Topic: Business. ( ip4)

Apa- in text citations – cite refs – use quotes – sim check to be

Long-term investment projects require a thorough understanding of all attributes of doing business in that country, including

import/export restrictions, labor relations, supplier financing, tax rules, depreciation schedules, currency properties and

restrictions, and sources of short-term and long-term debt, to name a few. China is currently the focus of investment and

market penetration strategies of multinational firms worldwide including Acme. Your supervisor has asked you to gather

information on some of these factors that your company or any MNE would want to consider when doing business in China. (This

is the primary focus of this assignment.)
As you begin your research, you realize your company would make a significant profit from doing business in China. You also

discover that policies on employee welfare, labor relations, etc. are the antithesis of what your CEO firmly believes. Do you

include this information in your report, or just provide the strategic information you were asked to gather? (Please respond

to this ethics question in a paragraph or two).

Use the Library and other Internet sources (you might start with the web sites listed here), to collect the information.

Extract from Guide to Doing Business in China
China Business Etiquette. http://info.hktdc.com/chinaguide/7-2.htm

http://www.cyborlink.com/besite/china.htm

Please submit your assignment.

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Financial Risks, as we have already covered in this lecture how derivatives such as forward contracts, futures contracts, and swaps can be used to hedge financial risks. A first step in risk management is to use the process described previously in assessing risk, keeping in mind that a cost/benefit analysis for each feasible alternative is a must.

Hedging with futures contracts as it applies to financial risk involving the CBOT contract on US Treasury Bonds. Treasury bond contracts are 20-year contracts, $100,000 with a 3.5 percent coupon.

Futures contracts can be used for both speculation and hedging. Note the distinction: Speculation involves betting on future price movements (futures are used because of the leverage inherent in the contracts); and, hedging is done by a firm or individual to protect against a price change that would otherwise negatively affect profits. Both parties to a futures contract can be hedgers (a natural hedge) or one party can be a speculator and the other a hedger. Note also that there are two basic types of hedges: (1) a long hedge in which futures contracts are bought in anticipation of (or to guard against) price increases; and (2) a short hedge where a firm or individual sells futures contracts to guard against price declines.

Futures markets were established for many commodities long before they began to be used for financial instruments.

If derivatives help in minimizing the variability of cash flows, this would help reduce the possibilities and related costs of financial distress.

1. Question: If this holds true, why do more large firms use derivatives than small firms?