Notes, summaries, assignments, exams, and problems for Economy

International Distribution Channels & Market Entry

Key Channel Functions

1. Distribution channels provide information and advice to buyers, including advice and promotions.
2. Direct access / channel involves reducing the number of contacts needed to reach the target audience.
3. Numerical distribution measures how many sales points carry a company's product.
4. A mixed channel combines direct and indirect market access strategies.
5. Logistics perform storage, transportation, and assortment diversification.

Channel Mapping Table

Market Entry Examples

• IKEA China -> Mixed access - joint ventures or piggybacking
• Ferrari in Switzerland -> Mixed access – licensing
• Samsung in the U.S. -> Indirect access – trading companies
• Case Study: Starbucks

Theme II: The Development of the Global Economy

5. Japan's Post-War Economic Growth

I. Role of Government

• Growth-driven policies and focused leadership
  • The Liberal Democratic Party (LDP) mostly ruled after 1955.
  • A cohesive unity of bureaucrats and politicians made up competent policymakers focused on achieving economic development and self-reliance.
  • Tight policy coordination was known as the "Iron Triangle."
  • The Yoshida Doctrine was implemented in the early 1950s.
  • Ikeda's Income Doubling Plan was introduced in the early 1960s.
  • Sato's Three Non-Nuclear Principles were established in the early 1970s.
• Heavy government involvement in the free market
  • The Ministry of International Trade and Industry (MITI) decided, charted, and planned Japan's industrial and

International Finance Fundamentals

Three Reasons International Finance is Special:

• Political Risk: Foreign expropriation, unstable regimes, and tariffs.
• Exchange Rate Risk: Currency value changes significantly affect cash flows.
• Market Imperfections: Barriers, taxes, and information gaps.

Multinational Corporation Goals:

• Maximize global shareholder value, not just domestic.

Currency Depreciation Effects:

• ↓ Currency → Exports ↑, Imports ↓.

Currency Appreciation Effects:

• ↑ Currency → Exports ↓, Imports ↑.

Understanding Financial Contagion:

• Economic crises spread to other countries (e.g., Greek debt crisis, Asian currency crisis).

Evolution of Global Monetary Systems

Bimetallism (Pre-1875):

• Both gold and silver backed currencies.
• Problem: Gresham’s

Agricultural Income 2(1A)

Bacha F. Guzdar V. CIT - Dividend income from agricultural company
Sakarlal Naranlal V. CIT - Galka and Loofah
CIT Poona V. HG Date - Jaggery sold since no sugar mill
CIT V. Raja Benoy Kumar Sahas Roy - Spontaneous growth in forest 1. Primary and secondary
Premier Construction Co. Ltd. v. C.I.T. - Part income 10% from an agricultural company not agricultural income.
C.I.T. v. Maddi Venkatasubbayya - Income derived from selling processed agricultural products (tobacco) not agricultural income.

Application and Diversion

CIT V. Sital Dass Tirathdas - Consent decree - alimony
CIT V. Sunil J. Kinariwala - Trust
Raja Bejoy Singh Dudhuria V. CIT - Step mother

Income from House Property

C.I.T., West Bengal v. Biman Behari Shaw, Shebait... Continue reading "Understanding Agricultural Income and Related Tax Cases" »

Chapter 18: Current & Accumulated E&P (CEP & AEP)

(TI ± its Adjustments = CEP) CEP is determined on the last day of the tax year, before calendar year distributions. Example: AEP = 20,000; Loss = 25,000; distribution = 10,000 on July 1. CEP at 7/1 = (25,000) × 1/2 = (12,500). Net = (12,500) + 20,000 = 7,500 taxable dividend and 2,500 nontaxable return of capital.

Corporate Distributions — Layered Tax Treatment

Corporate distributions are paid out of earnings and profits (E&P) unless otherwise shown, and they occur in layers:

• Earnings and Profits — Taxed as dividend income.
• Stock Basis — Nontaxable return of capital (reduces shareholder basis).
• Distribution in Excess of E&P and Basis — Taxed as capital gain.

E&P is... Continue reading "Corporate Taxation: Earnings & Profits, Distributions, 351, Partnerships" »

Fundamental Economic Concepts

• Consumers: People who buy goods and services.
• Trade-off: The act of giving up one goal to achieve another.
• Balance of Trade: A nation that exports more than it imports.
• Interest: A signal of upcoming changes in the economy.
• Price Index: A comparison of the general price level.
• Civilian Labor Force: All people aged 16 and older.
• Demand Schedule: A table showing the amount of a good or service demanded.
• Demand: The amount of a good or service consumers are willing to buy.
• Cartel: A group that acts together to control a market.
• Business Cycles: Fluctuations in economic activity, excluding depressions.
• Principle of Diminishing Utility: As consumers acquire more, satisfaction decreases.
• Product Differentiation: When a business

Forward Exchange (EUR/SEK):

x = Exchange rate * (1 + SEK interest rate) / (1 + EUR interest rate).

CAP: Establishes an upper limit on interest rates. Floor: Establishes a lower limit on interest rates. EBITDA: Higher than net income. ROE: Return on Equity. For the equity the company provides, it generates an operating income of X annually.

Theoretical Semiannual Euribor:

(1 + First-half rate) * (1 + Second-half rate) = (1 + Annual rate).

Nominal Exchange Rate: (Nominal Exchange Rate * Domestic Price Level) / Foreign Price Level.

Spot Market: Notional amount * (1 / Current exchange rate - 1 / Initial exchange rate). Positive value means that in 9 months the spot market will be more expensive.

FXA (Foreign Exchange Agreement): Notional amount * (1... Continue reading "Understanding Forex, Financial Ratios, and Country Competitiveness" »

Money and Monetary System

• Money: An asset that serves three functions: medium of exchange, store of value, and unit of account.
• Fiat Currency: Money issued by a government with no physical backing (e.g., euro, dollar).
• Fiduciary Currency: Money based on trust, not intrinsic value (e.g., Bitcoin, checks).
• Ledger: An accounting record showing debts and transactions.
• Unit of Account: Allows expressing the price of goods/services (e.g., a coffee costs €2).

Cryptography

• Hash: A mathematical function that converts data into a unique and irreversible digital fingerprint.
• Asymmetric Cryptography: Uses a pair of keys (public and private) to encrypt and decrypt messages.
• Digital Signature: Proves that a message was sent by a specific user and has not been modified.

The Fourteen Points of Woodrow Wilson

• 1. Open diplomacy
• 2. Freedom of the seas
• 3. Removal of economic barriers
• 4. Reduction of armaments
• 5. Adjustment of colonial claims
• 6. Evacuation of Russian territory
• 7. Preservation of Belgian sovereignty
• 8. Restoration of French territory
• 9. Redrawing of Italian frontiers
• 10. Division of Austria-Hungary
• 11. Redrawing of Balkan boundaries
• 12. Limitations on Turkey
• 13. Establishment of an independent Poland
• 14. Creation of an Association of Nations

Importance to Trade

• Fostering global wealth
• Restoring peace in Europe and global balance
• Stimulating international trade

Neoliberalism and Economic Policy

• Privatization generates employment
• Reaction to the economic context of the 1960s and 1970s
• Public spending generates economic

Unit 3: Financial Consolidation Methods

Global Integration (Consolidation)

• Non-current investments: 0
• Share capital and reserves: Parent company only
• Profit/loss: % Parent + (% Subsidiaries × Profit of subsidiaries)
• External shareholder: % Remaining purchase × (Share capital B + Reserves B + Profit/loss B)
• Goodwill: Price paid - (Share capital B × % B)
• Non-controlling interest: % Remaining purchase × (Share capital B + Reserves B + Profit/loss B)
• Non-current assets: Goodwill + PPE (A and B)
• Investment in A: 0 (due to consolidation)

Proportional Integration (Joint Ventures)

• Non-current investments: 0
• PPE, Current Assets, Liabilities, and Profit/loss: Parent + (Subsidiary × % Purchased)
• Share capital and reserves: Parent company only
• Negative differences