What impact has the World Trade Organization (WTO) had on corporate investment decision making?
What will be an ideal response?
The WTO pact makes it less risky for multinationals to source parts—that is, to have them built in cheap-labor countries and then brought back to the multinational's home country for use in making a product (e.g., brakes for automobiles). Industries that were expected to shift quickly to buying parts from all over the world for their products include computers, telecommunications, and other high-tech manufacturing. It is anticipated that with a freer flow of goods across borders, businesses will gain increased economies of scale by building parts-manufacturing plants at a location that serves a wide market area.
Because the tariff cuts were to be introduced gradually over a six-year period and were to be finalized only after 10 years, the impact on trade was not immediate. Once the major nations ratified the WTO pact, however, companies began to make investment and employment decisions predicated on dramatic reductions in tariffs, subsidies, and other government-established deterrents to free trade.
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A) n + 1 and then subtract 1. B) n ? 1 and then subtract 1. C) n + 1 and then add 1. D) n ? 1 and then add 1.
The relationship between total liabilities and total assets is the ________.
A) debt ratio B) debt to equity ratio C) current ratio D) earnings per share
Interest expense creates magnification of earnings through financial leverage because:
a. the interest rate is variable. b. interest accompanies debt financing. c. the use of interest causes higher earnings. d. interest costs are cheaper than the required rate of return to equity owners. e. while earnings available to pay interest rise, earnings to residual owners rise faster.
Which of the following is not a business use of life insurance?
A) To protect a business against loss caused by the death of a key person B) To provide a means of rewarding and retaining valuable personnel C) To lower business losses when an employee is fired D) To provide some amount of life insurance to employees