FIN 4213 Lecture Notes - Lecture 3: General Agreement On Tariffs And Trade, Portfolio Investment, North American Free Trade Agreement

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23 Aug 2016

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Document Summary

Summary of transactions between domestic and foreign residents for a specific country over a specified period of time. Current account - summary of flow of funds due to purchases of goods or services or the provision of income on financial assets. Capital account - summary of flow of funds resulting from the sale of assets between one specified country and all other countries over a specified period of time. Financial account - refers to the special types of investments, including dfi (direct foreign investment) and portfolio investments. Merchandise exports and imports represent tangible products that are transported between countries. Service exports and imports represent tourism and other services. The difference between total exports and imports is referred to as the balance of trade. Represents income (interest and dividend payments) received by investors on foreign investments in financial assets (securities) Represent aid, grants, and gifts from one country to another.

Related Questions

Under a system of floating exchange rates, which of the following would not tend to cause an increase in the value of a country's currency?

Question 1 options:

An increased demand for the country's goods.

Offering higher interest rates than other countries.

A downturn in the country's business activity.

A lower rate of inflation than other countries.

Foreign currency is usually referred to as

Question 2 options:

"foreign commodities."

"foreign exchange."

"foreign investment."

"foreign value."

All else held constant, the near-term result of a decrease in the exchange value of country A's currency against country B's currency would most likely

Question 3 options:

increase A's exports to B.

decrease B's trade deficit with A.

increase B's exports to A.

decrease B's imports from A.

When international trade occurs, currency exchange

Question 4 options:

is usually optional and rarely necessary.

can be avoided through careful planning.

is both necessary and unavoidable.

cannot occur unless both parties are coerced.

Question 5 (1 point)

In order to purchase a vacation home in Great Britain, an American buyer would

Question 5 options:

demand British pounds and supply U.S. dollars in the foreign exchange market.

demand U.S. dollars and supply British pounds in the foreign exchange market.

demand and supply British pounds, but not U.S. dollars, in the foreign exchange market.

demand and supply U.S. dollars, but not British pounds, in the foreign exchange market.

Which of the following will lead an American to exchange U.S. dollars for British pounds?

Question 6 options:

Importing a case of British salmon

Purchasing a cottage in the British countryside

Investing in a British manufacturing company

All of the above

Which of the following was established as a result of the Bretton Woods Conference?
I. The International Monetary Fund (IMF)
II. The World Bank
III. The Geneva Conventions

Question 7 options:

I and II only

I and III only

II and III only

I, II, and III

A "weak" (i.e., decreased value) U.S. dollar in relation to other currencies will typically have which of the following effects?

Question 8 options:

U.S. exports to other countries will decline.

Foreign countries will sell more goods in U.S. markets.

The U.S. trade deficit will increase.

None of the above.

Special Drawing Rights (SDRs)

Question 9 options:

constitute an international currency created by the International Monetary Fund.

are considered as "paper gold", used as a substitute for gold in international exchange.

are used as part of the official reserves of central banks to settle international debt.

all of the above.

10.

Which of the following will lead to an inflow of U.S. dollars in the U.S. Balance of Payments account?

Question 10 options:

Exports of U.S. goods and services

Gifts (aid) received by the U.S. from foreign countries

Foreign investment in U.S. Treasury securities

All of the above

11.

If the U.S. sells $150 million of wheat to Brazil in return for $200 million of Brazilian oil, the $50 million difference will necessarily

Question 11 options:

be balanced by other transactions in the U.S. Balance of Payments account.

never by paid back, resulting in a $50 million loss for Brazil.

result in the sale of $50 million more wheat to Brazil later on.

obligate the U.S. to provide $50 million in foreign aid to Brazil.

12.

An inflow of U.S. dollars to the U.S. Balance of Payments account will occur when

Question 12 options:

	the U.S. buys foreign currency in international markets.
	the U.S. donates foreign aid to other countries.
	Americans make investments in foreign assets.
	the U.S. exports merchandise to foreign countries.

Save

13.

A demand for foreign goods

Question 13 options:

	is a demand for foreign currency.
	requires supplying domestic currency.
	both of the above.
	none of the above.

I need Support on this

Week 3 Individual Case Study Assignment 1

Cash flow forecasts and projected financial statements

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For the following Individual Case Study, you assume the role of someone who has been asked to provide a Business Report for a group of friends who have invested in an organisation, Fashion Clothing. They had heard you are taking an Accounting and Finance Module and have asked for your advice.

The scenario

A group of friends have formed a new business called Fashion Clothing, an online and mail-order clothing business, in which they have invested Â£200,000 of their own capital. They intend to manufacture and sell quality clothes. They have set up the business and are selling direct to the final consumer, using a combination of aggressive marketing across a range of different media and also with the use of an automated Web site that accepts online orders. To support this, they also have a department of telephone sales and support staff ready to help customers. The sales staff work in teams and receive a basic salary plus commission for each successful sale. By the start of July 20X5, they have spent Â£150,000 on tangible non-current assets, and they currently have the remaining Â£50,000 in their business bank account.

They provide you with the following forecasted figures for their first 6 months of trading:

	Â£
Sales for the next 6 months	1,350,000
Cost of the materials used up in sales	390,000
Labour costs for the 6 months	480,000
Other expenses for the 6 months, including marketing costs and Â£15,000 depreciation of tangible non-current assets	345,000
Materials purchased during the 6 months	520,000

Their projected cash receipts and payments are estimated to be as follows:

Month (20X5)	Sales Receipts	Payments for Materials	Labour and Other Expenses
	Â£	Â£	Â£
July	150,000	120,000	These payments are divided equally over each of the 6 months.
August	120,000	100,000
September	150,000	60,000
October	210,000	60,000
November	260,000	60,000
December	285,000	60,000
Totals	1,175,000	460,000

In addition to the above, they expect to have to pay a tax bill of Â£20,000 in December 20X5 and also plan to buy (and pay for) Â£30,000 additional tangible non-current assets in that same month. All transactions will go through their business bank account.

Required

You are asked to provide a Business Report (1,000 words for the main body of the report) for the friends who have invested in Fashion Clothing, commenting on the businessâ prospects and including the following five financial statements:

Since none of the investors have a background in accounting and finance, you should also explain what each of these statements means as a part of your report.

An opening statement of financial position at the start of July 20X5.
A monthly cash flow forecast, showing the bank balance at the end of each of the 6 months and indicating what level of overdraft facilities the friends need to negotiate with their bank manager. Explain what additional expense they should take into account as a result of needing this financial assistance (overdraft).
A projected income statement for the first 6 months of trading.
A projected statement of financial position for Fashion Clothing at the end of its first 6 months of operations.
A projected statement of cash flows for the first 6 months of trading and using the indirect method.

Keep the following in mind:

Using a spreadsheet may help you to produce your cash flow forecast. Remember here that Â£150,000 of the initial Â£200,000 has already been spent. Hence, your opening bank balance should be Â£50,000. Your closing bank balance should be included in your statement of financial position as at 31.12.20X5.
Think carefully about the Â£15,000 depreciation charge when working out your monthly cash outflows for labour and other expenses.
Also think carefully about the figures for closing stocks (inventories), creditors (payables) and debtors (receivables).
Please remember that your qualitative analysis and explanation of your five statements are justas important as the calculations themselves. These, together with your presentation of a professional report, will contribute towards your grade for this assignment.
Please be sure to re-visit the Key Concept Overviews for Weeks 1 and 2, as well as Week 3. These should serve as a reminder of the accruals concept, plus the difference between a cash flow forecast and a statement of cash flows. They also include detailed numerical examples that should assist with your calculations for your financial statements.

Ideally a business report should be produced with a suitable structure and quality of discussion around the following key areas:

Executive summary

Table of contents

List of figures

Introduction
Main financial findings.

2.1 Summary of the first 6 months business operations

2.2 Financial accounting statements

Analysis

3.1 Initial analysis in context of the three financial statements.

3.2 Investigations to increase efficiency

Conclusion
References

ANNEX I: Statement of financial position Fashion Clothing â 01.07.20X5 and 31.12.20X5

ANNEX II: Income statement Fashion Clothing â 6 months to 31.12.20X5

ANNEX III: Statement of cash flows Fashion Clothing â 6 months to 31.12.20X5

ANNEX IV: Projected cash flow forecast for the first 6 months of trading

To complete the assignment:

Be sure to read over your Individual Assignment before submitting it to your Instructor. Make sure the spelling and grammar are correct and the language, citing and referencing you use when providing your opinion are appropriate for academic writing.

brownlion52

Compare Companies --- Netflix (NFLX) vs. GEO Holdings (TOK) Compute financial ratios, time value, variables, and returns using industry standard tools for optimizing financial success. Analyze corporate financial data in evaluating past and future financial performances.

Use formulas to calculate the following financial indicators for each year of data: Three fiscal years for Netflix and GEO Holdings for:

o Price to earnings ratio

o Debt to equity ratio

o Free cash flow

o Earnings per share

o Return on equity

o Net profit margin

V. Performance Over Time

A. Analyze the performance of the Netflix over time. What financial strengths and weaknesses does this company have? Consider addressing the free cash flows and ratios you calculated earlier.

B. Analyze the performance of your GEO Holdings over time. What financial strengths and weaknesses does this company have? Consider addressing the free cash flows and ratios you calculated earlier.

C. Analyze how the data differ between these two companies. Why do you think this is? Consider addressing the free cash flows and ratios you calculated earlier.

VI. Investment

A. Are the companies considered growth or value companies? Why?

B. Which companyâs stock is the better investment?

Netflix Inc. (NMS: NFLX)

Exchange rate used is that of the Year End reported date


As Reported Annual Balance Sheet
Report Date	12/31/2016	12/31/2015	12/31/2014
Currency	USD	USD	USD
Audit Status	Not Qualified	Not Qualified	Not Qualified
Consolidated	Yes	Yes	Yes
Scale	Thousands	Thousands	Thousands

Cash & cash equivalents	1467576	1809330	1113608
Short-term investments	266206	501385	494888
Current content library, net	-	-	2125702
Current content assets, net	3726307	2905998	-
Other current assets	260202	215127	206271
Total current assets	5720291	5431840	3940469
Non-current content library, net	-	-	2773326
Non-current content assets, net	7274501	4312817	-
Information technology assets	185345	194054	189274
Furniture & fixtures	32185	30914	25758
Building	40681	40681	40681
Leasehold improvements	107945	107793	57339
DVD operations equipment	70152	88471	89144
Capital work-in-progress	108296	8845	12495
Property & equipment, gross	544604	470758	414691
Less: accumulated depreciation	294209	297346	264816
Property & equipment, net	250395	173412	149875
Other non-current assets	341423	284802	192981
Total assets	13586610	10202871	7056651
Current content liabilities	3632711	2789023	2117241
Accounts payable	312842	253491	201581
Accrued expenses	197632	140389	69746
Deferred revenue	443472	346721	274586
Total current liabilities	4586657	3529624	2663154
Non-current content liabilities	2894654	2026360	1575832
Long-term debt	3364311	2371362	900000
Other non-current liabilities	61188	52099	59957
Total liabilities	10906810	7979445	5198943
Common stock	1599762	1324809	60
Additional paid-in capital	-	-	1042810
Foreign currency	-47966	-42502	-4615
Change in unrealized gains on available for sale securities	-599	-806	169
Accumulated other comprehensive income (loss)	-48565	-43308	-4446
Retained earnings (accumulated deficit)	1128603	941925	819284
Total stockholders' equity (deficiency)	2679800	2223426	1857708

Geo Holdings Corp (TOK: 2681)

Due to changes with International Financial Reporting Standards (IFRS), recent financials statement presentations have been adjusted to meet this standard. Please note the original historical presentations have remained in the original format

Exchange rate used is that of the Year End reported date


As Reported Annual Balance Sheet
Report Date	03/31/2016	03/31/2015	03/31/2014
Currency	JPY	JPY	JPY
Audit Status	Not Qualified	Not Qualified	Not Qualified
Consolidated	Yes	Yes	Yes
Scale	Millions	Millions	Thousands
Cash & deposits	37683	32052	19869000
Trade notes & accounts receivables	4100	4077	3992000
Merchandise	24894	23834	23495000
Deferred tax assets	2156	1806	1773000
Other current assets	5462	7181	5942000
Allowance for doubtful accounts	-281	-292	343000
Total current assets	74015	68659	54729000
Asset for rent, gross	100974	104514	104647000
Accumulated depreciation - asset for rent	-95154	-97475	96055000
Asset for rent, net	5820	7038	8591000
Buildings & structures, gross	40872	39984	39478000
Accumulated depreciation - buildings & structures	-27470	-26362	25976000
Buildings & structures, net	13402	13622	13501000
Land, net	5844	6356	6651000
Leased assets, gross	2176	3519	4576000
Accumulated depreciation - leased assets	-681	-1764	2588000
Leased assets, net	1495	1754	1988000
Other property, plant & equipment, gross	24838	20562	17708000
Accumulated depreciation - other property, plant & equipment	-18391	-15292	13236000
Other property, plant & equipment, net	6447	5270	4471000
Total property, plant & equipment	33010	34043	35205000
Total intangible assets	1865	1277	2028000
Investment securities	926	1002	1266000
Long-term loans receivable	2250	6682	6628000
Lease & guarantee deposits	14905	14735	15034000
Deferred tax assets	3342	3774	2845000
Other investments & other assets	1222	1188	1760000
Allowance for doubtful accounts	-1332	-3751	3917000
Total investments & other assets	21315	23632	23617000
Total non-current assets	56192	58952	60851000
Total assets	130207	127612	115581000
Trade accounts payable	12631	13540	13124000
Current portion of long-term borrowings	8333	7097	8754000
Current portion of bonds	149	149	249000
Income taxes payable	4815	265	1170000
Reserve for bonuses	1665	1420	1135000
Other current liabilities	10135	12595	10279000
Total current liabilities	37731	35068	34713000
Bonds	105	254	403000
Long-term borrowings	19509	21843	13910000
Lease liabilities	1612	1660	1590000
Deferred tax liabilities	23	22	26000
Asset retirement obligations	4406	3994	3898000
Other non-current liabilities	1857	1554	1839000
Total non-current liabilities	27514	29329	21668000
Total liabilities	65246	64398	56381000
Capital stock	8871	8615	8603000
Capital surplus	3283	6090	6078000
Retained earnings	52542	49998	44381000
Treasury shares	-	-1979	334000
Total shareholders' equity	64697	62724	58729000
Valuation difference on available-for-sale securities	166	282	297000
Loss (gain) on deferred hedge	-15	-	297000
Total accumulated other comprehensive income	150	282	172000
Stock acquisition rights	113	206	59199000
Net assets	64961	63214	115581000
Total liabilities & net assets	130207	127612

Netflix Inc. (NMS: NFLX)

Exchange rate used is that of the Year End reported date


As Reported Annual Income Statement
Report Date	12/31/2016	12/31/2015	12/31/2014
Currency	USD	USD	USD
Audit Status	Not Qualified	Not Qualified	Not Qualified
Consolidated	Yes	Yes	Yes
Scale	Thousands	Thousands	Thousands

Revenues	8830669	6779511	5504656
Cost of revenues	6029901	4591476	3752760
Marketing expenses	991078	824092	607186
Technology & development expenses	852098	650788	472321
General & administrative expenses	577799	407329	269741
Operating income (loss)	379793	305826	402648
Interest expense	150114	132716	50219
Interest & other income (expense)	30828	-31225	-3060
Income before income taxes - United States	188078	95644	325081
Income (loss) before income taxes - foreign	72429	46241	24288
Income (loss) before income taxes	260507	141885	349369
Current tax provision (benefit) - federal	54315	52557	86623
Current tax provision (benefit) - state	5790	-1576	9866
Current tax provision (benefit) - foreign	60571	26918	16144
Total current tax provision (benefit)	120676	77899	112633
Deferred tax provision (benefit) - federal	-24383	-37669	-10994
Deferred tax provision (benefit) - state	-14080	-17635	-17794
Deferred tax provision (benefit) - foreign	-8384	-3351	-1275
Total deferred tax provision (benefit)	-46847	-58655	-30063
Provision for (benefit from) income taxes	73829	19244	82570
Net income (loss)	186678	122641	266799
Weighted average shares outstanding - basic	428822	425889	420546
Weighted average shares outstanding - diluted	438652	436456	431893
Year end shares outstanding	430054.212	427940.44	422910.887
Net income (loss) per share - basic	0.44	0.29	0.634
Net income (loss) per share - diluted	0.43	0.28	0.617
Number of full time employees	4500	3500	2189
Number of part time & temporary employees	200	400	261
Total number of employees	4700	3700	2450
Number of common stockholders	290	237	203
Foreign currency translation adjustments	-5464	-37887	-

Geo Holdings Corp (TOK: 2681)

Exchange rate used is that of the Year End reported date


As Reported Annual Income Statement
Report Date	03/31/2016	03/31/2015	03/31/2014
Currency	JPY	JPY	JPY
Audit Status	Not Qualified	Not Qualified	Not Qualified
Consolidated	Yes	Yes	Yes
Scale	Millions	Millions	Thousands
Total revenue	267910	270308	262324000
Cost of sales	-151798	-157825	152301000
Gross profit	116112	112483	110022000
Selling, general & administrative expenses	-99559	-102925	100823000
Operating income	16552	9558	9198000
Interest & dividend income	49	114	111000
Rental income	1268	1167	1193000
Other non-operating income	1043	1062	453000
Total non-operating income	2361	2343	1758000
Interest expense	-230	-231	332000
Rental expenses	-759	-609	595000
Transfer to reserve for doubtful account	-	-227	-
Other non-operating expenses	-100	-803	-
Total non-operating expenses	-1089	-1871	684000
Ordinary income	17824	10030	1612000
Imapirment loss	-1319	-1543	9344000
Other extraordinary losses	-13	-	203000
Total extraordinary losses	-1333	-1543	203000
Income before income taxes	16491	8486	1218000
Income taxes - current	-5779	-2074	514000
Income taxes - deferred	-147	925	87000
Total income taxes	-5927	-1149	1821000
Profit	10563	7337	7726000
Profit attributable to owners of parent	10563	7337	4027000
Average number of shares outstanding - basic	51.331	53.169	-39000
Average number of shares outstanding - diluted	51.623	53.29	3987000
Year end shares outstanding	48.244	52.295	3738000
Earnings per share - basic	205.78	137.99	-70000
Earnings per share - diluted	204.62	137.68	3808000
Number of full time employees	3825	3579	53996.5
Number of part time employees	10421	10114	54066.499
Number of common stockholders	57105	65030	53996.5

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FIN 4213 Lecture Notes - Lecture 3: General Agreement On Tariffs And Trade, Portfolio Investment, North American Free Trade Agreement

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