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CPA > BEC Custom 5 > Flashcards

BEC Custom 5 Flashcards

1
Q

Import Quota

A

restricts the quantity of goods that can be imported

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2
Q

Import Tariff

A

Taxes on imported goods that increases cost in domestic market

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3
Q

Currency Exchange Rate

A

price of one unit of a country’s currency expressed in units of another country’s currency

  • $1.00 = .80 Euro
  • 1.00 Euro = $1.25
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4
Q

Balance of Trade

A
  • difference between money value of imports and exports
  • exports > imports = trade surplus
  • exports < imports = trade deficit
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5
Q

Balance of Payments Issue

A
  • summary accounting of U.S.-base transactions with all other countries during a period of time
  • balance of payments accounts: current account, capital account, and financial account
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6
Q

Current Account (Balance of Payments)

A

net dollar value for period of:
- amounts earned from export of goods and services
- amounts spent on import of goods and services
- income from foreign investments - dividends and interest
- net factor flow from foreign aid and grants
SUM = Net Balance

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7
Q

Capital Account (Balance of Payments)

A

net dollar value for period of:

  • inflows from investments and loans by foreign entities
  • outflows from investments and loans by U.S. entities made abroad
  • reflects net change in foreign ownership of U.S. assets and U.S. ownership of foreign assets
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8
Q

Financial Account (Balance of Payments)

A

net dollar amount of:

  • U.S. owned assets located abroad
  • Foreign-owned assets in the U.S.
  • shows accumulated amount of investments:
  • both government and private
  • monetary and non-monetary
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9
Q

Direct exchange rate

A

Expresses the domestic price of one unit of a foreign currency

1 Euro = $1.10

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10
Q

Indirect exchange rate

A

Foreign price of one unit of a domestic currency

$1.00 = .909 Euro

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11
Q

Free-floating currency

A

exchange rate is determined by market forces of supply and demand for a currency

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12
Q

Pegged or Movable currency

A

exchange rate is fixed by the government, with frequent revisions

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13
Q

Transaction Risk

A

The possible unfavorable impact of changes in currency exchange rates on transactions that are denominated in a foreign currency

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14
Q

Foreign Currency Exchange Rate Hedging

A

Hedging is a risk management strategy that involves using offsetting or contra transactions so that a loss on one would be offset by a gain on the other

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15
Q

Translation Risk

A

The possible unfavorable impact of changes in currency exchange rates on financial statements of foreign operation that are converted from a foreign currency to the domestic currency

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16
Q

Economic Risk

A

The possibility that changes in exchange rates will alter value of future revenues and costs

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17
Q

How can a firm mitigate economic risk?

A
  • distribute productive assets in different countries with different currencies
  • shift sources of revenues and expenses to different locations with different currencies
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18
Q

Foreign currency forward exchange contract

A

A contract to buy or sell a specified amount of a foreign currency at a specified date at a specified rate

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19
Q

Foreign currency option contract

A

A contract that gives the right to buy or sell a specified amount of a foreign currency for a specified time at a specified rate

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20
Q

In practice, what may transfer price be based on?

A
  • cost to the selling unit - either variable or full cost
  • market price - the price of such goods or services in the market, if available
  • negotiated price - between buying and selling units
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21
Q

Globalization

A

The movement toward a more integrated and interdependent world economy

22
Q

World Bank

A

promotes general economic development

23
Q

International Monetary Fund (IMF)

A

maintains order in the international monetary system by providing funds to economies in financial crisis, including - currency crisis, banking crisis, and financial debt crisis

24
Q

World Trade Organization (WTO)

A
  • oversees the implementation, administration, and operation of covered trade agreements
  • provides a forum for negotiations and for settling international trade disputes
25
Q

5 largest export countries in order

A
  1. China
  2. Germany
  3. U.S.
  4. Japan
  5. France
26
Q

5 largest import countries in order

A
  1. U.S.
  2. China
  3. Germany
  4. Japan
  5. France
27
Q

Outsourcing

A

Acquiring goods or services from a separate or external provider under contractual terms

28
Q

Outsourcing Risks

A
  • quality - goods or services do not meet buyer’s standards
  • security - provider misappropriates intellectual property, trade processes, data, etc.
  • export/import - home country or source country restricts the transfer of goods
  • currency exchange - the cost of goods and services in domestic currency increases
  • legal - possible violation of a country’s laws
29
Q

Capital Markets

A

Bring together providers of capital (investors) and users of capital (borrowers)

30
Q

Global Capital Market

A

Interconnected set of financial institutions and national markets that permit the trading of securities and other financial assets between and among investors and borrowers world-wide

31
Q

Eurodollar market

A

provides short and intermediate-term loans world-wide denominated in U.S. dollars

32
Q

International bond market (Eurobonds)

A
  • long-term loans outside borrower’s home country
  • offered in most major currencies
  • avoids most government regulation
33
Q

What are the two major reasons for movement of services world-wide?

A
  • internet and global communications

- relocation of services necessary to support foreign trade and production

34
Q

Foreign Licensing

A
  • Granting a foreign entity the right to use an asset: patent, trademark, formula, etc.
  • licensee makes royalty payments to the licensor
35
Q

Foreign Franchising

A
  • special form of licensing in which the franchisor typically mandates strict operating procedures
  • used primarily in foreign retail and service markets
36
Q

Foreign Joint Venture

A
  • an entity established in a foreign location and jointly owned by two or more otherwise unrelated entities
  • one of the owners is typically located in the foreign country
37
Q

Foreign Subsidiary

A
  • entity acquires or establishes a foreign subsidiary - a controlled, but legally separate entity
38
Q

Strategic Planning

A

Sequence of interrelated procedures for determining an entity’s long-term goals and objectives and identifying the best approaches for achieving those goals and objectives

39
Q

Mission Statement

A

provides expression of the purpose and range of entity activities

40
Q

Values

A

Establish the underlying beliefs that govern operations and how relationships with other parties are conducted

41
Q

Goals

A
  • general purposes towards which entity endeavors are directed
  • typically mid-to-long-term in outlook
  • may encompass multiple objectives
42
Q

What are the three generic business strategies from Michael Porter?

A
  • cost leadership
  • differentiation
  • focus
43
Q

PEST analysis

A

A macro-assessment of -

  • Political
  • Economic
  • Social
  • Technological elements of an environment
44
Q

Porter’s Five Forces

A
  • threat of new entrants into the market
  • threat of substitute goods or services
  • bargaining power of buyers
  • bargaining power of suppliers
  • intensity of rivalry
45
Q

SWOT Analysis

A
  • develops a profile of the internal Strengths and Weaknesses and external Opportunities and Threats
46
Q

What are Porter’s three generic strategies?

A
  • cost leadership
  • differentiation
  • focus - cost leadership or differentiation applied to a narrow market
47
Q

Cost Leadership strategy points

A
  • seek to minimize costs
  • invest significantly in production and distribution assets
  • have high levels of expertise in product design, manufacturing, and distribution
48
Q

Differentiation strategy points

A
  • highly skilled and creative product or service development personnel
  • leading edge research capabilities
  • strong and dedicated marketing and sales personnel
  • reputation for innovation, quality, and service
49
Q

Focus strategy points

A
  • outstanding market research and understanding of target group
  • ability to tailor strengths in product or service development to target group
  • high degree of customer satisfaction and loyalty
50
Q

Alternative Resources-Based Model (RBM)

A
  • alternative strategic planning model
  • assesses resources and capabilities of an entity
  • bases strategy on collection of resources and capabilities to take advantage of opportunities in the market

CPA (16 decks)

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