that includes both domestic and global market factors to estimate the cost of equity or required rate of return on stocks

financial statement analysis

an evaluation of a company's financial statements in order to identify significant trends or relationships among the items

sensitivity analysis

an examination of optimistic, expected, and pessimistic scenarios to give a more complete picture of the risks and returns of investments abroad

International Accounting Standards Boards (IASB)

an independent, privately funded accounting standard-setter based in London, U.K., that issues International Financial Reporting Standards

plain vanilla currency swap

an interest rate swap, often combined with a currency swap, if the interest being swapped is in different currencies

call option

an investor's right (but not obligation) to buy an asset (e.g., a currency) at a pre-determined price

put option

an investor's right (but not obligation) to sell an asset (e.g., a currency) at a pre-determined price

Some examples of World Bank mission priorities

are health, education, social institutions, environmental disasters, private business formation, economic reforms, and poverty reduction.

Countries that have little or no corporate income tax

are referred to as tax havens.

The costs of equity R and cost of debt I increase

as the debt, or financial leverage, of the firm increases due to increased bankruptcy risk.

Because the supplier who manufactures the voice activated sensor is the only one who makes that component, what risk do you face as a customer?

as the volume increase the supplier may increase their prices.

empowerment

aspect of customer service that allows employees to take care of customer problems immediately, without having to consult a supervisor

speculators

attempts in currencies and currency derivatives to earn profits from trading them and help to make prices efficient

term financing

bank and government loans to importers to cover the cost of major purchases

trade financing

bank and government loans used by exporters to finance working capital (i.e., labor, materials, inventory, and accounts receivables)

When a bank sells a LC into the financial marketplace as a money market instrument, it is called a(n) _____.

banker's acceptance

foreign bonds

bonds that are issued by foreign firms in another country in the home currency of that country

eurobonds

bonds that are sold in any country outside the home country, but in the home country's currency

The step in the new-product development process in which projections of potential revenues and profits for a potential new product are made is called _____.

business analysis

long position

buying a currency in a currency futures contract and profiting on an increase in the value of the currency over time

diversification

buying securities in a portfolio with price patterns over time that are different from one another, which reduces the volatility of the portfolio

Prevention objectives can be used to keep competitors out of a foreign market—usually

by low prices which competitors have difficulty matching—or deterring scrutiny by home and host-country governments.

International GAAP is developed

by the International Accounting Standards Board.

telecommunications networks

collections of computer hardware and software arranged to transmit information from one place to another

What is the last step in the new-product development process?

commercialization

The industrial market includes

companies that purchase products and services such as equipment and machinery, supplies, lubricants, consulting services, cleaning services, advertising, marketing research, raw materials, semi-finished products, and so on.

Goods and services that integrate a product are called _____.

components

The step in the new-product development process in which the new product idea is presented to a small sample of the international market to gauge its reaction is called _____.

concept testing

3 major markets within foreign markets

consumer markets, the industrial market, and government markets

On October 19, 1987, stock prices in Hong Kong began collapsing and spread throughout the day into Europe and then North America as their stock markets opened for trading. Within one week, Hong Kong fell 46 percent, Australia 42 percent, the U.S. 23 percent, and Canada 23 percent. This is an example of an event called _____.

contagion

Shipping products to overseas markets in trailer-sized containers are called _____.

containerization

The required rate of return demanded by stock and bond investors and used in net present value capital budgeting analyses as the discount rate is called the _____.

cost of capital

When setting a transfer price between a subsidiary and a parent company, what other factor, besides tax rate, needs to be considered?

cost of transporting the goods

Setting Prices in International Markets FACTORS

costs attractiveness of competitive products and their prices; how competitive the product is how much marketing support (promotion budget, level of customer service, number of sales people selling the product, etc.) the product will get; and what the demand will likely be.

Futures contracts available in currencies of emerging-market countries by large banks in the OTC market are called _____.

currency forward contracts

Which of the following is a common activity that many companies outsource, and that your company could outsource as well?

customer service

domestic bonds

debt contracts sold by firms domiciled in a country in the home currency

_____ refers to a price in a foreign market that undercuts the prices of companies competing there.

dumping

_____ risk refers to the ways in which long-term exchange rate movements affect firms.

economic

The IMF and World Bank are the major suppliers of

emergency and development assistance to poorer countries.

Software packages designed to integrate the majority of a firm's business processes, execute all transactions related to the firm's business processes being integrated, store each piece of data only once in an enterprise-wide database, allow access to data and information in real time, and operate in a client-server environment are called_____

enterprise resource planning systems

The production process may consist of one or more transformations which could be all of the following EXCEPT:

esteem

Bonds that are sold in any country outside the home country, but in the home country's currency, are called _____.

euro bond

The impact of random change in the value of one currency with respect to other currencies is called the _____.

exchange rate risk

A stock value measured with the coefficient obtained by regressing the stock's return on a currency's return over time is known as the _____.

exchange rate sensitivity

Research has demonstrated that ________ have larger impacts upon the stock prices of firms in the long term than the short term.

exchange rates

The sensitivity of a stock to market risk affected by currency movements is known as the _____.

exchange risk beta

A market that includes companies that purchase products and services such as equipment and machinery, supplies, lubricants, consulting services, cleaning services, advertising, marketing research, raw materials, semi-finished products, and so on is referred to as a consumer market.

false

Consolidated accounting statements consist of income statements and balance sheets of multinational corporations including all subsidiaries abroad and are due to the IMF's special drawing right.

false

Marked-to-market involves the trading of futures contracts in major currencies and offering price transparency and efficiency in addition to elimination of counterparty risk due to guaranteed payments on contract.

false

The sensitivity of a stock to market risk affected by currency movements is called the weighted average cost of capital.

false

The two types of short-term effects on currency movements are transactions risk and transformational risk.

false

Transfer pricing refers to the tax that corporations have to pay when transferring goods and services overseas.

false

When a company buys globally, it is said that the company is practicing global production.

false

When the demand is equal or lower than the minimum efficient scale, multiple production facility locations are preferred.

false

If losses occur causing a market participant's balance to fall below the maintenance margin at the end of the trading day, a margin premium occurs that requires the bank to replenish the investor's trading account.

false, the investor has to replenish his own account.

Goods with high value-to-weight ratios

favor a single location to use the advantages of centralized production.

Organizations that require accounting information to be reported to them include

federal, state, and local government agencies.

Bonds that are issued by foreign firms in another country in the home currency of that country are called _____.

foreign bonds

Agents for companies shipping products overseas who are chiefly involved with physical distribution activities and documentation are called _____.

freight forwarders

DISADVANTAGES OF INDIRECT STRATEGY

frequently carry competitive products, meaning that they may not devote much attention to the marketer's products the company relinquishes control over much of the marketing effort

When two parties enter into a currency futures contract, they agree on the amount of currency, the price to be paid, and ________.

future delivery date

currency forward contracts

futures contracts available in currencies of emerging-market countries by large banks in the OTC market, usually only for major currencies. usually less standarized than future contracts

market-to-market

futures contracts in which gains (losses) are earned (paid) in cash at the end of each trading day, buyers and sellers must pay them immediately in cash.

Long positions earn

gains as prices rise over time, while short positions earn gains as prices fall.

The supply chains of global businesses such as Boeing, Ford, United Airlines, and the pharmaceutical companies Merck and Pfizer are known as _____ supply chains.

global

components

goods and services that integrate a product

The _____ market is likely to emphasize major infrastructure projects as well as health care services and military operations.

government

_____ refers to unauthorized importers reselling a manufacturer's product in the manufacturer's domestic market at a price less than what the manufacturer charges in that domestic market.

gray marketing

In the _____ stage of the product life cycle, sales and profits rapidly increase and profits reach a maximum during the latter part of this stage.

growth

Using currency derivatives to reduce potential transaction, translation, and economic risks of currency movements that could lead to losses for a firm or investor is called_____.

hedging

Microchips and jewelry are examples of goods with

high value-to-weight ratio

Because your focus will be on product design, and you will be outsourcing the majority of your production process, you could be termed a(n) __________.

hollow corporation

Toddler Toys operates a massive research and development facility in Missouri, USA. The company designs its toys in the United States but outsources all other production process functions. Toddler Toys can be described as a

hollow corporation.

transactions risk

how short-term changes in exchange rates can affect operating costs and revenues of firms engaged in international business activities. arises from the import and export of goods and services.

Speculating, in contrast,

implies holding unhedged futures positions with no cash position.

The objectives of the IASB include:

increasing harmonization of accounting standards and disclosures to meet the needs of the global market; providing an accounting basis for underdeveloped or newly industrialized countries to follow as the accounting profession emerges in those countries; and increasing the compatibility of domestic and international accounting requirements.

A(n)_____ strategy refers to the use of channels of distribution to market products and services to international markets.

indirect

An advantage of the _____strategy include is that it does not require an up-front investment.

indirect

The _____ market includes companies that purchase products and services such as equipment and machinery, supplies, lubricants, consulting services, cleaning services, advertising, and so on.

industrial

marketing research

information collected at one particular time

marketing intelligence system (MIS)

information collected regularly over time

International shipments using different modes of transportation are called _____.

intermodal transport

Transfer pricing refers to the pricing of goods and services that are transferred (bought and sold)

internally between members of a corporate family, including from parent to subsidiary, from subsidiary to parent, and between subsidiaries.

intermodal transport

international shipments using different modes of transportation

The indirect strategy, using channels of distribution existing in the foreign location, offers several advantages.

introduce products into international markets more quickly have excellent knowledge of foreign markets does not require an up-front investment. the firm does not incur a cost until the channel sells the marketer's product.

In the _____ stage of the product life cycle, sales gradually increase, as do profits, which often are losses in the early part of this stage.

introduction

home bias

investing most of retirement and other savings in one's home country, which reduces diversification

money center banks

large global banks

margin call

losses that are incurred and that cause the participant's balance to fall below the maintenance margin at the end of the trading day

horizontal publication

magazine that target a specific job in various industries

vertical publication

magazine that target specific industries

Maintenance pricing objectives are designed to keep the status quo:

maintaining the same competitive landscape or maintaining favorable dealer relations (the margins dealers receive, the effort they put into selling products, etc.).

A computer manufacturer determining the cost implications of manufacturing the chassis for their desktop computers, or purchasing them from an outside vendor is an example of a(n) __________.

make or buy decision

Performance objectives involve bottom-line goals such as

net profit, return on investment (ROI), market share, and penetration.

bonds are a much more important source

of long-term financing for capital investments in land, buildings, equipment, and fixed assets.

When a firm has been making goods and services in-house, and then decides to buy these goods and services from suppliers, it is called _____

offshoring

Considering the value-to-weight ratio, which of the following companies would be most likely to benefit from multiple production facilities?

oil company

The safest method available to an exporter, but that which exposes the importer to some risk related to delivery of goods, is called _____.

payment in advance

commercial letter of credit (LC)

payment protection to both exporters and importers, as the importer's bank writes a guarantee of payment

_____ objectives for international products and services include bottom-line goals such as net profit, return on investment, market share, and penetration.

performance

reliability

performance of various aspects of customer service that meets customer expectations

Differences Between U.S. and International GAAP MIGHT INCLUDE

political and legal systems; sources of capital; business complexity; inflation; taxation; culture; and accidents of history, such as one country taking over another in a war.

The price paid by the buyer to the seller for an option contract is called a(n) _____.

premium

_____ objectives include deterring scrutiny by home and host-country governments and deterring competition.

prevention

Steps in the production process are called _____.

production stages

Which of the following is a disadvantage of global procurement?

quality control

Internal transfers can involve a variety of goods and services, including any or all of the following:

raw materials; semi-finished and finished goods; allocation of fixed costs; loans; fees; and royalties for use of trademarks and copyrights.

What benefit does government financing to large companies provide during times of financial crisis?

reduces damage to the economy by providing credit to keep businesses going.

Contests and sweepstakes, coupons, end-aisle displays in stores, sponsorships, and trade shows are all examples of _____.

sales promotion

internetworking

the linking of separate networks into an interconnected network, where each network retains its own identity

Of the following, which is NOT a consideration for the one-versus-many production facilities decision?

the local culture

supply-chain management

the management of all activities in the supply chain, in order to minimize the total cost of the supply chain, and to maximize the value of the product to the end user

operations management

the management of the direct resources that are involved in the production system of a business organization

glocalization

the marketing strategy which involves pursuing a standardization strategy in foreign markets when possible and an adaptation one when necessary

If the difference between the sell and buy prices is positive,

the payoff on the futures contract is a gain, and the converse if the difference is negative.

sales potential

the percentage of a market potential that a specific company expects to sell in a specific international market

share of wallet

the percentage of purchases in a category a buyer gives to one vendor

the minimum efficient scale

the point at which unit costs stabilize.

premium

the price paid by the buyer to the seller for an option contract

generally accepted accounting principles (GAAP)

the principles by which financial statements are prepared

When the firm doing the outsourcing and the supplier that will provide the outsourced goods and services are located in the same country, it is called ________.

DOMESTIC OUTSOURCING

For a large, trusted customer that you have done business with for several years, the best payment method to use would be a participation loan.

FALSE

Foreign overhead is the percentage of a market potential that a specific company expects to sell in a specific international market.

FALSE

Normally a lower current ratio indicates a better financial position, for it implies that that a company has adequate liquidity to carry out business operations.

FALSE

One reason that sales promotions are so popular is because they have a very low cost per contact.

FALSE

Society of Worldwide Interbank Financial Telecommunications (SWIFT) is an organization that provides large, wholesale dollar payment services for businesses, banks, and governments.

FALSE

The statement that shows the beginning balance for retained earnings, additions and reductions to retained earnings, and the ending balance of retained earnings is called the income statement.

FALSE

The component of the accounting information system that provides the financial information needed internally by external users such as investors and lenders is referred to as ________.

FINANCIAL ACCOUNTING

The relationship of a number on the financial statements to another number is called a _____.

FINANCIAL RATIO

An evaluation of a company's financial statements in order to identify significant trends or relationships among the items is called a(n) _____ analysis.

FINANCIAL STATEMENT

hich of the following is commonly used in market research to help marketers make better decisions about their overseas markets?

FOCUS GROUPS

At the time of the audit, the auditor will review only the financial records of the current year.

False

If firms can reduce their cost of capital by lowering costs of equity and debt, changes in the combination of debt and equity they use (i.e., capital structure), or tax management,

they can increase the value of NPVs on investment projects

When a firm buys components and raw materials globally, it is called ________.

GLOBAL PROCUREMENT

The marketing strategy which involves pursuing a standardization strategy in foreign markets when possible and an adaptation one when necessary is called_____.

GLOCALIZATION

________ include(s) automobiles, airplanes, and computers.

GOODS

As the Jenkins and Jones Corporation continues to grow, it will face the need to make more and more strategic decisions. Which one of the following best describes the corporation if it decides to make purchase globally versus domestically?

Global procurement

value-to-weight ratio

Goods with high value-to-weight ratios are expensive but do not weigh very much like microchips and jewelry. Goods with low value-to-weight ratios are cement and oil

Lower level of accounting authority

Guidelines published by SEC and other regulatory agencies FASB and GASB Concept Statements APB Statements AICPA Issues Papers Minutes of the FASB Emerging Issues Task Force Other professional association statements Accounting textbooks, reference books, and articles written by recognized authorities in the field

Banks and government loans used by exporters to finance working capital (i.e., labor, materials, inventory, and accounts receivable) are called ________.

trade finance

_____ risk arises from the import and export of goods and services.

transactions

Two kinds of short-term effects of currency movements are _____ risk and _____ risk.

transactions; translation

When members of a corporate family are located in different countries, _________.

transfer pricing affects taxes owed and company profits

A company's international pricing mix involves consideration of four major objectives: performance objectives, prevention objectives, maintenance objectives, and survival objectives.

true

A study analyzing why households have stopped purchasing a company's product would be an example of marketing research.

true

Agents for companies shipping products overseas who are chiefly involved with physical distribution activities and documentation are called freight forwarders.

true

All activities performed typically by business organizations such as suppliers, manufacturers, distributors, and retailer that involve the flow and transformation of goods and services is referred to as a supply chain.

true

Bank and government loans used by exporters to finance working capital are called trade financing.

true

Boeing buying from thousands of suppliers in more than 100 countries, but only having production facilities in the U.S. is an example of global procurement and domestic production

true

Currency swaps allow firms to exchange currencies at a previously agreed exchange rate as a way to hedge exchange rate movements.

true

Internal auditors review all aspects of operations in search of improvement, as well as review the internal control structure to determine if they are opperating as expected.

true

Marked-to-market refers to futures contracts in which gains are earned in cash at the end of each trading day.

true

Moody's and Standard and Poor's provide bond ratings which are important in assuring the credit quality to foreign investors.

true

On October 19, 1987 (Black Monday) stock prices in Hong Kong began collapsing and spread throughout the day into the Europe and then North America. This is an example of contagion.

true

One advantage of global procurement is that the firm can maximize its flexibility by allocating its orders among suppliers in a dynamic way and the firm has access to more suppliers that can generally provide lower costs than domestic suppliers.

true

Software packages designed to integrate the majority of a firm's business processes, execute all transactions related to the firm's business processes being integrated, store each piece of data only once in an enterprise-wide database, allow access to data and information in real time, and operate in a client-server environment, traditional or web-based are called enterprise resource planning systems.

true

The activities in operations management can be grouped into four business functions: procurement, production, logistics, and research and development.

true

The cost of equity is required rate of return by stockholders in a firm and is estimated by means of the Capital Asset Pricing Model (CAPM).

true

The practice of setting a price in a foreign market that undercuts the prices of competitive companies is referred to as dumping.

true

The three major considerations for deciding the location of production facilities for products are: does the product serve the needs of all customers around the world, proximity to market and proximity to suppliers, and the effect on product's image being produced in that location.

true

Two pricing strategies that will often trigger allegations of dumping is if the home-country firm sets a price in the foreign market below what it charges the domestic market or if the price is above what it domestically charges, but below the marginal cost to ship it overseas and sell it there.

true

When considering the one-versus-many location for production facilities for components and raw materials some of the most important considerations are: fixed costs, minimum efficient scale and its comparison to demand, and the value-to-weight ratio.

true

When developing an international product mix, companies have four options to consider in marketing their products overseas: modify their products for different countries and regions, develop new products for foreign markets, incorporate all product differences into one design and develop a global product, or sell the same domestic product overseas.

true

When the goods dominate the value of a product, it is typically called a manufacturing system.

true

gray marketing(parallel importation)

unauthorized importers reselling a manufacturer's product in the manufacturer's domestic market at a price less than what the manufacturer charges in that domestic market

The World Bank focuses

upon long-term loans to developing countries seeking financing for economic reform purposes intended to raise the standard of living

Hedging involves

using a futures position (i.e., buying or selling futures contracts) in an attempt to offset losses in the cash position (i.e., the sale of products to Europe by the U.S. exporter in the above example).

hedging

using currency derivatives to reduce potential transaction, translation, and economic risks of currency movements that could lead to losses for a firm or investor

Whether a firm has growth or value and how this firm characteristic affects an estimate of the cost of equity is called the _____.

value factor

value factor

whether a firm has growth or value and how this firm characteristic provides an estimate of the cost of equity

size factor

whether a firm is small or large and how this size provides an estimate of the cost of equity

Would calculating the Current Ratio be helpful to investors? Why or why not?

yes, it would be helpful to investors to know if the shops can pay their current liabilities with their assets

_____ refers to an independent, privately funded accounting standard-setter based in London, U.K., that issues International Financial Reporting Standards.

IASB

STEPS IN DEVELOPING NEW PRODUCTS FOR INTERNATIONAL MARKETS

IDEAL CONCEPT TESTING BUSINESS ANALYSIS DEVELOPMENT MARKET TESTING COMMERCIALIZATION

Which one of the following would the Williams Company expect to establish a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements?

IFRS

________ refers to a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements.

IFRS

In the production systems model, ________ may include materials, land, labor, machines and equipment.

INPUTS

Currency swaps are often combined with ________ swaps.

INTEREST RATE

________ audits are generally concerned with evaluating the economy and the efficiency with which scarce resources are used.

INTERNAL

The linking of separate networks into an interconnected network, where each network retains its own identity is known as ________.

INTERNETWORKING

Disadvantages of Making

Requires the company to have expertise in the production of the component or raw materials that will be made. The company may be missing out on the technological advances that the suppliers may have The people producing the component or raw material, sometimes called internal suppliers, may not have the incentive to improve their product since they do not face competition. The firm may not be able to gain the economies of scale that can be gained by a supplier that is able to pool the activity of a large number of firms. By making, a firm could increase the complexity of its production process, and this could prove detrimental. the firm would incur both fixed and variable costs, while when buying, the firm would only incur variable costs.

______ is responsible for the design of new products in the production process.

Research and development

Of the following, which is NOT an advantage of locating R&D facilities in foreign countries?

It costs more to build R&D facilities overseas.

Bank of International Cooperation (JBIC)

Japanese bank that supports exporters around the world that have at least 30% Japanese content

The following well-known formula can be used to compute the weighted average cost of capital for a firm:

K = (Equity/Total Market Value) R+(Debt/Total Market Value) (1 − Tax Rate) I Equity= market value of common and preferred stock outstandingDebt= market value of long-term debt outstandingR= cost of equity or required

The primary goal of the International Accounting Standards Board is to develop, in the public interest, a single set of high quality, understandable, and enforceable global accounting standards that require transparent and comparable information in general purpose financial statements.

TRUE

The production process may consist of one or more transformations: physical, locational, informational, psychological, physiological, exchange, or storage

TRUE

When a buyer is in a long position, the buyer "wins" when the price increases, and "loses" when the price decreases.

TRUE

When companies market their products and services through marketing or sales offices that they establish and maintain in the foreign markets served, it is called direct strategy.

TRUE

An American computer company sells servers to a buyer in Germany for 500,000 euros. The equipment is delivered and 90 days later, payment is made. What risk is the American company taking?

The exchange may fluctuate during the 90 day period and they end up getting less profit than they expected

For a financial statement audit, these procedures are applied with the objective of ensuring:

The existence of assets and liabilities and occurrence of income and expenses; the completeness of the financial statements (all assets, liabilities, income, and expenses are accounted for); proper valuation of assets, liabilities, income, and expenses; that the auditee owns the assets and is obligated to the extent of liabilities shown; and that all financial statement items are properly presented and all disclosure regulations have been followed.

IFRS are regarded as being more principles-based

Principles provide broad, general guidance

______ is responsible for the acquisition of goods and services in the production process.

Procurement

Which of these is responsible for the transformations required by the production process?

Production

________ had the highest per-capita GDP in 2010.

QUATAR

Of the following, which is NOT an advantage of global procurement?

The firm does not rely upon suppliers on important dimensions such as quality, delivery, and cost

Of the following, which is NOT a disadvantage of making?

The firm has less control over quality

Of the following, which is NOT a disadvantage of global procurement?

The firm has to invest the money that is associated with making products

When Aero, Inc. recommends purchasing futures contracts to its clients, it always informs the clients of the rather small commitment fee that is needed to purchase a futures contract. Which one of the following best identifies what this fee is called?

MARGIN

The total number of units of a product that could possibly be sold by all companies doing business in a specific international market is called ________.

MARKET POTENTIAL

The step in the new-product development process in which a company will develop the marketing mix for a new product is called ________.

MARKET TESTING

Executives at Mary Kay Cosmetics' European operations are conducting a study analyzing why households have stopped purchasing certain products. These executives are engaging in _____.

MARKETING RESEARCH

_____ collects information at one specific time in order to help marketers make better decisions about their overseas markets.

MARKETING RESEARCH

In the ________ stage of the product life cycle, sales reach a peak and then begin to decline as profits continue to decline.

MATURITY

________ refers to the property of ERP systems to handle the accounting standards of multiple countries.

MULTI NATIONAL

Ardella Enterprises acknowledges the importance of its supply chain. It knows that the company's operations would not be as successful if the supply chain was less effective. Which one of the following is not related to a company's supply chain and its functions?

Management of the supply chain requires adherence to stiff environmental standards

Which of the following pricing objectives is designed to keep competitors out of a foreign market?

PREVENTION

hen Bridgemont is selling its products in foreign markets, it must decide how to price them. Which of the following is least likely to be a factor for consideration when it comes to pricing of products being sold in foreign markets?

PRICE OF THE PRODUCT IN THE US

The system that businesses use to produce products is known as a(n) ________ system.

PRODUCTION

Accountants who work in the _____ accounting field need to be licensed by the state or states in which they work; the license is designated Certified Public Accountant (CPA).

PUBLIC

You identify a new customer in France, but you've never done business with them before. Which of the following payment methods would be safest for you as the exporter?

Payment in advance

Of the following, which is NOT an advantage of making?

People producing the component or raw material have the incentive to improve their product.

Oil prices are denominated in terms of ________ in international commodities markets.

DOLLARS

hollow corporation

a company that only completes product design and outsources all other production process functions

In the context of the CAPM, Fama and French propose the following cost of equity formula:

(Rit−Rft)t=α+βi(Rmt−Rft)+βsSMBt+βvHMLt.

Government markets often involve many of the same products and services as industrial markets

, but are likely to emphasize major infrastructure projects (roads, bridges, dams, airports, ports, communication services, clean water) as well as health care services and military operations.

A rule of thumb for a "good" current ratio is that companies should have a current ratio between _____ and _____.

1;2

Of the following, which is NOT an option for companies to consider when marketing their products overseas?

Aligning with international companies and selling their products

Most of the activities in operations management can be grouped into ____ business functions.

4

The international marketing manage has _____ major methods that can be used to promote products and services in international markets.

4

According to one estimate, ________ percent of a typical American manufacturing company's value-added in production and operations came from outside sources.

60

Which of the following is an example of a data that could be used in a marketing intelligence system?

A SOFTWARE COMPANY PROVIDING A SURVEY AT THE END OF THEIR DEMO

Aero, Inc. likes to make its customers aware of what is taking place within the global financial world. One of the lessons it imparts to its clients is about the International Monetary Fund's special drawing right. Which of the following best identifies what Aero, Inc. would be discussing with its clients?

A basket of currencies consisting of dollars, euros, pounds, and yen

_____ offers payment protection to both exporters and importers, as the importer's bank writes a guarantee of payment.

A commercial letter of credit

The Atlantic Camera & Film Company realizes it has many challenges to face while undertaking its international plan for growth. Which one of the following would be least likely to require the company to adapt to differences in the foreign market arena?

A standardization strategy to be used by the company

______ of how money is spent by government organizations is of paramount importance to citizens who pay the taxes that support government operations.

ACCOUNTABILITY

The ________ system is a system which has two principal objectives: 1) to provide all the financial information needed internally by management for business decision making, and 2) to provide financial information to various external users concerned with the financial activities of the organization.

ACCOUNTING INFORMATION

All of the following are the highest level of the primary sources of authoritative accounting literature, EXCEPT:

AICPA Accounting Interpretations.

Next level of accounting authority:

AICPA Industry Accounting Guides AICPA Statements of Position FASB and GASB Technical Bulletins Industry accounting practices AICPA Accounting Interpretations

Which of the following is a component of translation risk?

An American company with a British subsidiary translating the value of British assets and liabilities into american dollars for their accounting statements.

What is one of the first things Binney needs to do before her company can be publicly traded on the United States Stock Exchange?

An external auditor needs to review the company's financial statement to validate their accuracy

A statement that lists the balances of the asset, liability, and owners' equity accounts of a business on a specific date is known as a(n)_____.

BALANCE SHEET

A(n) _____ answers the question: What is the firm's financial position at a designated point in time?

BALANCE SHEET

An investor's right (but not obligation) to buy an asset at a pre-determined price is called a(n) ________.

CALL OPTION

What is the purpose of a margin in currency futures contracts?

COLLATERAL DEPOSIT

The last step of an audit typically is to _____.

COMMUNICATE AUDIT RESULTS

The ________ market includes food, clothing, transportation, banking services, credit services, and entertainment.

CONSUMER

When stock markets in many countries move down in concert with one another and thereby reduce international diversification benefits, it is called ________.

CONTAGION

Advantages of Making

COST CONTROL OVER QUALITY ALLOWS THE COMPANY MORE CONTROL OVER DELIVERIES IT SECURES THE SUPPLY SOURCE AFFORDS COMPLETE PROTECTION OF THE INTELLECTUAL PROPERTY

The weighted average of different interest rates paid on long-term borrowings is called the _____.

COST OF DEBT

The required rate of return by stockholders in a firm that can be estimated by means of the Capital Asset Pricing Model is called the ________.

COST OF EQUITY

Which of the following would the average United States food product manufacturer be most likely to spend the largest amount of money on?

COUPONS

Bonds ratings are important in assuring foreign investors of their ________ .

CREDIT QUALITY

CURRENT RATIO

CURRENT ASSETS ------------------------------ CURRENT LIABILITIES

Complete the following equation: Current Ratio = Current Assets /__? __ .

CURRENT LIABILITIES

Population of most populas countries

China (1.3 billion people) India (1.2 billion) the United States (310 million) Indonesia (243 million) Brazil (201 million) Pakistan (184 million) Bangladesh (156 million) Nigeria (152 million) Russia (139 million) Japan (127 million) Mexico (112 million)

One of the prominent concerns the clients of Aero, Inc. express is that of currency fluctuations. The clients know fluctuations in currency can wind up costing them money. Aero, Inc. alleviates its clients concern by suggesting the client enter into a situation where currencies can be exchanged at a previously agreed exchange rate as a way to hedge exchange rate movements. Which one of the following best identifies what Aero, Inc. is likely suggesting?

Currency swap

_____ allow firms to exchange currencies at a previously agreed exchange rate as a way to hedge exchange rate movements.

Currency swaps

How often are currency futures contracts marked-to-market?

DAILY

Which of the following would be an example of currency traded in a currency futures contract?

EUR TO USD

There are two major categories of auditing: _____ auditing and _____ auditing.

EXTERNAL AND INTERNAL

The Williams Company places a high value on maintaining integrity in its operations. Part of ensuring this integrity is maintained involves having frequent audits of the company's accounting records performed. Which one of the following would not be considered an objective of a financial statement audit?

Ensure dividends are allocated for stakeholders

When the Gayla Corporation conducts its operations in foreign markets, its customers often pay in different forms of currency. Many times there is a difference in the value of that currency received in comparison to the company's U. S. currency. Which of the following best identifies what the Gayla Corporation is experiencing?

Exchange rate risk

Conducting business in a tax haven means that there are no taxes whatsoever.

FALSE

Under IFRS, criteria are less rigid.

For example, under IFRS, regarding the third criterion, instead of setting a number (i.e., 75 percent) as in U.S. GAAP, the IFRS criterion is that the lease term is for the "major part" of the economic life of the asset. The criterion "major part" is more a subjective principle than a rules-based specific number, 75 percent.

The principles by which financial statements are prepared are called ________.

GAAP

In the United States,

GAAP is primarily developed by the Financial Accounting Standards Board (FASB),

_____ is frequently used as an overall measure of a nation's income; it represents the total purchasing power of a nation.

GDP(GROSS DOMESTIC PRODUCT)

Financial statements consist of

Income statement; Balance sheet; Statement of retained earnings; and Statement of cash flows.

The Board's international GAAP is called

International Financial Reporting Standards, or IFRS.

Of the following, which is NOT a LOWER level of authoritative accounting literature?

Interpretations issued by the FASB

Types of taxes include all of the following EXCEPT:

LABOR

Which of the following external users would require financial statement information, specifically information concerning ability to meet financial obligations?

LENDERS

Determining if products made in-house will be produced in one or more facilities, and if these facilities should be located in one or more countries, is called a(n) ________ decision.

LOCATION

Which of the following is an example of a performance objective?

LOWER THE COST OF PRODUCING THE PRODUCT

Firms finance their international operations in a variety of ways.

Large banks normally handle short-term financing of goods and services. Accessing international bond and stock markets provides long-term financing of capital equipment, land, and buildings. Government financing is also available to help meet international trade policy goals in a particular country.

Which of these is responsible for the movement of materials in the production process?

Logistics

Internal audits are also called _____ audits.

MANAGEMENT

bond ratings

Moody's and Standard and Poor's rating services which are important in assuring foreign investors of the credit quality of bond issues

_____ refers to the property of ERP systems to simultaneously operate in multiple languages.

Multi-language

One of the world's first cases of cybercrime occurred in _____.

NEW ZEALAND

Can Binney use the latest audit report from her current accountant to satisfy audit requirements for publicly traded companies? Why or why not?

No, the auditor may not have any material financial interest or stake in the company.

Highest level of accounting authority:

Non-superseded sections of the Accounting Research Bulletins issued by Committee on Accounting Procedures Non-superseded sections of the APB Opinions issued by the Accounting Principles Board Statements of Financial Accounting Standards issued by the FASB Interpretations issued by the FASB Statements and Interpretations of the Governmental Accounting Standards Board (for governmental units)

As the Jenkins and Jones Corporation continues to grow and expand, one of the strategic decisions it must face is that of location of its facilities. Which one of the following does not relate to the problem of location?

Number of Internet users

Brininger Enterprises conducts international business. It realizes there are sometimes different accounting guidelines that need to be followed when dealing on an international level. In essence, there are differences between U. S. and international generally accepted accounting principles. Which one of the following is not a factor that would influence the development of accounting and financial reporting?

Numbering system

The trading of futures contracts in major currencies and offering price transparency and efficiency in addition to elimination of counterparty risk due to guaranteed payments on contracts are called ________.

ORGANIZED EXCHANGE

Of the following statements about tax rates in selected countries, which is NOT true?

Only developed nations impose a corporate income tax.

______ refers to the management of the direct resources that are involved in the production system of a business organization.

Operations management

One major disadvantage of ________ is its high cost per contact.

PERSONAL SELLING

The first step of an audit typically is to _____.

PLAN THE AUDIT

Internationally integrated equity markets require the use of the International CAPM(ICAPM)Footnote to estimate the cost of equity. The ICAPM can be written as follows:

Rit=Rft+βi(Rmt−Rft)+βig(Rgt−Rft) Rgt= the one-month return on a global market index (e.g., the Dow Jones world index of stocks)βig= the global beta risk measure for the stock other terms as before.

The Capital Asset Pricing ModelFootnote (CAPM) is a well-known approach to estimating the cost of domestic equity. The CAPM is written as follows:

Rit=Rft+βi(Rmt−Rft), Rit= the one-month return on stock i in month tRmt= the one-month return on a domestic market index (e.g., the S&P 500 index of the 500 largest

_____ provide the procedures for dealing with specific accounting matters.

SFAS

Which of the following is NOT a type of tax that MNC's must pay?

SOCIAL

Attempts in currencies and currency derivatives to earn profits from trading them and help to make prices efficient is called ________.

SPECULATING

Marketing strategies used in international markets by a company that are the same as those used in its domestic market are called ________.

STANDARDIZATION

A(n) _____ answers the question: How much cash was taken in and paid out during the period?

STATEMENT OF CASH FLOWS

A statement that shows the beginning balance for retained earnings, additions and reductions to retained earnings, and the ending balance of retained earnings is known as a(n)_____.

STATEMENT OF RETAINED EARNINGS

PRODUCTION SYSTEM MODEL

SUPPLIERS-INPUTS-PRODUCTION PROCESS-OUTPUTS-CUSTOMERS

A group of banks that collectively make a loan to a firm is called a(n) ________.

SYNDICATE

_____ refers to the percentage of purchases in a category a buyer gives to one vendor.

Share of wallet

A basket of currencies consisting of dollars, euros, pounds, and yen created by the International Monetary Fund is known as the _____.

Special Drawing Right

Brininger Enterprises maintains accurate and thorough accounting records. Which piece of the company's accounting records would be needed to identify what cash monies were received and what cash was paid out by the company?

Statement of cash flows

ERP systems aim to

Store all information in a single database Represent each business function by a module Design the system as a collection of business processes, and not functions.

A magazine that targets specific industries is called a(n) ________ publication.

VERTICAL

What is one problem with setting the same price in the foreign market as the domestic market for products using indirect distribution?

THE NET PROFIT WOULD BE DIFFERENT DUE TO INTERNATIONAL TRANSPORTATION, STORAGE COSTS AND COMMISSION

________ has the highest income tax rate.

THE UNITED STATES

There are ________ major markets within each foreign market that can purchase products and services and needs to be analyzed.

THREE

Complete the following equation: Debt Ratio = Total Liabilities/________.

TOTAL ASSETS

Complete the following equation: Debt Ratio = __? __ / Total Assets.

TOTAL LIABILITIES

DEBT RATIO

TOTAL LIABILITIES --------------------------------- TOTAL ASSETS

The Gayla Corporation must fully understand and effectively handle the short-term changes in exchange rates and how this can affect operating costs and revenues derived from its international business operations. Which of the following best identifies what this organization is facing in this situation?

TRANSACTION RISK

_____ pricing refers to the pricing of goods and services that are transferred (bought and sold) internally between members of a corporate family.

TRANSFER

________ risk is associated with the short-term effects of currency movements on the consolidated accounting statements of a firm.

TRANSLATION

A company may be suspected of dumping if they set the price for the foreign market lower than what it charges in the domestic market.

TRUE

A lender will specify minimum certain current ratio requirements to maintain the loan. This is an example of debt covenants.

TRUE

A price that an overseas market is willing to pay is referred to as the arms length price.

TRUE

A typical AIS has two principal objectives: (1) to provide all the financial information internally needed by management for business decision-making, known as management accounting; and (2) to provide financial information to various external users concerned with the financial activities of the organization, known as financial accounting.

TRUE

Determining if products made in-house will be produced in one or more facilities, and if these facilities should be located in one or more countries is called a location decision.

TRUE

Financial ratios are helpful in equalizing companies of different sizes for comparison of financial performance.

TRUE

Futures contracts available in currencies of emerging-market countries by large banks in the OTC market are called currency forward contracts.

TRUE

Internal transfers typically consist of raw materials, semi-finished and finished goods, allocation of fixed costs, loans, fees, and royalties for use of trademarks and copyrights.

TRUE

International Financial Reporting Standards (IFRS) are a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements.

TRUE

Marketing strategies used in international markets by a company that are the same as those used in its domestic market represent an example of standardization.

TRUE

Pressures for the IASB to harmonize it's accounting standards is coming from cross-border mergers and rapid growth in international capital markets.

TRUE

The Organization for Economic Cooperation and Development is an international organization of 30 countries that accept the principles of representative democracy and free market economy.

TRUE

The highest corporate income taxes can be found in the United States and Japan.

TRUE

The impact of random change on the value of one currency with respect to other currencies is referred to as the exchange rate risk.

TRUE

The make-or-buy decision involves determining which components and raw materials should be produced in-house and which components and raw materials should be acquired from suppliers.

TRUE

The most important financial statements are the income statement, statement of retained earnings, balance sheet, and statement of cash flows.

TRUE

The practice of buying securities in a portfolio with price patterns over time that are different from one another, which reduces the volatility of the portfolio, is called diversification.

TRUE

The practice of using currency derivatives to reduce potential transaction, translation, and economic risks of currency movements that could lead to losses for a firm or investor is referred to as hedging.

TRUE

The primary external users of accounting information are goverment units, lenders, vendors, credit-rating agencies, stockholders, customers, and employees.

TRUE

Of the following statements about financial ratios, which is NOT true?

The Debt Ratio = Total Liabilities/Current Assets.

In addition to governments, what other entity provides short-term loans to countries in financial crisis?

The International Monetary Fund (IMF)

The dollar decreased in value relative to the euro

The U.S. exporter would gain profits, and the U.S. importer would lose profits.

Which of the following records would be examined as part of the audit for Binney's company?

The company's bank statements

U.S. importer would convert its strong dollars to weak euros and buy European goods

Thereby decreasing its cost of imported goods, which would boost profits.

Why would the firms seek loans from foreign banks in this example IN A VANILLA CURRENCY SWAP?

They are able to secure credit on more favorable interest rates or other loan terms from the foreign lender. Hence, firms can use currency swaps to save on credit costs.

Companies have four options to consider when marketing their products overseas.

They can sell the same domestic product overseas. They can modify products for different countries and regions. They can develop new products for foreign markets. they can incorporate all product differences into one design and develop a global product suitable for most world markets.

Forex risks can be hedged

Through the use of several different contracts including futures, forwards, options, and swaps.

If you were the owner of a small import-export company, which entity would you go to for financing support?

US Small Business Administration

world's highest GDP in 2010

United States($14.1 trillion) China ($8.7 trillion) Japan ($4.1 trillion) India ($3.6 trillion) Germany ($2.8 trillion) United Kingdom ($2.1 trillion), Russia ($2.1 trillion) France ($2.0 trillion) Brazil ($2.0 trillion) Italy ($1.7 trillion).

Distribution of its products has never been a problem for Bridgemont Industries. Which one of the following is a distribution method that is least likely to be used by Bridgemont?

Use local government distribution systems

Those who rely on financial statements are very concerned about the ____ of the reports they receive.

VALIDITY

Which of the following would be a reason for you to select a commercial letter of credit (LC) as a payment option?

You could take the LC to your bank to get financing to help pay for the production of the customer's order.

Export-Import (Ex-Im) Bank

a US government export finance agency that supports US firms competing against exports of other countries that are government supported

Special Drawing Right (SDR)

a basket of currencies consisting of dollars, euros, pounds, and yen created by the IMF

distributor

a channel of distribution that purchases products from a company doing business in a foreign market and then resells them to other buyers

agent

a channel of distribution that represents a company in a foreign market and is paid by commission

product life cycle (PLC)

a depiction of the sales and profits for a new product over its lifetime (INTRODUCTION, GROWTH, MATURITY, AND DECLINE)

product elimination

a formal, written procedure to determine which of a company's products should be dropped

syndicate

a group of banks that collectively make a loan to a firm

Buying a currency in a currency futures contract and profiting on an increase in the value of the currency over time is called _____.

a long position

beta risk

a measurement of the general market risk of a stock in the Capital Asset Pricing Model (CAPM)

transfer price

a price a company charges its overseas subsidiaries

dumping

a price in a foreign market that undercuts the prices of companies competing there

arms length price

a price that an overseas market is willing to pay

global product

a product that can be sold in most world markets

manufacturing system

a production system in which goods dominate the value of the product

service system

a production system in which services dominate the value of the product

multi-currency

a property of ERP systems to handle multiple currencies

multi-national

a property of ERP systems to handle the accounting standards of multiple countries

multi-language

a property of ERP systems to simultaneously operate in multiple languages

International Financial Reporting Standards (IFRS)

a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements.

currency swaps

allow firms to exchange currencies at a previously agreed exchange rate as a way to hedge exchange rate movements

Outstanding stocks are

actively traded on a daily basis.

Brazilians use doughnuts as a snack item whereas Americans tend to associate doughnuts with breakfast; electrical voltages differ in many countries than those that exist in the United States. In these instances, a firm would pursue a(n) _____ strategy.

adaptation

The international marketing manager has four major methods that can be used to promote products and services in international markets:

advertising, personal selling, sales promotion, and publicity.

freight forwarder

agents for companies shipping products overseas who are chiefly involved with physical distribution activities and documentation

supply chain

all activities associated with the flow and transformation of goods and services from the raw materials stage to the end user, together with the corresponding flows of monetary funds and information

direct strategy

bypassing channels of distribution by using marketing and sales offices located in foreign countries

over-the-counter (OTC) market

derivatives market run by large banks

location decision

determining if products made in-house will be produced in one or more facilities, and if these facilities should be located in one or more countries

make-or-buy decision (sourcing decision)

determining which components and raw materials should be produced in-house and which should be acquired from suppliers; also called the sourcing decision

reverse strategy

development of a new product first for emerging markets then selling it to developed markets

A channel of distribution that purchases products from a company doing business in a foreign market and then resells them to other buyers is called a(n) _____.

distibutor

Of the following, which is NOT one of the major methods that can be used to promote products and services in international markets?

distribution

Buying securities in a portfolio with price patterns over time that are different from one another, which reduces the volatility of the portfolio, is called _____.

diversification

Advantages of global procurement

does not need to invest the money that is associated with making. can focus upon the production stages and components with the most value added. can maximize its flexibility by allocating its orders among the suppliers in a dynamic way. has access to more suppliers, and these global suppliers usually can provide lower costs than domestic suppliers. if global suppliers are selling to many companies in the same industry but in different countries, these suppliers can achieve economies of scale and lower costs.

Debt contracts sold by firms domiciled in a country in the home currency are called _____.

domestic bonds

Notice that higher taxes can reduce the cost of capital, or K,

due to higher interest deductions on debt payments

If you discover quality issues with the supplier of the voice activated sensors, which of the following would be the best option for your company moving forward?

manufacture the sensors yourself in America

The production systems of Honda Motor Company, the Boeing Company, and Toshiba Corporation, would be called _____ systems.

manufacturing

A small commitment fee needed to purchase a futures contract is called a _____.

margin

Losses that are incurred and that cause the participant's balance to fall below the maintenance margin at the end of the trading day is called a _____.

margin call

_____ potential refers to the total number of units of a product that could possibly be sold by all companies doing business in a specific international market.

market

adaptation

marketing strategies used in international markets by a company that are different from those used in its domestic market

standardization

marketing strategies used in international markets by a company that are the same as those used in its domestic market

raw materials

materials used to produce components

the inputs may include

materials, land, labor, machines and equipment, energy, and information.

Ford's ERP system follows the American accounting standards in its U.S. subsidiaries, and follows the Mexican accounting standards in its Mexico subsidiaries. This ERP system is _____.

multi-national

Consumer markets in developed countries often account for over 50 percent of those nations' GDPs (gross domestic products) a

nd purchase a wide variety of products, such as food, clothing, transportation, banking services, credit services, and entertainment. Consumer markets

When demand is equal or lower than the minimum efficient scale

one production facility location is preferred.

A simple agreement wherein the exporter sends an invoice with the goods and the exporter pays upon the receipt is called a(n) _____

open account

CHIPS (Clearing House Interbank Payments System)

organization in NYC that provides large, wholesale dollar payments services for businesses, banks, and governments

SWIFT (Society of Worldwide Interbank Financial Telecommunications)

organization that provides secure communications for contracts, invoices, and other trade documents that normally accompany cash payments

External users of accounting information fall into two major categories:

organizations that require or expect information to be reported, and organizations that receive information on an as-needed basis.

In the production system model, _____ represent the desired goods and services.

outputs

When a firm has been making goods and services in-house, and then decides to buy these goods and services from suppliers, it is called _____

outsourcing

A derivatives market run by large banks is called a(n) _____.

over-the-counter market

Statements of Financial Accounting Standards (SFAS)

part of the highest level of generally accepted accounting principles (GAAP), issued by the Financial Accounting Standards Boards (FASB)

And the production process may consist of one or more transformations which could be:

physical, as in manufacturing; locational, as in transportation; informational, as in consulting; psychological, as in entertainment; physiological, as in health care; exchange, as in retailing; storage, as in warehousing.

Audits are characterized by the following common set of steps:

plan the audit; obtain and evaluate evidence; arrive at an audit opinion; and communicate audit results.

Disadvantages of Global Procurement

relying upon suppliers on important dimensions such as quality, delivery, and cost. may also need to compete for the attention of suppliers. the profits that the company could earn by producing the goods and services in-house now go to the suppliers. can also carry the risk of suppliers providing those same goods and services to the competition

Nestle had success with its Maggi noodles in South Asia; subsequently they were introduced in Australia. Nestle is using a(n) _____ strategy.

revers

Development of a new product first for emerging markets then selling it to developed markets is known as a(n) _____ strategy.

reverse

U.S. GAAP as being more rules-based.

rules provide narrow, detailed guidance. The detailed rules of U.S. GAAP may be (at least partly) the result of extreme business complexity and the extremely high rate of litigation in the nation

Most of the activities in operations management can be grouped into the following business functions EXCEPT:

selling

short position

selling a currency in a currency futures contract and profiting on a decrease in the value of the currency over time

A production system in which services dominate the value of the product is known as a(n) _____ system.

service

The production systems of the Fred Hutchinson Cancer Research Center, the Walt Disney Company, and the consulting firm Accenture, would be called _____ systems.

service

When demand is higher than the minimum efficient scale

several production facilities are economically feasible.

containerization

shipping products to overseas markets in trailer-sized containers

margin

small commitment fee needed to purchase a futures contract

enterprise resource planning (ERP) systems

software packages designed to integrate the majority of a firm's business processes, execute all transactions related to the firm's business processes being integrated, store each piece of data only once in an enterprise-wide database, allow access to data and information in real time, and operate in a client-server environment, traditional or web-based.

currency futures contracts

standardized agreements to buy or sell a specified amount of currency at a date in the future at a pre-determined price, similar to debt, equity, and commodity futures contracts.

statement of cash flows

statement showing the company's inflows and outflows of cash

balance sheet

statement that lists the balances of the asset, liability, and owner's equity accounts of a business(financial position) on a specific date

statement of retained earnings

statement that shows the beginning balance for retained earnings, additions and reductions to retained earnings, and the ending balance of retained earnings

income statement

statement that summarizes the revenues earned and the expenses incurred by a business over a period of time

production stages

steps in the production process

physical distribution

storage and transportation operations that are used in moving products to a foreign market

bonds that often are purchased by institutional investors

such as insurance companies that hold the debt securities to maturity

The management of all activities in the supply chain, in order to minimize the total cost of the supply chain, and to maximize the value of the product to the end user is known as _____.

supply chain management

What is one critical factor companies must keep in mind when setting transfer pricing?

taxing authorities may be reviewing their numbers

Collections of computer hardware and software arranged to transmit information from one place to another are known as _____.

telecommunication networks

In 2010, _____ had the world's highest GDP.

the United States

financial accounting

the component of the accounting information system that provides financial information needed by external users such as investors and lenders

management accounting

the component of the accounting information system that provides the financial information needed internally by business managers for efficient (timely) and effective (correct) decision-making

The tax type that receives the most attention is

the corporate income tax.

The outputs represent

the desired goods and services.

net present value

the difference between present value of futures profits on an investment project minus the initial investment cost

exchange rate risk

the impact of random change in the value of one currency with respect to other currencies

consolidating accounting statements

the income statements and balance sheets of multinational corporations and of all subsidiaries abroad due to home country tax requirements

commercialization

the last step in the new product development process in which the new product is manufactured, the marketing mix is finalized, and the product is introduced to the foreign market

accounting

the recording, summarizing, and reporting of the economic activities and events of an organization

financial ratio

the relationship of a number on the financial statements to another number

cost of equity

the required rate of return by stockholders in a firm and is estimated by means of the Capital Asset Pricing Model (CAPM)

cost of capital

the required rate of return demanded by stock and bond investors and is used in net present value capital budgeting analyses as the discount rate

payment in advance

the safest method available to an exporter, but that which exposes the importer to some risk related to delivery of goods

exchange risk beta

the sensitivity of a stock to market risk affected by currency movements

translation risk

the short-term effects of currency movements on the consolidated accounting statements of a firm

production facility

the site where production takes place

market testing

the step in the new product development process in which a company will develop the marketing mix for a new product

business analysis

the step in the new product development process in which projections of potential revenues and profits for a potential new product are made

concept testing

the step in the new product development process in which the new product idea is presented to a small sample of the international market to gauge its reaction

weighted average cost of capital

the sum of the costs of equity and debt weighted by the amount of financing from these two capital sources

production system

the system that businesses use to produce products

market potential

the total number of units of a product that could possibly be sold by all companies doing business in a specific international market

organized exchanges

the trading of futures contracts in major currencies and offering price transparency and efficiency in addition to elimination of counterparty risk due to guaranteed payments on contacts

country risk

the uncertainty in predicting how a variety of different factors will affect an investment in a country, including political risk, economic risk, inflation risk, tax risk, etc

indirect strategy

the use of channels of distribution to market products and services to international markets

Transportation costs will constitute a higher percentage of total unit costs for goods with a low value-to-weight ratio,

the way to go in this situation is to have many production facilities in order to be close to the places where the components are needed.

economic risk

the ways in which long-term exchange rate movements affect firms

cost of debt

the weighted average of different interest rates paid on long-term borrowings

In addition to information about income and expenses, investors may also want to gain an understanding of whether either of the shops is carrying too much debt as compared to their assets. Which of the following formulas would be used to generate this information?

total liabilities divided by total assets

An example of a substantive difference between U.S. GAAP and IFRS concerns leases. Under U.S. GAAP, leases are classified as capital if one or more of the following four criteria are met:

title transfer; bargain purchase option; lease terms are equal to or greater than 75 percent of the asset's economic life; and minimum lease payments are greater than or equal to 90 percent of the asset's fair market value.

The price of a futures contract

to buy (long position) and sell (short position) is denoted at P0.

In addition to investors, why would lenders need to know the shops' Current Ratio?

to determine if the borrower will have the money necessary to pay its interest obligations and later repay the loans.

Why would it be important for an American-based international firm to frequently review special drawing rights and the major currency index?

to evaluate how the dollar is currently valued in world currency markets

Hedges are similar

to insurance contracts where a premium is paid to protect against potential losses.

The IMF can serve as a "lender of last resort" .

to reduce currency panics and assist troubled banks.

Atlantic is striving to be as successful as possible within the foreign marketplace. All of the following are options for the company to use in making product sales except which one?

wait for the market to adapt to the products offered

banker's acceptance

when a bank sells an LC into the financial marketplace as a money market instrument

offshoring

when a firm and the supplier are located in different countries

global procurement

when a firm buys components and raw materials globally

global production

when a firm globally produces goods and services

outsourcing

when a firm has been making goods and services in-house, and then decides to buy these goods and services from suppliers

dual sourcing

when components and raw materials are produced in-house and purchased from suppliers

contagion

when stock markets in many countries move down in concert with one another and thereby reduce international diversification benefits

Using the minimum efficient scale, at what point should a company consider using multiple production facilities?

when the demand is higher that the minimum efficient scale.

global outsourcing(offshoring)

when the firm doing the outsourcing and the supplier that will provide the outsourced goods and services are located in different countries; also called offshoring

domestic outsourcing

when the firm doing the outsourcing and the supplier that will provide the outsourced goods and services are located in the same country

insourcing

when the firm has been buying goods and services from suppliers, and then decides to make these goods and services in-house