C214 - Financial Management Study
Guide - EXAM QUESTIONS AND ALL
CORRECT ANSWERS 100% SOLVED AND
GUARANTEED SUCCESS!!
Hedging - The process of eliminating risk
Tariffs - Taxes levied on goods imported into a country
Foreign Exchange Risk (AKA FX Risk) - Risks associated with the changing values of countries'
concurrences
Direct Quote - If you are located in the United States, a direct quote is one where the foreign
currency is in the denominator of the quote. EUR/USD = €1.11
Indirect Quote - When a currency exchange rate is started with the currency of interest in
the denominator. USD/EUR = $0.901
Floating Exchange Rate - If a country follows a floating exchange rate policy, the value of the
currency is determined strictly by supply and demand in the open market.
Fixed (Pegged) Exchange Rate - A country's monetary authority (e.g., the Bank of England for
the UK) intervenes to maintain a constant value of the country's currency.
, Managed (Dirty Floating) Exchange Rate - Currencies are generally allowed to float but the
fluctuations are managed. A managed float is essentially a policy of allowing a currency to float
within a minimum and maximum value.
The two primary methods used to hedge FX risk are: - Financial derivatives and direct
investment.
Financial Derivatives - To use a derivative contract also known as a Currency Forward.
Currency Forward - An agreement for delayed delivery.
Direct Investment - A direct investment strategy requires a firm build infrastructure in the
country where sales occur. It's very straight forward.
FX Hedging - Allows firms to focus on making profits through their operations and not trying
to guess which direction FX rates will move.
Tariffs - The motivation for tariffs is the protection of domestic industries.
Currency Restrictions - The idea is to limit the ability of a foreign firm to take capital out of a
country.
FASB (Financial Accounting Standards Board) - The U.S. accounting system is governed by the
Financial Accounting Standards Board (FASB), which is a private non-profit organization that
attempts to establish and regulate the generally accepted accounting principles of firms.
Outsourcing - To produce a product or service outside of the country.
Guide - EXAM QUESTIONS AND ALL
CORRECT ANSWERS 100% SOLVED AND
GUARANTEED SUCCESS!!
Hedging - The process of eliminating risk
Tariffs - Taxes levied on goods imported into a country
Foreign Exchange Risk (AKA FX Risk) - Risks associated with the changing values of countries'
concurrences
Direct Quote - If you are located in the United States, a direct quote is one where the foreign
currency is in the denominator of the quote. EUR/USD = €1.11
Indirect Quote - When a currency exchange rate is started with the currency of interest in
the denominator. USD/EUR = $0.901
Floating Exchange Rate - If a country follows a floating exchange rate policy, the value of the
currency is determined strictly by supply and demand in the open market.
Fixed (Pegged) Exchange Rate - A country's monetary authority (e.g., the Bank of England for
the UK) intervenes to maintain a constant value of the country's currency.
, Managed (Dirty Floating) Exchange Rate - Currencies are generally allowed to float but the
fluctuations are managed. A managed float is essentially a policy of allowing a currency to float
within a minimum and maximum value.
The two primary methods used to hedge FX risk are: - Financial derivatives and direct
investment.
Financial Derivatives - To use a derivative contract also known as a Currency Forward.
Currency Forward - An agreement for delayed delivery.
Direct Investment - A direct investment strategy requires a firm build infrastructure in the
country where sales occur. It's very straight forward.
FX Hedging - Allows firms to focus on making profits through their operations and not trying
to guess which direction FX rates will move.
Tariffs - The motivation for tariffs is the protection of domestic industries.
Currency Restrictions - The idea is to limit the ability of a foreign firm to take capital out of a
country.
FASB (Financial Accounting Standards Board) - The U.S. accounting system is governed by the
Financial Accounting Standards Board (FASB), which is a private non-profit organization that
attempts to establish and regulate the generally accepted accounting principles of firms.
Outsourcing - To produce a product or service outside of the country.
