Exam 20: Accounting and Finance in the International Business

What is capital budgeting?

The budget is the main instrument of financial control in an organization.

Describe the three exchange rates that Lessard and Lorange pointed out.

Which of the following statements is true of the capital budgeting used in international businesses?

A fee is compensation for professional services or expertise supplied to a foreign subsidiary by the parent company or another subsidiary.

What are the nine possible combinations of the three exchange rates proposed by Lessard and Lorange in the control process?

Most international businesses require all budgets and performance data within the firm to be expressed in the "corporate currency," which is normally _____.

Auditing standards are rules that define the accounting principles and monetary policy of a nation.

Political risk tends to be greater in countries experiencing social unrest or disorder.

Accounting standards _____.

The theoretical framework for performing capital budgeting for a foreign project is vastly different from domestic capital budgeting.

IASB is a major proponent of international accounting standards.

Firms use fronting loans to _____.

The technical process by which an independent person gathers evidence for determining if financial accounts conform to required accounting standards is known as _____.

Accounting is shaped by the environment in which it operates.

_____ is the most common method by which firms transfer funds from foreign subsidiaries to the parent company.

Compliance to IASB standards is mandatory for countries to engage in international trade.

A deferral principle specifies that parent companies are not taxed on foreign source income until they actually receive a dividend.

The total size of a firm's cash pool increases when it pools cash reserves of subsidiaries.

A tax heaven is a country that gives income tax exemptions to firms that export all or part of its products.