FBLA International Business

International Companies

importers & exporters, with no investment outside home countries

Multinational Companies

investments in other countries, but adapt each product to the specific place

Global Companies

investments in other countries, but general global marketing

Transnational Companies

give more power to each subculture within the organization

Debt vs Equity Financing

Debt is borrowing with promise to eventually pay back, Equity is giving ownership away

Trade Finance relationships

Exporter generally requires imports to pay for goods. Importer provides Letter of Credit to exporter as a promissory note that when the Bill of Lading is shown, the transporter will be paid.

Export Credit Agencies

provide export financing or credit insurance

Trade Credit

credit given by manufacturers/suppliers that let importers buy now and pay later

Credit Insurance

insurance protecting the exporter if the importer is unable to pay

Political risk Insurance

Insurance protecting the exporter from any political risks that arise

Foreign Bond

bond of a non-domestic company issued in the domestic bond market using the currency of the domestic country

American Depository Receipt

traded in America representing a country not headquartered in America; issued by banks.

Global Depository Receipt (GDR)

traded globally representing foreign firms

Countertrade

trading products for products (kind of like barter); international trade with goods

Offset Transaction

transaction that cancels out another transaction, cancels risks and benefits of another element (a transaction that chooses the investor's decision in another transaction)

Noncash Transaction

doesn't change cash outflows or inflows, but simply changes equity/long term assets and liabilities

International Monetary Fund

founded in 1944 at Bretton Woods, this organization tries to create monetary cooperation by promoting free trade, employment, and exchange rate stability

World Bank

provides loans to developing countries, part of United Nations

Certificate of Origin

shows where products originated, particularly at customs

Bill of Lading

held by the shipper, details what's being shipped, and transfers ownership to importer

Commercial Invoice

document required by customs to determine the true value of imported goods, in depth description of shipment

Letter of Credit

document from bank saying that exporter will receive payment as long as certain conditions are met

Fronting a Loan

loan within multinational company uses international banks (give money to bank at home country, bank in international country pays host country)

Debt and Equity Financing

SBA (Small Business Administration in the United States) for domestic operations

Foreign Exchange Risk (FX Risk)

financial transaction in currency different from base currency

Financial Structure

Mix of debt and equity used to finance a business

Financial Accounting Standards Board (FASB)

The body that writes the generally accepted accounting principles by which the financial statements of US firms must be prepared.

Foreign Portfolio Investment

Investments by individuals, firms, or public bodies (e.g., national and local governments) in foreign financial instruments (e.g., government bonds, foreign stocks).

Fronting Loans

A loan between a parent company and a foreign subsidiary that is channeled through a financial intermediary.

Hedge Fund

Investment fund that not only buys financial assets (stocks, bonds, currencies) but also sells them short

Historic Cost Principle

Accounting principle founded on the assumption that the currency unit used to report financial results is not losing its value due to inflation.

Market Makers

Financial service companies that connect investors and borrowers, either directly or indirectly.

Short Selling

Occurs when an investor places a speculative bet that the value of a financial asset will decline, and profits from that decline

Subsidy

Government financial assistance to a domestic producer

Current Cost Accounting

Method that adjusts all items in a financial statement to factor out the effects of inflation.

Current Rate Method

Using the exchange rate at the balance sheet date to translate the financial statements of a foreign subsidiary into the home currency.

Transnational Financial Reporting

The need for a firm headquartered in one country to report its results to citizens of another country.

Unbundling

Relying on more than one financial technique to transfer funds across borders

International Monetary Fund

International institution set up to maintain order in the international monetary system

World Bank

International institution set up to promote general economic development in the world's poorer nations.

Foreign Direct Investment

the net inflows of investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor

Inflows of FDI

Flow of foreign direct investment into a country

Multilateral Agreement on Investment

An agreement that would make it illegal for signatory states to discriminate against foreign investors; would have liberalized rules governing FDI between OECD states

Outflows of FDI

Flow of foreign direct investment out of a country

Eclectic Paradigm

Argument that combining location-specific assets or resource endowments and the firm's own unique assets often requires FDI; it requires the firm to establish production facilities where those foreign assets or resource endowments are located.

Countertrade

The trade of goods and services for other goods and services.

Noncash Transaction

Investing or financing activity that does not affect the cash inflows or outflows, but involves only owners' equity or long-term assets and liabilities. If it represents a significant amount, a noncash transaction is disclosed in the notes (footnotes) to the cash flow statement.

IMPACTS OF FDI (National Bureau of Economic Research)

Within host countries, it has been abundantly shown that foreign- owned firms pay higher wages than domestically- owned firms - Small or inefficient local firms may be forced to contract or leave the industry altogether. That may be viewed as a healthy redeployment of capital, but it is an explanation for some host country opposition to foreign multinationals.

Bilateral Netting

Settlement in which the amount one subsidiary owes another can be cancelled by the debt the second subsidiary owes the first.

Capital Account

In the balance of payments, records transactions involving the purchase or sale of assets.

Capital Controls

Restrictions on cross-border capital flows that segment different stock markets; limit amount of a firm's stock a foreigner can own; and limit a citizen's ability to invest outside the country

Gross Fixed Capital Formation

Summarizes the total amount of capital invested in factories, stores, office buildings, and the like.

International Accounting Standards Committee

Organization of representatives of 106 professional accounting organizations from 79 countries that is attempting to harmonize accounting standards across countries.

Eurobonds

A bond placed in countries other than the one in whose currency the bond is denominated.

Systematic Risk

Movements in a stock portfolio's value that are attributable to macroeconomic forces affecting all firms in an economy, rather than factors specific to an individual firm (unsystematic risk).

Debt financing

You borrow the money and agree to pay it back in a particular time frame at a set interest rate. You owe the money whether your venture succeeds or not. Bank loans are what most people typically think of as debt financing.

Equity financing

You sell partial ownership of your company in exchange for cash. The investors assume all (or most) of the risk--if the company fails, they lose their money. But if it succeeds, they typically make much greater return on their investment than interest rates. In other words, equity financing is far more expensive if your company is successful, but far less expensive if it isn't.