Fire 316 Essay

796 Words4 Pages
1. Explain the importance of international business activity to large corporations. What are the types of opportunities sought by aspiring multinational companies? What are the risks faced by these companies, which are specific to the international nature of their business activities? a. Opportunities: investment opportunities; enhancing revenues (global branding, marketing flexibility, advantages of scale and scope); reducing operating costs (low cost materials, labor, flexibility in global site selection, flexibility in sourcing and production, economies of scale and scope, economies of vertical integration); multinational business strategy (following the customer, leading the customer, following the leader, going local) b. Risks: differences in legal, accounting, and tax systems; differences in personnel management (i.e. HR practices); differences in marketing; differences in distribution; differences in financial markets; differences in corporate governance 2. Given the following Euro to $ Exchange rate of 1.46, what is the information contained in this quote? If the Purchasing Power Parity Theory is correct, what is true about the relationship between the US dollar and the Euro at this exchange rate? a. 3. A US multinational company is required to report its financial results in US dollars. How does this create currency exchange risk for the company? What is the term which most accurately describes this particular risk? a. Currency risk- if unexpected changes in currency values affect the value of the firm 4. Identify and describe the ways in which a US company can participate in international commerce. 5. The price of a currency forward contract is determined by the relationship between interest rates of the two countries in question and the time period covered by the contract. Is this statement exactly true, partly true or false?

More about Fire 316 Essay

Open Document