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
