İŞLETME FİNANSI II

Conglomerate multinational corporation produces a different range of products in different countries. By this diversification process, conglomerate multinationals look to spread risks, and maximize returns by careful buying of assets overseas. The correct answer is E.

Horizontally integrated multinational corporation involves the production of essentially the same product in different countries. The main object here is for the corporation to continue to grow by the means of expansion into many different types of new markets. The correct answer is E.

Vertically integrated multinational corporation commences various stages of production in different countries. The essential motive behind this growth strategy is for the corporations to be able to obtain or have more control over the costs and to reduce the uncertainty of the business environment. The correct answer is D.

Franchising is a more comprehensive type of licensing. The franchisee receives a complete package comprising the franchiser’s trademark, products and services, and a complete set of operating principles thereby creating the illusion of a worldwide company for a fee and royalty payments. the correct answer is A.

International Joint Venture (IJV): An IJV is an agreement by two or more companies, one or more is foreign, to produce a product or service together. It involves a much higher level of investment and therefore of risk than the previous entry strategies. Generally, an IJV consists of a multinational corporation and a local partner. Equity proportions vary but usually relative ownership approximates to 50–50 although there are many variations including IJVs with more than two partners including relatively passive partners with minority holdings. The correct answer is B.

Contract Manufacturing and Service Provision: Firms often prefers to outsource production and the main form of outsourcing in many industries is a contract manufacturing agreement. Outsourcing allows a firm to concentrate on enhancing products by focusing on R&D, marketing and design while enjoying the cost advantages brought in by the expertise of contract manufacturers (CM). For decades, many of the MNCs outsource production in different countries in order to benefit the labor cost advantages, as well as the logistical proximity. The best example is specified as Nike that distinguishes design, product development, and marketing from shoe and clothing manufacturing geographically. The correct answer is D.

Exporting: It is the most popular low-risk entry strategy as it involves little investment and exit is unproblematic. It is a fact that for the firms with insufficient resources for other types of internationalization strategies, exporting is the only way to reach to foreign consumers. However, success is entirely dependent on being able to identify efficient and reliable distribution channels. Other critical factors are import tariffs and quotas as well as freight costs. The correct answer is C.

The ratings lie on a spectrum ranging between highest  credit quality  on one end and  default  or “junk” on the other. Long-term credit ratings are denoted with a letter: a triple A (AAA) is the highest credit quality, and C or D (depending on the agency issuing the rating) is the lowest or junk quality. Within this spectrum, there are different degrees of each rating, which are, depending on the agency, sometimes denoted by a plus or negative sign or a number. The correct answer is B.

It is a fact that the global financial system promotes economic growth by several means: - facilitating specialization and promoting trade; - mobilizing resources globally; - Increasing the set of opportunities available to companies, entrepreneurs, and individuals to participate in and contribute to global economic growth. - facilitating risk management, - obtaining information for the evaluation of businesses and allocating capital. The correct answer is C.

The correct answer is A.

The amount and direction of financial flows depend on various factors, including but not limited to the following factors:
- the condition of the global economy. The global economic conditions change over time along with the economic and business cycles, the economy goes through
expansion and contraction. Economic conditions are considered to be sound or positive when an economy is expanding and are seen as adverse or negative when the economy is contracting. Furthermore, the economic recession in developed countries usually causes a decline in the world trade by reducing the demand for goods, this, in turn, affects the developing country economies,
- the size of the international trade barriers;
- different rates of economic development of the countries (synchrony or asynchrony in the major countries’ economies);
- the differential break of inflation’s rate and the level of interest rates,
- the increase of balance of payments’ deficits due to the imbalance of international payments.

A multinational corporation (MNC) consists of a parent company in the firm’s resident country and the operating subsidiaries, branches, and affiliates it controls both at home and abroad. Although there can be various types and structures of an MNC, there are four categories of multinationals that exist. They include:

The characteristics of the multinational corporations are:

Exporting is the most popular low-risk entry strategy as it involves little investment and exit is unproblematic. It is a fact that for the firms with insufficient resources for other types of internationalization strategies, exporting is the only way to reach to foreign consumers. However, success is entirely dependent on being able to identify efficient and reliable distribution channels. Other critical factors are import tariffs and quotas as well as freight costs

Nominal Exchange Rate is the rate between two currencies and represents the relative price of two currencies (the offer to exchange one currency into another). The exchange rate is generally determined in the exchange rate market under the demand and supply conditions. The foreign exchange rate used in the contracts is generally the rate as determined by the intermediary financial institutions referring to the rate determined in the market.

With the ultimate goal of profit maximization, traders in the interbank market try to buy and sell various foreign currencies and so they quote two-way prices. The bid rate is the rate at which they want to buy a base currency and the ask rate is the rate at which they sell the base currency. The difference between these two rates is known as the bid-ask spread.

The principal functions of the foreign exchange market are the following:
• To set the prices of some currencies with respect to others (currency pairs).
• To allow for the realization of currency risk coverage, for example, when investments are made in another currency.
• To favor the exchange of funds between different countries that have excess liquidity and which are in need of foreign currency liquidity.
• To finance international trade, whose transactions represent a significant part of the currency market.

Three main types of exchange rate risks are:

The global financial system is immense, variant and interconnected. It consists of many different types of financial institutions, as well as financial markets in stocks, bonds, commodities, and derivatives. It is a fact that the global financial
the system promotes economic growth by several means:
- facilitating specialization and promoting trade;
- mobilizing resources globally;
- Increasing the set of opportunities available to companies, entrepreneurs, and
individuals to participate in and contribute to global economic growth.
- facilitating risk management,
- obtaining information for the evaluation of businesses and allocating capital