International Financial Management
14th Edition
ISBN: 9780357130698
Author: Madura
Publisher: Cengage
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A commercial Bank in Zambia has a net profit after taxes of K10 million with an asset base of K100 million. It is also noted that the equity capital investment for the bank amounts to K20 million. Based on the foregoing, calculate the Return on Equity (RoE) and Return on Assets (RoA). Ensure to also comment on the relationship between the two performance parameters ROE and ROA.
Distinguish between the short run and long run determinants of exchange rate volatility. In your assessment show how the exchange rate movements can influence the Interest Parity Condition
Transaction exposure:
A. measures the extent to which foreign exchange volatility may affect a firm's future ongoing revenues and costs.
B. measures the effects of FX changes on the balance sheet of the firm.
C. refers to the extent to which the value of the firm's cash flows may be affected by changes in the exchange rate.
D. tries to measure the impact of unexpected exchange rate fluctuations on the net present value of the firm's future cash flows.
Which risk ratios best answer each of the following financial questions? a. How quickly is a company able to collect its receivables? b. How quickly is a company able to sell its inventory? c. Is the company able to make interest payments as they become due?
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- Match each term in Column A with its related definition in Column B. Column A 1. ____________ Spot rate 2. ____________ Currency appreciation 3. ____________ Translation risk 4. ____________ Transaction risk 5. ____________ Exchange rate Column B a. The rate at which one currency can be traded for another currency. b. The possibility that future cash transactions will be affected by changing exchange rates. c. A month ago, 1 U.S. was worth 8.5 Mexican pesos. Today, 1 is worth 9.0 Mexican pesos. The U.S. dollar has undergone what? d. The degree to which a firms financial statements are exposed to exchange rate fluctuation. e. The exchange rate of one currency for another for immediate delivery (today).arrow_forwardOn what factors rely the trend of gold market and is gold market related to the currency exchange rate specifically USD also is USD value are specified by gold value in the market ?arrow_forwardExplain why the following statement is true or false: “The smaller and less liquid markets and currency markets frequently demonstrate behaviors that follow the principles outlined by the different schools of thought on exchange rate determination (parity conditions, balance of payments approach, and asset approach) relatively well in the medium to long term.”arrow_forward
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