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International Financial Management

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter19: Financing International Trade

Section: Chapter Questions

Problem 5BIC

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Question

A financial account is considered to be located in a foreign country if:
A) The account is physically located outside the United States.
OB) The financial institution is headquartered outside the United States.
OC) The financial institution has branches or offices present outside the United States.
OD) The majority shareholders in the financial institution are not U.S. citizens.

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Do all transactions by U.S. companies with foreign parties require special accounting procedures by the U.S. companies? Explain.
A foreign company maintains its books and records in its domestic currency. Identify several factors that might suggest that the domestic currency is not the entity’s functional currency.
Foreign exchange risk arises when: A)business transactions are denominated in foreign currencies. B)sales are made to customers in a foreign country. C)goods or services are purchased from suppliers in a foreign country. D)accounting reports are prepared in a foreign currency.
Identify the reasons for U.S. banks to operate in foreign countries and for foreign banks to operate in the United States.
Requiring a foreign banks to operate under the same rules as domestic banks is termed?
. An American Depositary Receipt is defined as a security: A. that has been deposited in an interest-bearing account at a U.S. bank. B. issued outside the U.S. that represents shares of a U.S. stock. C. issued in the U.S. that represents shares of a foreign stock. D. that has a guarantee of payment from a U.S. bank. E. issued in multiple countries but denominated in U.S. currency.
Which of the following factors are related to an ADR? Factor -1: An ADR is a certificate that represents ownership of a foreign stock. An ADR is typically created by a U.S. bank who buys stock in foreign corporations in their domestic currencies and places them in its vault. Factor - 2: The major attraction to U.S. investors is that ADRs are claims to foreign companies that trade on domestic (U.S.) exchanges and in dollars. A. Only Factor 1 is correct B.Only Factor 2 is correct C.Both Factors are correct D-Neither Factor is correct.
Identify the reasonsfor U.S. banks to operate in foreign countries and for foreignbanks to operate inthe United States.
1. Why don’t the additions and deductions from the bank balance on a bank reconciliation require adjustment by the company? 2. Do all transactions by U.S. companies with foreign parties require special accounting procedures by the U.S. companies? Explain.
A foreign currency account maintained by a bank abroad is its Oa. Nostro account Ob. Vostro áccount Oc. Loro account O d. Foreign bank account
An American Depositary Receipt (ADR) is defined as a security:(a) that has been deposited in an interest-bearing account at a U.S. bank(b) issued outside the U.S. that represents shares of a U.S. stock(c) issued in the U.S. that represents shares of a foreign stock(d) that has a guarantee of payment from a U.S. bank(e) issued in multiple countries but denominated in U.S. currency
Foreign banks are authorized to perform banking operations only if they convert as domestic banks. True False

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