International Financial Management Analysis

International Financial Management Analysis1. Financial management decisions of most firms are not confined to ______________ borders. Many ______________
and ______________ decisions involve economies and firms
outside a firm’s own domestic borders either directly,
through ______________ transactions, or indirectly,
through the effects of international issues on the
______________ economy. International ______________
management is the management of a firm’s assets and liabilities considering the ______________ economy in which
the firm operates.
2. Trends and agreements throughout the twentieth century
reduced ______________. The General ______________ on
______________ and Trade (GATT) is a forum for negotiating the reduction in trade ______________ on a multilatCh25 Page 245 Tuesday, December 16, 2003 9:16 AM
246 QUESTIONS AND PROBLEMS
eral basis. Monetary cooperation and international trade
is facilitated through the ______________ Fund
(______________). The ______________ Union (E.U.) is an
organization whose goal is to increase ______________
cooperation and integration among its European member
countries. The North ______________ Free ______________
Agreement (______________) is a pact among Canada,
Mexico, and the United States for the gradual removal of
trade barriers for most ______________ produced and sold
in North America.
3. A(n) ______________ company is a firm that does business
in two or more ______________. Most large U.S. corporations are ______________ firms, deriving a large part of
their income from operations beyond the U.S.
______________. Companies expand beyond their
______________ borders for many reasons, including: To
gain access to new ______________, to achieve
______________ efficiency, to gain access to ______________,
to reduce political and regulatory ______________, to diversify, and to gain access to ______________.
4. Financial managers must be aware of the issues relating to
multiple ______________. In particular, the financial manager must be aware of ______________ rates and the related
______________ risk. The ______________ rate is the number of units of a given currency that can be purchased for
one unit of another country’s ______________; the
exchange rate tells us about the relative ______________ of
any two currencies. Currency risk or ______________ risk is
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the risk that the relative values of the domestic and foreign
currencies will ______________ change.
5. When a currency ______________ value relative to other
currencies, we say that the currency has ______________ if
the change is due to changes in supply and demand, or
been ______________ if the change is due to government
intervention. If the currency ______________ value relative other currencies, we say that the currency has
______________ or been ______________.
6. If there are ______________ barriers or costs to trade
across borders, the ______________ of a given product
will be the ______________ regardless of where it is sold.
This is referred to as the law of ______________ price:
Where there are different ______________ on either side of
the border, after adjusting for the difference in currencies,
the ______________ of a good or service is the same across
borders. In the case of different currencies, the law of one
price is known as ______________ (______________).
7. Taxes paid by corporate entities can be classified into two
types: ______________ taxes and ______________ taxes.
The former includes taxes paid to the ______________
government based on ______________ income and possibly any ______________ income taxes. Indirect taxes
include real estate appreciation, ______________ taxes,
and miscellaneous taxes on ______________ transactions.
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248 QUESTIONS AND PROBLEMS
8. It is common for a company’s ______________ in different
countries to buy and sell goods from each other. The price
for the goods in such ______________ transactions is
called a(n) ______________ price. Establishing transfer
prices to promote goal ______________ within a(n)
______________ company is a complicated topic. In practice, a primary goal in the establishment of transfer prices
is the minimization of worldwide ______________,
______________ taxes and ______________ duty taxes.
9. A corporation is not limited to raising funds in the capital
market where it is domiciled. ______________ means the
______________ of capital markets throughout the world
into a global capital market. From the perspective of a
given country, capital markets can be classified into two
markets: either a(n) ______________ market or a(n)
______________ market, and a(n) ______________ market.
It can be decomposed into two parts: the ______________
market and the ______________ market. The ______________
market is where issuers ______________ in the country
issue securities and where those securities are subsequently
______________.
10.The world capital markets can be classified as either completely ______________ or completely ______________. In
a completely ______________ capital market, investors in
one country are ______________ permitted to invest in the
securities issued by an entity in another country. In a completely ______________ capital market there are
______________ restrictions to prevent investors from
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investing in securities issued in any capital market
throughout the world. Real-world capital markets are
______________ completely segmented nor completely
integrated, but fall somewhere in between and are
______________ segmented or ______________ integrated.
11.A corporate treasurer seeking to raise funds via a(n)
______________ offering can issue in the ______________
sector of another country’s bond market or the
______________. The distinguishing features of the securities in this market are that they are ______________ by an
international syndicate, at issuance they are offered
______________ to investors in a number of countries,
they are issued ______________ the jurisdiction of any single country, and they are in ______________ form. The
sector of the Euromarket in which bonds are traded is
called the ______________ market.
12.The important elements of cash flows, ______________ of
capital, and analysis are present in the ______________
capital budgeting decision whether the investment is
______________ or ______________. There are several
sources of the added complexity: ______________ currency
risk, restrictions on ______________, and ______________
risk. These risks and ______________ affect not only an
investment’s cost of ______________ but also make the
estimation of cash flows all the more difficult.