International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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Assume that an U.S. firm wants to engage in international business without making a major investment in the foreign country. Which method is LEAST appropriate in this situation?
A.
licensing
B.
acquisition of an existing firm in the foreign country
C.
exporting
D.
franchising
How important of international trade (imports and exports) to the world economy?
What accounting issues arise for a company as a result of engaging in international trade (imports and exports)?
Why might a company be interested in investing in an operation in a foreign country (foreign direct investment)?
Simulate your own multinational corporation (MNC). Justify the form of your own MNC, based in the Caribbean, which trades with three countries outside of the North America region. Examine issues related to foreign exchange management within your multinational corporation.
The type of MNC, whether franchising, licensing, the exportation of a product sold through a distributor, etc. The rationale behind using this form of MNC should also be given.
The main foreign currencies that will be used in the business.
The foreign exchange exposure of the company and how the company plans to manage this exposure.
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Match each term in Column A with its related definition in Column B. Column A 1. ____________ Maquiladora 2. ____________ Import 3. ____________ Joint venture 4. ____________ Export 5. ____________ MNC Column B a. A company that does business in more than one country in such volume that its well-being and growth rest in more than one country. b. A company purchases materials or parts from another company that is located in a foreign country. c. A company sells its product to purchasers located in foreign countries. d. A type of partnership in which investors from one country co-own the enterprise with investors from another country. e. A manufacturing plant located in Mexico that processes imported materials and reexports them to the United States.arrow_forwarda. According to the OLI paradigm, foreign direct investment is explained by three conditions (ownership advantages, location advantages and internalization). Examine the factors that influence firms to locate subsidiaries close to markets. b. Managers of multinational enterprises are advised to take advantage of their home region institutions such as the European Union. Assume you are the manager of a multinational enterprise in Belgium. Why is the institutional framework created by the EU pivotal for business? c.arrow_forwardWhich of the following statements are true about globaliza-tion methods? a. International licensing involves the creation of a new company that is owned by two or more firms from dif-ferent countries. b. Exporting involves contracts that allow a foreign com-pany to use a domestic company’s trademarks, patents, processes, or technology.c. Global sourcing involves the close coordination ofresearch and development, purchasing, marketing, andmanufacturing across national boundaries.d. A wholly owned international subsidiary is createdwhen a foreign government owns 100 percent of theequity in a U.S.-based firm.arrow_forward
- As used in international accounting, a “hedge” is: A)a business transaction made to reduce the exposure of foreign exchange risk. B)the legal barrier between the various divisions of a multinational company. C)the loss in US$ resulting from a decline in the value of the US$ relative to foreign currencies. D)one form of foreign direct investment.arrow_forwardIf a firm does not have foreign subsidiaries, it is not subject to ____. Group of answer choices transaction exposure economic exposure translation exposure A and Barrow_forwardWhich one of these represents the most basic level of international participation by a business entity? Multiple choice question. Operating a single retail store in a singe foreign country Producing a single product in a foreign-built facility Importing and exporting goods and services Operating multiple facilities in various countries to spread riskarrow_forward
- Which of the following statements best differentiates multinational firms from domestic firms? a. Multinational firms have overseas sales offices. b. Multinationals engage in both importing and exporting. c. Multinational firms have one or more plant(s) in a foreign country. d. Multinational business people make use of worldwide sales, capital, and labor markets.arrow_forwardForeign 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.arrow_forwardAdvise management the different hedging strategies that can be employed by a company against foreign exchange exposures.arrow_forward
- Businesspeople need to understand international culture and corporate practices to successfully transfer their business activities to foreign countries. Compare and contrast US culture and corporate practices with India’s and identify challenges as a result for a US based company to operate its activities in India. Identify at least three risks associated with doing transactions by the US based company operating in India and what can be done to mitigate such risks. Note that operations are in India but majority of the products are sold in US. Include tangible examples for better clarity. Include currency exchange risk among those mentioned above, and explain ways to mitigate this risk. Explain in detail.arrow_forwardGive typing answer with explanation and conclusion Which of the following is an example of foreign exchange risk for an MNC? a. Foreign subsidiary of the MNC may face higher tarriffs b. Foreign subsidiary of the MNC may have to pay higher taxes c. Foreign subsidiary of the MNC may make less sales due to weak foreign currency d. Foreign subsidiary of the MNC may make less sales due to lower consumer incomearrow_forward
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