International Business Finance
If the exchange rate of U.S. dollars for euro is 1.37 to 1, this means that it would take ____ to purchase one euro
$1.37
–The firm’s cost of capital is also referred to as the firm’s _________ cost of capital.
opportunity
The number of years needed to recover the initial cash outlay related to an investment is the ______ ________
Payback Period
Accounting profits are not equal to ____ ____. It is possible for a firm to generate accounting profits but not have cash - or to generate cash flows but not report accounting profits in the books.
____ ____ is what matters
Cash Flow
This is when interest paid on an investment during the first period is added to the principal; then, during the second period, interest is earned on the new sum (that includes the principal and interest earned so far).
Compounding
D_______ F________ I________ occurs when a company from one country makes a physical investment, such building a manufacturing facility, in another country.
Direct Foreign Investment
Capital constitutes all items on the right hand side of balance sheet, which are ...
liabilities and common equity
It is easier to find profitable projects than to evaluate them. (T or F)
False
A dollar received today is worth more than a dollar received in the future. Money has ____ ______.
Time Value
Bodhi Leaf Coffee's new name (the Profit)
Red Beard [Coffee Traders]
The ________ _____ is the price of one currency stated in terms of another
Exchange Rate
Name two of the main sources of capital
Debt, Preferred stock, Retained earnings, and Common Stock
Name at least 3 sources of project ideas
R&D, Employees, Competition, Suppliers, Customers.
Risk Requires
Reward
On the Income Statement: ________ - ________ = ________
Sales – Expenses = Profits
The foreign exchange (F X) market is by far the world’s largest financial market, with daily trading volumes of a) 1-2 trillion, b) 3 trillion, c) more than 4 trillion
more than $4 trillion.
This is the minimum rate of return necessary to attract an investor to purchase or hold a security.
Investor’s Required Rate of Return
This is equal to the present value of all future free cash flows less the investment’s initial outlay. It measures the net value of a project in today’s dollars.
Net Present Value
______ ______ are generally right
Market Prices
Common-sized income statement restates the income statement items as a ___________ of _____.
Percentage of Sales
What are the top three currencies traded daily (country name ok)
US Dollar, Euro, Japanese Yen
A firm’s financial policy indicates the desired _____ __ _______ and the particular ___ in which it will be used.
sources of financing / mix
What are two drawbacks to using the payback period?
–Ignores the time value of money
–Does not consider cash flows beyond the payback period
Conflict of Interest cause _______ ________
Agency Problems
This Ratio compares a firm’s current assets to its current liabilities.
Current