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Midterm

Review for the midterms :D It has the chapeter+class review for Chps.3, 4, 6, 7, 14, 15


Department
Accounting & Financial Management
Course Code
AFM131
Professor
Robert Sproule
Study Guide
Midterm

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AFM 131 Midterm
Chapter 3: competing in global markets
Why trade with other nations?
- No country can produce all products that people want and need
- Even if self-sufficient, other nations seek to trade with country in order to
meet needs of own people
- Some have abundance of natural resources, lack of technology, vice versa
- Enhances quality of life for Canadians and contributes to country’s
economic well-being
Free Trade movement of goods and services among nations without political or
economic obstruction
Comparative advantage sell to countries products that it produces most
effectively and efficiently and buy from countries whose products it cannot produce
as effectively.efficiently
Absolute advantage country has monopoly on producing specific product, or
able to produce more efficiently than all other countries
Balance of trade nation’s ratio of exports to imports -> favorable = exports
exceeds imports (surplus), opposite = deficit
Balance of payments difference between money coming into country (exports)
and money leaving (imports) plus money flows from other factors (tourism, foreign
aid, military expenditures, foreign investment, etc), goal = more money flowing
in
Strategies for reaching global markets
Exporting
Licensing a firm allows foreign company to produce its product in exchange for a
fee
- Spends little or no money to produce and market products
- Gain additional revenues from product it would not have generated in
home market
- Licensees must purchase supplies, component materials, consulting
services – from licensing firm
Franchising someone with good idea for business sells rights to use business
name and sell a product or service to others in given territory
Contract manufacturing foreign country’s production of private-label goods to
which a domestic company attaches its brand name or trademark (outsourcing)
Joint venture partnership in which two or more companies undertake major
project to form new company

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- Benefits: shared technology and risk, shared marketing and management
expertise, entry into markets where foreign companies are not allowed
unless goods produced locally, shared knowledge of local market
- Disadvantages one partner learn other’s technology and uses what it
has learned, shared technology become obsolete
-Strategic alliance long-term partnership between two or more
companies to help each company build competitive market advantages
Foreign Direct Investment buying of permanent property and businesses in
foreign nations
-Foreign subsidiary company owned in a foreign country by another
company
Trade protectionism- use of government regulations to limit import of goods and
services
Dumping – selling products in foreign country at lower prices than those charged in
producing country
Import quota limits number of products in a certain category that a nation can
import
Embargo – complete ban on import/ export of certain product

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Chapter 4: Role of government in business
Government activities affecting business crown corporations, laws and
regulations, taxation and financial policies, government expenditures, purchasing
policies, and services
National policy placed high tariffs on imports from U.S. to protect Canadian
manufacturing, which had higher costs (NAFTA eliminated this)
Crown operations - companies owned by federal or provincial governments
- Provided service that were not being provided by businesses (air Canada)
- Bail out a major industry in trouble (ex. Canadian national railway)
- Provide special service that could not otherwise be made available
Minor revolution – disposal of government assets and companies
-Privatization – process of governments selling crown corporations
-Regulated industries became deregulated (partial or complete)
- Looking for ways to lower costs and improve efficiencies
- Reduce role of government in economy
Federal government responsible for trade regulations, incorporation of federal
companies, taxation, banking/monetary system, national defence, unemployment,
immigration, criminal law, fisheries
Provincial government regulation of provincial trade and commerce, natural
resources within their boundaries, direct taxation for provincial purposes,
incorporation of provincial companies, licensing for revenue purposes,
administration of justice, health and social services, municipal affairs, property law,
labour law, education
- Health care reform - provinces implement health care policies set by
federal
- Free trade between provinces
Municipal government – defined by province in which they operate
- Role in consumer protection
Taxation and financial policies
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