Question 1

What is a clearinghouse account? What are the benefits of using such accounts?

Accepted Answer

To facilitate countertrade, firms may agree to establish clearinghouse accounts, in which the exporting firm incurs a counterpurchase obligation of an equivalent value, which is recorded in its clearinghouse account. When the exporting firm eventually buys goods from its partner, its clearinghouse obligation is reduced. Thus, a firm does not need to balance any single countertrade transaction, although it must honor its cumulative set of obligations by the time its clearinghouse account expires.

Question 2

What types of transactions denominated in a foreign currency can lead to transaction exposure?

Accepted Answer

The types of transactions include the purchase of goods, services, or assets; sales of goods, services, or assets; extension of credit; and borrowing of money.

Question 3

The purchase of goods, services, or assets denominated in a foreign currency most likely leads to ________.

Accepted Answer

A)  exchange rate risk 
B)  translation exposure 
C)  transaction exposure 
D)  currency conversion risk 
A)  exchange rate risk 
B)  translation exposure 
C)  transaction exposure 
D)  currency conversion risk C

Question 4

A(n) ________ is created when an international firm matches its assets denominated in a given currency with its liabilities denominated in that same currency.

Accepted Answer

A)  offsetting asset 
B)  income statement hedge 
C)  balance sheet hedge 
D)  cash account 
A)  offsetting asset 
B)  income statement hedge 
C)  balance sheet hedge 
D)  cash account

Question 5

The price paid for goods and services in intra-corporate transfers is the ________.

Accepted Answer

A)  hurdle rate 
B)  net present value 
C)  transfer price 
D)  swap price 
A)  hurdle rate 
B)  net present value 
C)  transfer price 
D)  swap price

Question 6

Megan, a financial manager at Price Manufacturing, an MNE, strives to minimize the firm's working capital balances. Why would this most likely be important for Price Manufacturing?

Accepted Answer

A)  Subsidiaries need working capital in host-country currencies. 
B)  Working capital has an increased foreign-exchange risk. 
C)  Working capital earns a very low rate of return. 
D)  Working capital is highly taxed overseas. 
A)  Subsidiaries need working capital in host-country currencies. 
B)  Working capital has an increased foreign-exchange risk. 
C)  Working capital earns a very low rate of return. 
D)  Working capital is highly taxed overseas.

Question 7

What is the most common form of countertrade?

Accepted Answer

A)  barter 
B)  offset purchase 
C)  counterpurchase 
D)  clearinghouse accounts 
A)  barter 
B)  offset purchase 
C)  counterpurchase 
D)  clearinghouse accounts

Question 8

The vast majority of the exports of less-developed countries and of the exports of Latin American countries are in-voiced using the U.S. dollar, whereas the exports of many of the neighbors of the European Union favor the euro.

Accepted Answer

A) True 
 B)False

Question 9

Which document is issued by a bank and contains its promise to pay the exporter on receiving proof that the exporter has fulfilled all requirements specified in the document?

Accepted Answer

A)  bill of lading 
B)  bill of exchange 
C)  letter of credit 
D)  trade acceptance 
A)  bill of lading 
B)  bill of exchange 
C)  letter of credit 
D)  trade acceptance

Question 10

Theresa, an importer, uses a variety of payment methods when paying for goods. Which of the following is most likely the safest for Theresa?

Accepted Answer

A)  letter of credit 
B)  wire transfer 
C)  open account 
D)  payment in advance 
A)  letter of credit 
B)  wire transfer 
C)  open account 
D)  payment in advance

Question 11

Exporters prefer that payments in advance be made by check.

Accepted Answer

A) True 
 B)False

Question 12

A sight draft requires payment prior to the shipment of the goods.

Accepted Answer

A) True 
 B)False

Question 13

Columbus Trading agrees to exchange coffee and rice to Romania in return for machinery. Which term best describes this transaction?

Accepted Answer

A)  countertrade 
B)  in-kind payment 
C)  open account payment 
D)  documentary collection 
A)  countertrade 
B)  in-kind payment 
C)  open account payment 
D)  documentary collection

Question 14

Company X sold its products to Company Z in September. Company X will be compensated with Company Z's products in December. Which term best describes this transaction?

Accepted Answer

A)  offset purchase 
B)  parallel switch 
C)  counterpurchase 
D)  clearinghouse accounts 
A)  offset purchase 
B)  parallel switch 
C)  counterpurchase 
D)  clearinghouse accounts

Question 15

More than 70 percent of developing country exports are invoiced in ________.

Accepted Answer

A)  U.S. dollars 
B)  euros 
C)  Japanese yen 
D)  Swiss francs 
A)  U.S. dollars 
B)  euros 
C)  Japanese yen 
D)  Swiss francs

Question 16

Which type of country relies most on countertrade?

Accepted Answer

Countertrade is particularly important t

Question 17

A ________ requires payment upon the transfer of title to the goods from the exporter to the importer.

Accepted Answer

A)  sight draft 
B)  time draft 
C)  bill of lading 
D)  bill of exchange 
A)  sight draft 
B)  time draft 
C)  bill of lading 
D)  bill of exchange

Question 18

The minimum rate of return the firm finds acceptable for its capital investments is called the ________.

Accepted Answer

A)  hurdle rate 
B)  internal rate of return 
C)  return on investment 
D)  saturation rate 
A)  hurdle rate 
B)  internal rate of return 
C)  return on investment 
D)  saturation rate

Question 19

In a counterpurchase, one part of the transaction can proceed even if the second part of the transaction requires additional time.

Accepted Answer

A) True 
 B)False

Question 20

Countertrade is primarily important to countries that lack ________.

Accepted Answer

A)  foreign trade zones 
B)  convertible currencies 
C)  greenfield investments 
D)  democratic governments 
A)  foreign trade zones 
B)  convertible currencies 
C)  greenfield investments 
D)  democratic governments

What is a clearinghouse account? What are the benefits of using such accounts?

What types of transactions denominated in a foreign currency can lead to transaction exposure?

The purchase of goods, services, or assets denominated in a foreign currency most likely leads to ________.

A(n) ________ is created when an international firm matches its assets denominated in a given currency with its liabilities denominated in that same currency.

The price paid for goods and services in intra-corporate transfers is the ________.

Megan, a financial manager at Price Manufacturing, an MNE, strives to minimize the firm's working capital balances. Why would this most likely be important for Price Manufacturing?

What is the most common form of countertrade?

The vast majority of the exports of less-developed countries and of the exports of Latin American countries are in-voiced using the U.S. dollar, whereas the exports of many of the neighbors of the European Union favor the euro.

Which document is issued by a bank and contains its promise to pay the exporter on receiving proof that the exporter has fulfilled all requirements specified in the document?

Theresa, an importer, uses a variety of payment methods when paying for goods. Which of the following is most likely the safest for Theresa?

Exporters prefer that payments in advance be made by check.

A sight draft requires payment prior to the shipment of the goods.

Columbus Trading agrees to exchange coffee and rice to Romania in return for machinery. Which term best describes this transaction?

Company X sold its products to Company Z in September. Company X will be compensated with Company Z's products in December. Which term best describes this transaction?

More than 70 percent of developing country exports are invoiced in ________.

Which type of country relies most on countertrade?

A ________ requires payment upon the transfer of title to the goods from the exporter to the importer.

The minimum rate of return the firm finds acceptable for its capital investments is called the ________.

In a counterpurchase, one part of the transaction can proceed even if the second part of the transaction requires additional time.

Countertrade is primarily important to countries that lack ________.

An Overview of International Business

Global Marketplaces and Business Centers

Legal, Technological, and Political Environments

The Role of Culture

Ethics and Social Responsibility in International Business

International Trade and Investment

The International Monetary System and the Balance of Payments

Foreign Exchange and International Financial Markets

Formulation of National Trade Policies

International Cooperation Among Nations

International Strategic Management

Strategies for Analyzing and Entering Foreign Markets

International Strategic Alliances

International Organization Design and Control

Leadership and Employee Behavior in International Business

International Marketing

International Operations Management

International Human Resource Management and Labor Relations

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Exam 18: International Financial Management

What is a clearinghouse account? What are the benefits of using such accounts?

What types of transactions denominated in a foreign currency can lead to transaction exposure?

The purchase of goods, services, or assets denominated in a foreign currency most likely leads to ________.

A(n) ________ is created when an international firm matches its assets denominated in a given currency with its liabilities denominated in that same currency.

The price paid for goods and services in intra-corporate transfers is the ________.

Megan, a financial manager at Price Manufacturing, an MNE, strives to minimize the firm's working capital balances. Why would this most likely be important for Price Manufacturing?

What is the most common form of countertrade?

The vast majority of the exports of less-developed countries and of the exports of Latin American countries are in-voiced using the U.S. dollar, whereas the exports of many of the neighbors of the European Union favor the euro.

Which document is issued by a bank and contains its promise to pay the exporter on receiving proof that the exporter has fulfilled all requirements specified in the document?

Theresa, an importer, uses a variety of payment methods when paying for goods. Which of the following is most likely the safest for Theresa?

Exporters prefer that payments in advance be made by check.

A sight draft requires payment prior to the shipment of the goods.

Columbus Trading agrees to exchange coffee and rice to Romania in return for machinery. Which term best describes this transaction?

Company X sold its products to Company Z in September. Company X will be compensated with Company Z's products in December. Which term best describes this transaction?

More than 70 percent of developing country exports are invoiced in ________.

Which type of country relies most on countertrade?

A ________ requires payment upon the transfer of title to the goods from the exporter to the importer.

The minimum rate of return the firm finds acceptable for its capital investments is called the ________.

In a counterpurchase, one part of the transaction can proceed even if the second part of the transaction requires additional time.

Countertrade is primarily important to countries that lack ________.

An Overview of International Business

Global Marketplaces and Business Centers

Legal, Technological, and Political Environments

The Role of Culture

Ethics and Social Responsibility in International Business

International Trade and Investment

The International Monetary System and the Balance of Payments

Foreign Exchange and International Financial Markets

Formulation of National Trade Policies

International Cooperation Among Nations

International Strategic Management

Strategies for Analyzing and Entering Foreign Markets

International Strategic Alliances

International Organization Design and Control

Leadership and Employee Behavior in International Business

International Marketing

International Operations Management

International Human Resource Management and Labor Relations

Filters