Part 1 Flashcards
What are the three main challenges economy and capitalism
- The dependence on natural resources and the planet
- The financial economy over the real economy
- The problem of distribution of income and wealth
Where does ESG stands for?
E: Environmental
S: Social
G: Governmental
Where does VUCA stands for?
V: Volatility
U: Uncertainty
C: Complexity
A: Ambiguity
Give the definitions of:
BEPS
Tax arbitrage
Cash sweeping
Cash pooling
Transfer pricing
Base erosion and profit shifting (BEPS): refers to corporate tax planning strategies used by multinationals to “shift” profits from higher-tax jurisdictions to lower-tax jurisdictions or no-tax locations where there is little or no economic activity, thus “eroding” the “tax base” of the higher-tax jurisdictions using deductible payments such as interest or royalties.
Tax arbitrage: is the practice of profiting from differences that arise from the ways various types of income, capital gains, and transactions are taxed. The complexity of many countries’ tax codes allows individuals to seek out legal loopholes or restructure their transactions in such a way that they are able to pay the least amount of tax.
Cash sweeping: A cash sweeping system (also known as physical pooling) is designed to move the cash in a company’s outlying bank accounts into a central concentration account, from which it can be more easily invested. By concentrating cash in one place, a business can place funds in larger financial instruments at higher rates of return. Cash sweeps are intended to occur at the end of every business day, which means that quite many sweep transactions may arise over the course of a year.
Cash pooling: is a financial service available to companies and groups of companies so that they can concentrate the balances of several bank accounts in one centralising account, from and to which funds flow, by sweeping and replenishing funds between accounts.
Transfer price, also known as transfer cost, is the price at which related parties transact with each other, such as during the trade of supplies or labor between departments. Transfer prices may be used in transactions between a company and its subsidiaries, or between divisions of the same company in different countries.
What are the 5 new paradigms in the business investments?
- Structural and systematic crisis of investment agencies
- Environmental factors; globalization vs protectionism
- Change in risk in economic sectors
- Change of business focuses
- Technology, innovation and investments
What are the three new behaviours in business investments?
- Incorporation of new roles, ethics and values to new companies.
- Economy and investments are determined by disruptive technology evolution and strong reconstruction business models
- Drastic reduction of CAPEX and lower debt the importance of ABM and Bootstrapping
Name some management and macro trends
- Importance of customer data
- Automated assistance systems
- Automated MK systems
- Human integration
- Robotic and 3D integration
- Logistics development
- New devices and channels
- New analyses
New economies in the 90’s
Informational economy: It is an informational economy because ‘the productivity and competitiveness of its agents (be they companies, regions or nations) depends fundamentally on their ability to efficiently generate, process and apply knowledge-based information.
Global economy: Global economy because “production, consumption and circulation, as well as their components (capital, labour, raw materials, management, information, technology, markets), are organized on a global scale, either directly or through a network of links between economic agents.
New economies and businesses
- Grid economies: a market in which computing resources and services are bought and sold on demand
- Share economy; a peer-to-peer-based activity of acquiring, providing or sharing access to goods and services that is often facilitated by a community-based online platform.
- A collaborative economy: is a marketplace where consumers rely on each other instead of large companies to meet their wants and needs.
- Crowd economy: is the focus on economic models engaged by the crowd who are individuals, not purpose-driven organisations with passionate and interested stakeholders to raise the profile.
- Gig economy: a labour market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs
- Token economy: a method of encouraging desirable behavior, especially in a hospital setting, by offering rewards of token money that can be exchanged for special food, access to television, and other bonuses.
- A circular economy: is a model of production and consumption which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products for as long as possible. We have white, green and blue economies
- Social economy: the social economy is made up of a diversity of enterprises and organizations like cooperatives, mutuals, associations, foundations, ethical banks, and social enterprises among other forms specific to each country. It puts people before profits and invests in people. Putting people in the centre of the economy
- Functional economy: is one that optimizes the use (or function) of goods and services and thus the management of existing wealth (goods, knowledge, and nature).
- Sustainable finance: Sustainable finance is defined as investment decisions that take into account the environmental, social, and governance (ESG) factors of an economic activity or project.
The are of intangible assets:
- An economy that operated with information technologies and communications
- An economy in which the speed (time) of action is key
- An economy in which imagination is the basis of the process
- An economy with structural contradictions, where the idea of change and innovation are its political and techno-economic axes
Three intangible assets
- Human
- Structure
- Relations
The main reasons for internationalization:
- Equity, quotation or listing, stock markets, public equity
- Other equity e.g. venture capital, joint venture, family office, private equity
- Bonds and other loans; collateral, convertible and hybrids
- Project Finance
- Other types of international financing; corporate venture, leverage buyout (LBO), Management buyout (MBO), management buy-in (MBI), buy-in management buyout (BIMBO)
- Tax reasons; lower taxation or less supervision. BEPS (Base erosion and profit shifting), Cash sweeping and Cash pooling
- Legal reasons; greater legal protection or less protectionism
- For productive reasons; lower labour costs or due to the need for qualification and technology
- For reasons of demand; population problems in the first economies
- Due to demand opportunity; competitive advantages or less competitive pressure
- For R&D&I; protection of intellectual property and research capacity of the country
- Portfolio and capital allocation effects
a. Relationship between return and risk management
b. Diversified portfolio for reasons of international risk
c. Defence against globalization - Due to alliances, cooperation agreements and joint ventures
- International relations; country placet, corporate relations
- Corporate image; such as fashion and professional services\
