ADM 3360 Chapter 17: Ch. 17 – Personal Property
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The primary costs of FDI to host countries are:
| Loss of sovereignty and patriotism | ||
| Adverse effects on competition and exports | ||
| Capital outflow | ||
| Loss of sovereignty, adverse effects on competition, and capital outflow |
____ suggests that FDI, unrestricted by government intervention, will enable countries to tap into their absolute or comparative advantage by specializing in the production of certain goods or services.
| The radical view | ||
| The free market view | ||
| Pragmatic nationalism | ||
| Expropriation |
What are the benefits of FDI to home countries?
| Repatriated earnings from profits from FDI. | ||
| Increased exports of components and services to host countries. | ||
| Learning via FDI from operations abroad. | ||
| All of these answers |
When one firm enters a foreign country through FDI, its rivals are likely to follow by undertaking additional FDI in a host country to:
| Create knowledge spillover | ||
| Discover a new market for its goods | ||
| Overcome and combat market failure through FDI | ||
| Acquire location advantages or neutralize the first moverâs location advantages |
Most countries practice:
| Pragmatic nationalism | ||
| Free market based FDI | ||
| Government embracing radical view | ||
| French patriotism |
FDI may be viewed as a reflection of firm motivation to extend firm-specific capabilities abroad and their responses to overcome imperfections and failures.
| True | ||
| False |
Most countries practice a totally "free market" view.
| True | ||
| False |
8. Outsourcing is the process of turning over an organizational activity to an outside supplier, located in a foreign country, which will perform it on behalf of the local firm.
| True | ||
| False |
Financial, physical, and technological resources and capabilities are all tangible assets.
| True | ||
| False |
A firm's resources and capabilities are tangible assets a firm uses to choose and implement its strategies.
| True | ||
| False |
An example of low power distance would be when subordinates address their bosses on a first-name basis.
| True | ||
| False |
Benchmarking is an assessment as to whether a firm has resources and capabilities to perform a particular activity in a manner superior to competitors.
| True | ||
| False |
A country with low-masculinity has a more subtle differentiation between the gender roles.
| True | ||
| False |
Setting up subsidiaries abroad so the work can be performed in-house but in the foreign location is also called captive sourcing.
| True | ||
| False |
Managers in low uncertainty avoidance countries rely more on experience and training than managers in high uncertainty avoidance countries who rely more on rules.
| True | ||
| False |
Informal institutions include laws, regulations, and rules.
| True | ||
| False |
The United States is often classified as a collective society.
| True | ||
| False |
A pure market economy characterized by the "invisible hand" of market forces is noted by
| John Stuart Mill | ||
| Adam Smith | ||
| Aristotle | ||
| Amatya Zen |
Culture is defined in the text as:
| The communication between members of similar location. | ||
| The collective programming of the mind, which distinguishes the members of one group or category of people from another. | ||
| The main component of formal institutions. | ||
| The attitudes and behaviors characteristic of a particular social group or organization. |
When an expat employee returns to her or his current employer but the employer does not provide attractive opportunities, she/he often may be hired by a competitor firm. Why?
| Competitor firms are also interested in globalizing their business. | ||
| Former expats bring instant expertise and experience. | ||
| Competing firms will pay a higher premium for expertise. | ||
| All of these answers |
The government taking a "hands-off approach" is known as:
| Laissez faire | ||
| Command economy | ||
| Mixed economy | ||
| Liberal approach |
Expatriate managers make ideal candidates for top management positions.
| True | ||
| False |
____ are defined as rights associated with the ownership of intellectual property.
| Patents | ||
| Copyrights | ||
| Trademarks | ||
| Intellectual property rights |
In a collective society:
| Family units are highly valued. | ||
| Being an entrepreneur is a popular mindset | ||
| Being different than your neighbor is important. | ||
| Outsiders are easily trusted. |
Which of the following definitions best defines an expatriate manager?
| A manager who works outside his or her native country | ||
| A manager of great expertise | ||
| An ex-manager rehired for advisory purposes | ||
| None of these answers |
The Awesome Products Business ValuationCase
Awesome is a small closely held company operating in the UnitedStates. Assume you are in the early stages of preparing a businessvaluation on Awesome Products to assist a potential purchaser.
Included in the case is a copy of Awesome Products, Inc.Unadjusted Income Statement and Balance Sheet and Operating Expensedetail for the periods ending December 31st; all numbers are inthousands. All questions on this case use the attached data asbasis.
Instructions: Complete each of the exercises.
1. Based on the information given, prepare the normalizationentries for the years 2010 - 2014. Explain your reasons for eachnormalization entry.
2. Using the data you created in #1,
a. Prepare normalized and common size balance sheets for eachyear from 2010 - 2014
b. Prepare a normalized and common size income statement foreach year from 2010 - 2014.
Information needed for normalizationentries
You have discovered the following information after reviewingthe financial statements and other company documents, andinterviewing management.
1. Net Sales
During the period 2010 through 2014, the company has expandedtheir product line and opened new stores. This caused the increasein sales during this period. An analysis of the information showsthe following:
Year Number of NewStores Increase in Sales
20111 20%
2012 2
2013 0
2014 2 10%
2. Cost of Sales
Products purchased from the same supplier. Different cost ofsales percentages, due to different product lines.
3. Salaries and Wages
Generally, the increase in salary expense was caused by hiringadditional employees to work in the new stores. Included in theaccount, Officers' Compensation, is the salary of the owner, GeorgeBigshot. His salary for the 5 year period has been:
2010 | - $375,000 |
2011 | - $400,000 |
2012 | - $475,000 |
2013 | - $500,000 |
2014 | - $535,000 |
You have compared his salary to industry data, and the amount hereceives appears to be high. His compensation appears to be 15%above the industry norm. June Bigshot is an employee and earns$35,000 per year recorded in Other Salaries & Wages. Frominterviews and physical observation, it does not appear that shehas any responsibilities and is rarely at the business location.When Awesome opened the last 2 stores in 2014, they hiredexperienced managers. Each of these manager's earn $5,000 more thanthe managers in the other stores, this amount appears to be $3,000above the norm in the industry.
4. Selling Expenses
This category includes numerous expense items. The Advertisingand Promotion category is significantly higher in 2014 compared toprevious years. The marketing manager told you Awesome redesignedall their literature in 2014. The cost of the design work andprinting costs was $550,000.
After careful analysis, you notice that the Travel andEntertainment category has increased steadily since 2010. Afterasking questions, you discover personal trips that were paid for bythe company. The annual amount for these trips, is as follows: 2012= $80,259; 2013 = $120,000; and 2014 = $200,000.
Other Selling Expenses, includes expenses for a condo owned bythe company. The condo was acquired in 2010, and was capitalized asan Investment on the Balance Sheet (see Investments below). Thecompany has incurred $20,000 per year for the upkeep of the condofrom 2010 - 2014. Also, in this category there is$23,000 in 2013and $500,000 in 2012 related to an employee strike. The strike wassettled and management does not anticipate any strikes in thefuture. Related to the strike the legal fees to handle thesituation were $100,500 in 2013 and$80,750 in 2012. The legal feeswere included in the General & Administrative section.
5. General & Administrative
The insurance account has increased significantly. Most of theadditional cost is due to the opening of the new stores. However,there is $10,000 per year of property insurance on the condo, and$12,500 per year of real estate taxes for the condo. The two storesopened in 2014 are in a specialty area, and the rent paid issignificantly higher than the other stores. The rent for each ofthese stores is$48,000 per year, and the average rent for the otherstores is $30,000 per year. The use of office supplies appears tobe very inconsistent. The amount fluctuates greatly from year toyear, but you could not find any reason for this. In each year,that new stores were opened, the company took the maximum deductionfor Section 179 expenses of $18,500. This amount is recorded in theDepreciation Section. Under normal circumstances these assets wouldbe depreciated over a 5 year period using straight linedepreciation.
6. Investments
The condominium was acquired in 2010 for $190,000. Thecondominium was depreciated on the straight line basis over 30years, starting at the beginning of 2010 with the land valued at$10,000. The balance in the Investment account was reducedaccordingly, instead of showing accumulated depreciation and thedepreciation expense was recorded in Other Expenses under theGeneral & Administrative category. The balance in theInvestment account represents stock that Mr. Bigshot trades on aregular basis. No gains or losses were incurred on theseinvestments.
7. Dividends
Dividends of $100,000 were paid in 2011.
8. Advances from Affiliates
This account represents funds borrowed from another companyowned by Mr. Bigshot. Awesome pays a fair rate of interest on thefunds borrow
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