Multinational Financial Management

GLOSSARY

Absolute advantage The situation whereby one nation can produce more of a given product per unit of inputs than can other countries.

Accelerating collections Speeding up the collection of accounts receivable.

Acceptance A time draft that is accepted by the drawee. Accepting a draft means writing accepted across its face, followed by an authorized person's signature and the date. The party accepting a draft incurs the obligation to pay it at maturity.

Accounting exposure The change in the value of a firm's foreign-currency-denominated accounts due to a change in exchange rates.

Act of state doctrine This doctrine says that a nation is sovereign within its own borders and its domestic actions may not be questioned in the courts of another nation.

Adjusted present value (APV) The net present value of a project using the all-equity rate as a discount rate. The effects of financing are incorporated in separate terms.

Advance pricing agreement (APA) Procedure that allows the multinational firm, the IRS, and the foreign tax authority to work out, in advance, a method to calculate transfer prices.

Ad valorem tariff Import duties that are set as a percentage of the value of the imported goods.

Adverse incentives See moral hazard

Adverse selection The possibility that only the highest-risk customers will seek insurance.

Advising bank Bank that would advise the beneficiary (exporter) that a letter of credit opened by an issuing bank for an applicant is available.

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