Transaction exposure is a foreign exchange risk that

Multiple Choice

• arises when future payment in a foreign currency is involved.
• results from translating values in foreign currencies to the home-country currency.
• occurs when subsidiary financial statements are consolidated at the corporate level.
• cannot be protected against.

Many companies take advantage of banking opportunities in the Cayman Islands where there are low taxes and less strict banking regulations. The banking centers in the Cayman Islands are an example of

Multiple Choice

• tax havens.
• 3BL.
• ADRs
• fronting loans.

Item27Time Remaining 2 hours 47 minutes 45 seconds02:47:45eBookReferencesItem27Time Remaining 2 hours 47 minutes 45 seconds02:47:45

When firms issue stock to raise capital, they

Multiple Choice

• are limited to domestic markets, due to local legislation.
• are foregoing the use of domestic debt markets.
• are making a commitment to adopt 3BL.
• may tap foreign as well as domestic markets.

Multilateral netting is used to

Multiple Choice

• loan money to foreign subsidiaries.
• optimize cash flow.
• capture spot exchange rates.
• administer human resource benefits.

What is a source for debt financing used by some companies?

Multiple Choice

• local lines of credit
• other businesses
• subsidiaries
• offshore financial markets

According to the Sidney Gray study, in the values related to accounting,

Multiple Choice

• optimism and secrecy tend to occur together.
• honesty is found through the accounting systems of the most conservative countries.
• transparency and optimism tend to occur together.
• transparency and conservatism tend to occur together.

Companies pursue swap contracts in order to

Multiple Choice

• limit currency exposure.
• validate accounting operations.
• eliminate unwanted suppliers.
• reward expatriate workers.