Exam 20: Financial Management and Accounting in the Global Firm

When a Japanese firm sells yen-denominated bonds in the United States, it is issuing foreign bonds.

Firms obtain debt financing by selling stock shares to investors who then have an ownership interest in the firm.

EZ Lawn Currency Risk (Scenario) The EZ Lawn Corporation manufactures lawn equipment such as lawn mowers, blowers, and trimmers. The lawn equipment is assembled in the U.S. at a facility in Florida, but the firm outsources inputs from a number of countries, each with varying degrees of economic stability. Given the importance of the firm's sourcing activities, EZ Lawn managers are discussing methods which might reduce the currency risk faced by EZ Lawn. -Which of the following would most likely minimize the currency risk of EZ Lawn?

Net present value is defined as the ________.

Euro bond is a bond sold outside the issuer's country and denominated in the currency of the country where issued.

Freedom Energy Group (Scenario) Freedom Energy Group (FEG) is a major American energy services group based in Oklahoma. FEG manufactures products to facilitate oil and gas exploration and is involved in the construction of oil refineries and gas pipelines around the world. FEG managers are considering the purchase of a Canadian energy firm, Maple Leaf Energy, which manufactures pipeline stabilization products. The financial management division of FEG is considering the risks and benefits of purchasing Maple Leaf. -Which of the following most likely supports the purchase of Maple Leaf by FEG?

Freedom Energy Group (Scenario) Freedom Energy Group (FEG) is a major American energy services group based in Oklahoma. FEG manufactures products to facilitate oil and gas exploration and is involved in the construction of oil refineries and gas pipelines around the world. FEG managers are considering the purchase of a Canadian energy firm, Maple Leaf Energy, which manufactures pipeline stabilization products. The financial management division of FEG is considering the risks and benefits of purchasing Maple Leaf. -Which of the following should most likely be considered by financial managers before FEG purchases Maple Leaf?

Which of the following terms is used to refer to compensation paid to the owner of intellectual property?

Through ________, a subsidiary can defer payment for goods and services received from its parent firm.

The mix of long-term equity financing and debt financing that firms use to support their international activities is known as ________.

Net working capital is ________.

Global equity market refers to ________.

Economic exposure results from exchange-rate fluctuations that affect ________.

________ forecasts spot exchange rates, or forward rates, and calculates their present value using a discount rate in line with the required return on projects of similar risk.

A fronting loan would most likely be utilized by an MNE attempting to ________.

Explain the differences between equity financing and debt financing, and discuss the ways international firms obtain equity financing or debt financing.

Gains and losses do not directly affect cash flows in the case of translation exposure, but cash flows can be significantly affected by transaction exposure.

________ is the strategic reduction of cash transfers within the MNE family through the elimination of offsetting cash flows.

Current rate method is the translation of foreign currency balance sheet and income statements at an exchange rate that varies with the underlying method of valuation.

A centralized depository lets managers reduce the size of highly liquid accounts and invest the funds, generally at the higher interest rates offered for large deposits, to generate maximal returns.