Exam 14: Global Financial Management

Scenario - The Gayla Corporation The Gayla Corporation is a multinational business that conducts operations in twelve foreign markets.  This multi-million dollar organization is very familiar with currency exchanges and has considerable understanding when it comes to the risks associated with operating in the global market arena.  The Gayla Corporation claims it would not be as successful without the expertise of the financial wizards that work for it. The company has not lost money so far and plans to stay that way. The Gayla Corporation must fully understand and effectively handle all the ways in which long-term exchange rate movements affect the firm. Which of the following best identifies what this organization is facing in this situation?  

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

Compare and contrast the Export-Import (Ex-Im)Bank and Japan's Bank of International Cooperation.

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

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

Scenario - Aero, Inc. Aero, Inc. started from the idea of Brad Aerostle of Madison, South Dakota in 1992.  Brad earned a financial degree from Harvard and had watched the financial markets for years.  Armed with college credentials and knowledge, he believed he could offer needed services to individuals and companies desiring to conduct business around the globe.  From the minute Brad put his idea into motion, his brainchild - Aero, Inc. - proved quite profitable. Aero, Inc. currently has over five thousand clients ranging from slightly wealthy individuals to very rich and thriving corporations around the world.  Brad's skill at what he does has made his company a sought out firm by those who want to prosper in the foreign marketplace. 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?  

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

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_____.

Large global banks are called _______ center banks.

Investors who attempt to earn profits from trading in currencies or currency derivatives are referred to as _______.

Large international firms deal in considerable volumes of goods and often must obtain a(n)_____ from a group of banks known as a syndicate..

Differentiate between hedging and speculating.

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).

Scenario - The Gayla Corporation The Gayla Corporation is a multinational business that conducts operations in twelve foreign markets.  This multi-million dollar organization is very familiar with currency exchanges and has considerable understanding when it comes to the risks associated with operating in the global market arena.  The Gayla Corporation claims it would not be as successful without the expertise of the financial wizards that work for it. The company has not lost money so far and plans to stay that way. 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?  

_______ accounting statements are the income statements and balance sheets of multinational corporations and of all subsidiaries abroad due to home tax requirements.

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.

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

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

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

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