intl business final
The Bretton Woods System
1945 (WWII) to 1971
purchasing power parity
a means of adjusting the exchange rates for two currencies so the currencies have equivalent purchasing power.
international strategy
a plan that guides the way firms make choices about developing and deploying scarce resources to achieve their international objectives
purchasing power parity
amount of adjustment that must be made in the exchange rates for two currencies for the to have equivalent purchasing power
private consumption: discretionary income
amount of income left after paying taxes and making essential purchases
strategic planning step 1
analyze the company's external environments- Not controllable
Reserves
assets held by a nation's central bank, used to back up government liabilities
bottom-up
begins at the lowest level and continues upward, con- complexity, time consuming
Why Foreign Currency Exchange Occurs
buyers and sellers want to do business in their own currency to avoid the risk that accompanies currency exchange.
mission statement
defines the organization's purpose and scope
Floating exchange rate
determined by supply and demand that allow currency values to float against one another.
explicit knowledge
easy to communicate to others via words, pictures, formulas or other means
emerging market economies
economies with per-capita incomes in the. low to middle range are in a transition toward developed status.
taxation
effective tax management can yield a competitive advantage
current currency arrangements
exchange arrangement with no separate legal tender
Arbitrage functions to
exploit price differences between markets, so as to profit with no risk
in a currency board arrangement, a country's govt. commits to adopt the currency of another
false
the Bretton woods system led to minimal growth in international trade but helped to reduce inflation levels
false
the controlling mechanism for a gold based exchange system and a floating rate system are the same
false
the international monetary fund uses the US dollar as its unit of account
false
currency exchange controls
govt's can control currency exchange of their currency and other currencies within their borders.
bid price
highest priced buy order currently in the market
Taxation is a financial force in that
if the firm can achieve a lower tax burden than its competitors, it can generate higher revenues, and then lower its prices or pay higher wages and dividends.
foreign environment
includes all the uncontrollable forces originating outside the home country that surrounds and influences the firm.
tacit knowledge
is difficult for an individual to express clearly in words, pictures or formulas and is therefore difficult to transmit to others
What is appealing about the gold standard is
its simplicity.
a broad statement that defines the purpose for a company's existence including its business, objectives, and approach for reaching those objectives is known as a * * statemenet
mission
With increasing inflation, borrowing becomes
more attractive because repayment can be made with cheaper money.
tacit knowledge is also known as
organizational
arbitrage
process of buying and selling instantaneously to make a profit with no risk
Historically, gold has been used as a way for people to store value because of its
purity and scarcity
fisher effect
shows a relationship between real and nominal interest rates
tacit knowledge is more detailed
than implicit
fluctuating currency values
the major currencies are allowed by their central banks to fluctuate freely against each other.
Purchasing Power Parity is a way to compare
the purchasing power of several currencies.
The inflation rate determines
the real cost of borrowing in capital markets.
The price of gold since about 1200 AD has been
trending upward.
The Fisher effect describes interest rate parity; it's the law of one price applied to interest rates. interest rates vary to take into account anticipated didferences in inflation levels
true
The spot rate is the rate for exchange within two days in the currency market.
true
international monetary fund is a source of economic data that analysts can access to assess economic conditions
true
strategic plans promote consistency of action among the firm's managers worldwide and encourage them to consider the ramifications of their actions in the firm's other geographic and functional areas
true
real interest rate
will be the nominal interest rate minus the expected rate of inflation