The Agency Problem: Possible Solutions Businesses can try to handle this issue by offering monetary incentives for avoiding it or threatening to fire employees who display it.

Chief Financial Officer (CFO) People in this position guide a company's financial activities and handle the company's capital and investments. They may issue stock or split stock shares.

Financial Management Processes: Determination of Capital Structure A process in financial management that involves finding out how to acquire the money needed by your company. You may decide to use stocks or bonds.

Corporate Financial Management The method a company uses to meet organizational goals with capital. The major goal of this process is the maximization of profits.

Limited Liability Partnership A kind of partnership that is often favored by professionals, including doctors. Each partner in this type of business will be subject to limited liability.

General Partnership These businesses have more than one owner. These owners work out a partnership agreement and are not offered any protection from liabilities.

Limited Partnership A business arrangement that has a general partner who is in control and limited partners who aren't given rights to management.

Sole Proprietorship If you organize your business in this way, you and your business are considered to be the same legally. You'll be liable for all business debts.

C Corporation These corporations are subject to two levels of taxation. The corporation is subject to corporate income tax, and dividends paid to shareholders are also taxed.

Limited Liability Company (LLC): Taxes If you arrange your business in this way, the company itself isn't responsible for taxes. Taxes pass through to individual owners, who are taxed for business profits with their income tax rate.

The Agency Problem: Example Enron displayed this issue when high-ranking officers, including the CEO and CFO, used false accounting statements to sell stock at high prices.

Limited Liability Company (LLC) A business structure that combines characteristics of corporations and partnerships.

Limited Liability Company (LLC): Liability This company provides members with liability protection by keeping personal assets and business assets apart. Liability is limited to the money invested in the business.

The Agency Problem A conflict that occurs if the managers in a business focus on their best interests instead of the stockholders' best interests.

Cash Budget Businesses can look at this budget to see if they have enough cash to pay for their operational requirements. It estimates inflows and outflows of money for a company.

Financial Management Processes: Estimation of Capital Requirements Businesses complete this process when they need to discern their long-term money needs.

Limited Liability Company (LLC): Registration You will need to register this kind of business with your state government before you can begin operations.

Capital Sources Methods to increase capital. Businesses can self-generate this with their revenue streams, or use debt and equity from external sources of funding.

Corporation Large businesses that face a lot of regulation. They are guided by a board of directors elected by shareholders who have invested in the business.

Financial Management Processes: Investment Strategies You work on this process when you determine strategies that can help your company invest and earn money.

Capital Budgeting A way to plan how capital should be used over time. Once this process shows there's no way to continue value growth, a business will pay out dividends and repurchase stocks.

S Corporation This type of corporation isn't subject to federal income tax; shareholders are taxed instead. There are a lot of rules for setting up this kind of corporation.

Uniform Partnership Act The primary law that has been put in place in every state to govern partnerships.

Net Cash Flow (NCF) This measures multiple cash inflows into a company over a set length of time.

Amortization You complete this process by deducting costs associated with a capital asset that is intangible over some length of time.

Balance Sheet: Assets We use this term to refer to things that have value that are owned by a company. Examples can include equipment or land.

Capital Expenditures Costs associated with the purchase of equipment and machinery by a business. This many also involve the purchase of buildings.

Earnings Before Interest and Taxes (EBIT) The revenue a company has left after they take out costs associated with production, general expenses, administration and selling, but before removing taxes of interest.

Depreciation Use this accounting process by deducting the costs of capital assets that are considered tangible.

Revenue This is how much money a company acquires over the length of an accounting period.

Free Cash Flow (FCF) Look at this to see how much money a company makes after removing the money spent on various capital expenditures.

Balance Sheet A financial statement that lists a company's accounts for liabilities, assets and owner's equity. It also shows the balances of these accounts.

Balance Sheet: Liabilities These are things a business owes and they must be reported on this financial statement. Examples can include payments for rent or interest.

Net Income We use this term to describe what happens if a company's revenue is greater than its expenses in an accounting period.

Generally Accepted Accounting Principles (GAAP) A set of standards that govern how financial statements, including the balance sheet, are reported.

Balance Sheet Equation / Basic Accounting Equation: Formula Assets = liabilities + owner's equity

Negative Cash Flow A type of cash flow that occurs when a business loses more money than it brings in.

Positive Cash Flow Businesses have this kind of cash flow when they bring in more cash than they lose.

Operating Cash Flow (OCF): Formula Earnings before taxes and interest are removed + amortization + depreciation - taxes

Free Cash Flow (FCF): Formula Operating cash flow - capital expenditures

Net Cash Flow (NCF): Formula Operating cash flow + cash flow that comes from investments + cash flow associated with financing

Operating Cash Flow (OCF) You can look at this to see how well you company can use the core activities of business to generate a positive cash flow.

Balance Sheet Equation / Basic Accounting Equation An equation that says a company's assets have to equal the owner's equity added to liabilities. If assets exceed these, there has been an error in the calculation.

Permanent Account These accounts always remain on the chart of accounts for a company once they are opened.

Liquidity We use this term when discussing the rate at which we can transform an asset into cash.

Return on Equity Ratio This ratio allows us to judge the return associated with money that shareholders have invested.

Acid Ratio / Quick Ratio We look at this ratio to judge a company's ability to pay off its short-term debts using assets with the most liquidity.

Current Ratio / Working Capital Ratio A ratio used to see how many current liabilities a company has in comparison to its current assets.

Statement of Retained Earnings We look at this financial statement to see how much of a company's earnings were kept and invested back into the company.

Return on Equity Ratio: Formula Net income / average stockholder's equity

Earnings per Share Ratio (EPS) Complete this ratio to see the amount a company earns in net income for each share of its common stock.

Balance Sheet This financial statement lists all company accounts that are separated by category. It doesn't include temporary accounts.

Debt-to-Assets Ratio Looking at this ratio will show you the amount of assets that a company used debt to finance.

Debt-to-Assets Ratio: Formula Total liabilities / total assets

Cash Ratio The liquidity ratio that includes the most stringency. It looks only at a company's cash and cash equivalents.

Acid / Quick Ratio: Formula (Cash & Cash Equivalents + Accounts Receivable) / Liabilities

Income Statement A financial statement that can tell you what amount of money your company lost or earned over a set amount of time.

Cash Ratio: Formula (Cash + cash equivalents) / current liabilities

Financial Statement Ratios Ratios that use information drawn from financial statements. Businesses can use these when they want to judge how productive and efficient they are.

Adjusted Trial Balance This shows all of a company's accounts after any financial adjustments have been completed, meaning that it offers a timely and accurate looks at a company's accounts.

Current Ratio / Working Capital Ratio: Formula Current assets / current liabilities

Current Asset These are assets that an organization may convert into cash inside of a single year.

Earnings per Share Ratio: Formula Net income / weighted average shares of outstanding common stock

Capital Investment These are investments that take a long time to recover their initial costs. Expensive equipment is an example.

Pro-Forma Balance Sheet Companies create this balance sheet when using the percentage of sale method. It will be unbalanced until the company determines how much external financing it needs.

Financial Planning Model A model that executives can use to assess how business strategies may effect their organizations in the future.

Resource Allocation A process in financial planning that involves figuring out where to use the resources available to a company in order to fulfill organizational goals.

Financial Planning Model: Economic Assumptions An element of the financial planning model that focuses on external factors, such as weather, along with the economy and market sector.

External Financing Needed (EFN): Formula Change in Assets - Change in a Company's Current Liabilities - Company's Retained Earnings

Budget This document is primarily used in financial planning to assess potential revenues and expenses that can occur during a specific length of time.

Percentage of Sales Method This is a method for financial forecasting that can be used to annually forecast a business's sales growth.

Determinants Factors that influence whether a company grows or falters. They can include natural resources, employees who are available to work, consumers, and technology.

Financial Planning Model: Sales Forecast A way for businesses to predict the percentage that their sales will grow. This propels the financial planning model forward.

Internal Growth Rate (IGR): Formula Retained Earnings / Total Assets

Capital Budget These budgets are used by a business to determine how to pay for a capital investment.

Forecasted Sales Growth: Formula Current Sales x (1 + Growth Rate/100)

Corporate Balance Sheet A financial statement that records assets, liabilities, and owner's equity.

Financial Planning Model: Plug This financial planning model element is a backup measure that a company can use to handle potential gaps in the plan.

External Financing Sources of financing from outside of a company. You may obtain this kind of financing by getting a loan or by selling some of your company's stocks.

Natural Resources These are valuable things that are found in nature. They can impact business growth. An example of this would be an increase in the cost to transport goods due to expensive fuel.

Percentage of Retained Earnings: Formula Retained Earnings / Net Income x 100

Cash Flow We use this term to refer to the way money moves into a business or out of the business.

Financial Feasibility This aspect of financial planning focuses on analyzing the financial viability of a business venture. You do this by assessing its total costs and possible profits.

Master Budget A special kind of budget that contains separate but interdependent budgets. Estimates of these budgets may be influenced by one another.

External Financing Needed (EFN) This tells us how much financing a company needs from outside sources.

Sustainable Growth Rate (SGR) This rate deals with how much a company can grow in a given amount of time with no money borrowed. Companies exceed this if they borrow funds.

Internal Growth Rate (IGR) A rate that can be used to ascertain the uppermost amount of growth a company can complete without drawing on external financing.

Financial Control Systems set up by a business for controlling acquisitions and making sure the use of financial resources follows a plan.

Financial Planning Model: Pro Forma Financial Statement You can create this statement, which may forecast future financial statements, as part of the financial planning model.

Interest-Only Loan If you take out this kind of loan, you make initial payments that are only for interest. However, eventually you will have to start making extra payments to cover your principal balance.

Floating-Rate Bond: Coupon These are payments that are calculated by taking the bond's fixed margin and adding its index.

Floating-Rate Bond The coupon for these bonds is variable and connected to some outside variable along with a margin rate that is fixed.

Perpetuity These are payments that have no maturity or end date.

Future Value This is how much an investment you make today will be worth at some point in the future.

Future Value: Formula Present value * (1 + interest rate)^number of time periods

Pure Discount Loan A loan that you sell at one price with a set maturity date, at which point you pay the loan back at its face value. For example, you could sell a $10 loan for $5 that matures in a week.

Bond Yield This represents how much money an investor gets from his or her investment. Generally, if a bond has a lower market price, this will be higher.

Present Value of a Perpetuity: Formula Dividend / discount rate

Bond Yield: Formula Coupon payment / the bond's original price

Zero-Growth Valuation Method: Formula Dividend for an individual share of stock / rate of return

Real Interest Rate We consider this to be a rate of interest that has been adjusted to account for inflation. It is calculated with something called the Fisher equation.

Compound Interest This is calculated at set intervals of time. It involves calculations on accrued interest and the principal. If you put money in a savings account, it accrues this kind of interest.

Bond Yield: Interest Rates These rates vary based on the length of the bond. Short-term bonds usually have low rates, while longer-term bonds have higher rates.

Real Interest Rate: Formula Nominal interest rate - expected rate of inflation

Amortizing Loan With this kind of loan, you make monthly payments. A portion of these payments goes toward your principal and the rest goes toward paying off interest.

Zero-Growth Valuation Method Use this method to value stock that has an non-moving dividend rate. This tells you how much you should pay for each share of this kind of stock.

Inflation A process that causes prices to climb over time while money drops in value. This means products will cost more as time passes.

Present Value: Formula Future value required / ((1 + periodic rate of return) ^ number of periods)

Present Value This is how much of today's money, invested at an interest rate, that will be equal to single or multiple payments at a point in the future.

Zero-Coupon Bond You won't get any interest from these bonds. Instead, once the bond reaches maturity you can redeem it for its face value.

Nonconstant Growth Valuation Method A method for finding the value of stock that works under the belief that the stock's value will change every year.

Compound Interest: Formula Principal (1 + interest rate / how many times a year interest compounds) ^ (how many times a year interest compounds number of years)

Empirical Rule / 68-95-99.7 Rule: Distribution of Data Within one standard deviation of the mean: 68% Within two standard deviations of the mean: 95% Within three standard deviations of the mean: 99.7%

Standard Deviation A way to look at data's variability or spread when considering normal distribution.

Dollar Return Looking at this tells you how much actual currency you get back from an investment. It doesn't directly correlate to the percentage return and may be high while the percentage return is low.

Investment Returns: Normal Distribution / Gaussian Distribution Investment returns distributed in this way will take the shape of a bell curve, because it will be in the shape of a bell.

Efficient Market Hypothesis (EMH): Effects on Competitive Advantage Because of this hypothesis, we know investors can't gain great benefits. This is because market prices account for all pieces of information.

Rate of Return Look at this rate to see how much money you get after paying the initial costs for an investment. It provides information in percentage form and may be positive or negative.

Efficient Market Hypothesis (EMH): Forms Weak-form Semi-strong Strong-form

Geometric Average / Mean A way to find the average that looks at the past performance of an investment.

Efficient Market Hypothesis (EMH) This tells us that everyone participating in a market can access the same facts, ensuring an accurate value for stock prices, meaning a market will adjust according to changes in expectations.

Geometric Average / Mean: Formula {(a x b x c x d x e) ^1/n} - 1. Convert percentages to decimals before beginning by adding one to each percentage.

Percentage Return: Formula (Sales price - purchase price + dividends) / purchase price

Arithmetic Average / Mean The standard method for finding an average. You use this method when finding out your average grade in a class, but it can mislead you if used to calculate average returns.

Dollar Return: Formula Sale price - purchase price + dividends = return in dollars

Rate of Return: Current Value of an Investment We consider this to be how much money an investment is worth at the present time.

Rate of Return: Original Value of an Investment This represents the price you paid to initially buy an object or investment.

Arithmetic Average / Mean: Formula To determine this for a group of numbers, you add all the numbers together and divide your total by the amount of numbers you added.

Rate of Return: Formula ((Current value - original value) / original value) x 100

Empirical Rule / 68-95-99.7 Rule A rule that tells us how data will be arranged around the mean when distributed normally.

Percentage Return A way of looking at the money you make on an investment compared to the money you make on other investments. It shows how much you make compared to how much you spent.

Stock Options: Benefits to Employees These offer employees a pay incentive, allowing businesses to cut costs and still offer rewards to employees who are performing well.

Stocks: Dilution A process that occurs when new stocks are created by a company. The presence of these stocks reduces the value of pre-existing stocks, lessening their proportion of ownership.

Warrant Businesses can make this kind of offer to investors. It includes a purchase price and a premium, as well as a date when it expires. They may cost less and earn more money than stocks.

Stock Option: Call This is a stock contract designed to give you the right to purchase options at a price that was previously set up.

Maturity Date This is the date at which point a purchasing offer for call options or warrants expires.

Call Option An investment that you may purchase on an options exchange. It gives you the chance to purchase stock shares that are at certain prices. Dilution is not caused by this investment.

Stock Option: Put A contract option for stocks that allows you the chance to sell your stocks at a price that has been predetermined.

Stock Option We consider this to be an arrangement that allows the employees of a business to purchase company stocks for a predetermined price. This must usually be accomplished in a certain amount of time.

Derivatives The value of these financial instruments is determined by the value of a different financial instrument. Stock option contracts are considered an example of this.

Preferred Stock Owning this kind of stock guarantees that you will earn dividends and gives you a percentage of ownership in a company. However, you can't vote on company changes.

Common Stock Investors who own this kind of stock are given voting rights and a percentage of company ownership. They don't get a guarantee on dividend payouts.

Accounting Rate of Return / Simple Rate of Return / Average Accounting Return You can look at this to estimate how much profit you'll earn off of an investment.

Payback Analysis A formula that allows you to figure out how long it will take an investment to pay for itself.

Stocks: Advantages Companies may choose to issue these instead of bonds because they don't arequire the company to pay out dividends.

Modified Accelerated Cost Recovery System (MACRS) A system that provides information about how items that will last for over a year will depreciate.

Stock These are shares of ownership in a company. There are two types: common and preferred. Both are considered to be equity.

Securities and Exchange Commission (SEC): Protection This organization looks at the financial health of companies that offer stocks and bonds. This helps build investor confidence.

Systematic Risk The inherent risk of investing in the stock market. This risk does not indicate anything about a specific stock, but reflects the entire market as a whole.

Cost of Capital How much money you lose by not investing your money somewhere.

Accounting Rate of Return / Simple Rate of Return / Average Accounting Return: Formula Average profit / average investment x 100. The answer is written as a percent.

Payback Analysis: Formula Initial investment / annual net cash flow = payback period. Find out what your initial investment should be by using the equation: payback period x annual net cash flow.

Stocks: Marketing Businesses use this process to try to raise the number of bond sales. This process requires businesses to spend money.

Bonds: Advantages Offering these instead of stocks allows businesses to maintain voting rights. Additionally, companies don't have to offer repayment for several years with these.

Investing: Beta In investing, this term is used when discussing the risk an investment offers as it relates to some type of benchmark.

Capital Another term for money. In order to raise this, companies may sell stocks or offer bonds to investors.

Securities and Exchange Commission (SEC) This regulatory body requires companies to register before they can publically offer their stock. Businesses must pay a registration fee as part of this process.

Cum-Dividend Date This represents the final date that you can buy stock and qualify to receive a dividend from the company.

Dividend in Kind With this kind of dividend, a company provides products or physical goods for a dividend, instead of money or stocks.

Stock Split: 3-for-1 With this kind of stock split, you will triple the amount of stocks you hold. The individual worth of each stock drops while the total value stays the same.

Date of Record On this day, an organization must record all the people who will get a dividend. They must also record what amount all the shareholders are owed.

Clientele Effect A concept that tells us that investors will choose to invest their money in companies that offer the kinds of dividends they want.

Cash Dividend: Payment Schedule Dividends of this kind are usually paid out annually or on a quarterly basis.

Stock Split A process that allows businesses to lower the price per share of their stocks by making each stock worth less. This can raise the level of investor interest in stocks.

Declaration Date The day when a company declares publically that they're going to offer dividends.

Low Dividends: Benefits This kind of dividend may be desired by investors who have high levels of income, since they may help lower the investor's taxes.

Dividend A term used when talking about a payment made by a company to shareholders in the company. The payment comes from profits earned by the organization and is based on how many shares you own.

Ex-Dividend Date This day directly follows the cum-dividend date. Once this day occurs, the dividend will go to the person who sold the stock, not the stock's purchaser.

Stock Dividend You will receive newly created stock shares if you get this kind of dividend. For example, if you have 10 stocks with a dividend of 1/10, you'll get one extra stock for your dividend.

Information Content of Dividends Theory This theory asserts that we can assume companies that offer high dividends are strong. These companies can be considered good investments.

Stock Repurchase A process that occurs if a company decides to re-purchase its stock shares. Companies may do this if they think their stock is undervalued.

Stock Split: Company Ownership While the individual worth of stocks is decreased with this process, investors maintain the same level of ownership in the company, as the number of stocks they hold increases.

Cash Dividend Businesses offer this kind of dividend as cash, usually by means of a bank transfer or through a check. This is how dividends are most commonly offered.

Cash Float We use this to refer to the difference between money a company has in its books and the money actually contained in the business's bank accounts.

Net Float This represents both disbursement and collection float considered together. You find it by subtracting disbursement float from collection float.

Check 21 / Check Clearing for the 21st Century Act An act that allows banks to electronically process checks.

Miller-Orr Model Businesses can use this model to place both upper and lower limits on how much cash they have, allowing for movement between these limits.

Compensating Balances A requirement placed on businesses by banks after the business takes out a loan. These force the business to keep a set level of cash on hand.

Default Risk We use this term to refer to the odds that someone who borrowed money won't repay their debt. Lenders consider this when determining if they'll offer someone credit.

Controlled Disbursement Account Banks tell businesses that have this kind of account about the checks that should be disbursed for a specific day. This can help the process of money management.

Accelerating Collections A process that involves lessening how much time is required for a businesses to turn sales into available cash.

Collection Float A type of cash float that starts going into effect after one company gets a check from another company and delivers the check to their bank.

Baumol-Allais-Tobin Model / BAT model A method that allows companies to see how much cash to keep. It involves making regular, scheduled deposits of a set amount of funds.

Economic Order Quantity Model A model for inventory management that tries to set up an ideal level for a business's inventory. It works well for products that have a stable level of demand.

Short-Term Security These are any kind of investment that a business can liquidate within a single year or less.

Default A risk associated with repaying investments. You don't face this risk if you choose to simply hold onto your excess cash.

Mutual Funds A variety of securities that have been grouped together and that are managed by business professionals.

Cash Concentration You accomplish this if you take money from multiple accounts and place them all into one account.

Lockbox System Businesses use this collections system if they have customers mail payments to a post office box in check form. A service collects and deposits these checks.

Holding Cash: Disadvantages Maintaining high levels of this can cause problems for a businesses as it doesn't result in interest and it may be better utilized to create returns.

Zero-Balance Account A disbursement account designed to end every day with a balance set at zero. If any money remains in this account at day's end, the company will remove it.

Treasury Bills A type of security investment offered by the government. These are available for short term investments and can be used to hold a business's extra cash.

Statement of Cash Flow This financial document is used to record cash transactions that come into or go out of a business as it completes various activities.

Disbursement In business, this term is used to describe the action a business takes when it spends money.

Accounts Receivable Days We consider this to be the average length of time, in days, from the time a business makes a sale to the time they collect on that sale.

Holding Cash: Motives Speculative Precautionary Transaction

Disbursement Float The kind of cash float that occurs first. Writing a check begins this.

Law of Supply A law that asserts that if a product's price increases, so will its supply. Conversely, if a product drops in price, its supply will fall as well.

International Fisher Effect A rule that asserts that anticipated changes within interest rates are responsible for shifting the exchange rate.

International Corporate Finance: Political Risks These risks are caused by political actions. Fluctuations in a currency's value are most common, but changes in tax rates and political upheaval, such as civil wars, are also issues.

International Capital Management: Long-Run Approach An approach to handling international capital management that focuses on alleviating risks in the long-term while dismissing fluctuations in the short-term.

Arbitrage We complete this action if we buy something from a different country because that country offers a better price, even after taking the cost of currency exchange into consideration.

Purchasing Power Parity Theory This theory says that identical products sold in different countries will match up in cost if you take the exchange rate into consideration.

Absolute Purchase Price Parity A kind of purchase price parity designed to keep the price levels of goods balanced in different countries. This ensures products have the same relative cost in different areas.

Spot Exchange Rate This is another term used to describe the exchange rate as it currently stands.

Law of Demand This law tells us that people demand less of a good as it becomes more expensive, and will want more of a good when it is less expensive.

Interest Arbitrage A process that involves trading money from one currency to another. Different exchange rates allow some companies to generate a profit through this process.

Short-Run Exposure We consider this to be the chance that over the short-term an investor will be met with less than favorable exchange rates.

Inflation A process that can lower one country's real purchasing power.

Foreign Currency Exchange Rate: Supply Changing this can influence the exchange rate. Increasing the amount of currency will lower the exchange rate, while restricting the amount of currency raises it.

Foreign Currency Exchange Rate: Demand This can increase or decrease the exchange rate. For example, if consumers want more goods from one country, they will want more of that country's currency as well.

International Capital Management: Home Currency Approach Businesses use this approach to international capital management when they base all business on their own country's currency.

Forward Exchange Rate Businesses use this exchange rate when they try to predict what the exchange rate will be in the future.

Translation Exposure A risk associated with investing in currencies from other countries. This can negatively impact a company's reported finances if they must report during drops in the exchange rate.

Interest Rate Parity We see this if we look at the interest rates of two countries and find the difference between one and the other to be the same as the difference found for the forward and spot exchange rates.

Inflation A process that can lower one country's real purchasing power.

Forward Exchange Rate Businesses use this exchange rate when they try to predict what the exchange rate will be in the future.

Translation Exposure A risk associated with investing in currencies from other countries. This can negatively impact a company's reported finances if they must report during drops in the exchange rate.

Law of Demand This law tells us that people demand less of a good as it becomes more expensive, and will want more of a good when it is less expensive.

Spot Exchange Rate This is another term used to describe the exchange rate as it currently stands.

Purchasing Power Parity Theory This theory says that identical products sold in different countries will match up in cost if you take the exchange rate into consideration.

International Capital Management: Home Currency Approach Businesses use this approach to international capital management when they base all business on their own country's currency.

International Fisher Effect A rule that asserts that anticipated changes within interest rates are responsible for shifting the exchange rate.

Foreign Currency Exchange Rate: Demand This can increase or decrease the exchange rate. For example, if consumers want more goods from one country, they will want more of that country's currency as well.

International Corporate Finance: Political Risks These risks are caused by political actions. Fluctuations in a currency's value are most common, but changes in tax rates and political upheaval, such as civil wars, are also issues.

Absolute Purchase Price Parity A kind of purchase price parity designed to keep the price levels of goods balanced in different countries. This ensures products have the same relative cost in different areas.

Interest Arbitrage A process that involves trading money from one currency to another. Different exchange rates allow some companies to generate a profit through this process.

International Capital Management: Long-Run Approach An approach to handling international capital management that focuses on alleviating risks in the long-term while dismissing fluctuations in the short-term.

Arbitrage: We complete this action if we buy something from a different country because that country offers a better price, even after taking the cost of currency exchange into consideration.