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Cost and Management Accounting: An Introduction, 7th edition Colin Drury ISBN 978-1-40803-213-9 2011 Cengage Learning EMEA
Chapter Objectives
To describe the background and corporate use of the following international financial markets:
foreign exchange market international money market international credit market international bond market international stock markets
Cost and Management Accounting: An Introduction, 7th edition Colin Drury ISBN 978-1-40803-213-9 2011 Cengage Learning EMEA
Cost and Management International Accounting: FinancialAn Management, Introduction, 2nd 7th edition edition Jeff Colin Madura Drury and Roland Fox ISBN 978-1-40803-213-9 ISBN 978-1-4080-3229-9 2011 Cengage 2011 Cengage Learning Learning EMEAEMEA
Gold Standard
From 1876 to 1913, exchange rates were dictated by the gold standard. Each currency was convertible into gold at a specified rate. Thus, the exchange rate between two currencies was determined by their relative convertibility rates per ounce of gold. Each country used gold to back its currency.
Cost and Management Accounting: An Introduction, 7th edition Colin Drury ISBN 978-1-40803-213-9 2011 Cengage Learning EMEA
Gold Standard
When World War I began in 1914, the gold standard was suspended. In 1930s, some countries attempted to peg their currency to the dollar or the British pound, but there were frequent revisions.
Cost and Management Accounting: An Introduction, 7th edition Colin Drury ISBN 978-1-40803-213-9 2011 Cengage Learning EMEA
In as the Bretton Woods Agreement) called for fixed exchange rates between currencies. This agreement lasted until 1971. During this period, governments would intervene to prevent exchange rates from moving more than 1 percent above or below their initially established levels. As a result of this conference, which led to the Smithsonian Agreement, the U.S. dollar was devalued relative to the other major currencies. The degree to which the dollar was devalued varied with each foreign currency. Not only was the dollars value reset, but exchange rates were also allowed to fl uctuate by 2.25 percent in either direction from the newly set rates.
Cost and Management Accounting: An Introduction, 7th edition Colin Drury ISBN 978-1-40803-213-9 2011 Cengage Learning EMEA
Cost and Management International Accounting: FinancialAn Management, Introduction, 2nd 7th edition edition Jeff Colin Madura Drury and Roland Fox ISBN 978-1-40803-213-9 ISBN 978-1-4080-3229-9 2011 Cengage 2011 Cengage Learning Learning EMEAEMEA
Cost and Management International Accounting: FinancialAn Management, Introduction, 2nd 7th edition edition Jeff Colin Madura Drury and Roland Fox ISBN 978-1-40803-213-9 ISBN 978-1-4080-3229-9 2011 Cengage 2011 Cengage Learning Learning EMEAEMEA
Direct quotation
So with the Rs. as the home currency Rs. 105: $1 = $ (1/105) : Rs.1
Cost and Management International Accounting: FinancialAn Management, Introduction, 2nd 7th edition edition Jeff Colin Madura Drury and Roland Fox ISBN 978-1-40803-213-9 ISBN 978-1-4080-3229-9 2011 Cengage 2011 Cengage Learning Learning EMEAEMEA
Example
Direct quote: $1.5:1, $.009:1 Indirect quote: 0.67:$1, 111.11:$1 value of in $ Value of in = value of in $ $1.50:1 = $.009:1
= 166.67:1
Cost and Management International Accounting: FinancialAn Management, Introduction, 2nd 7th edition edition Jeff Colin Madura Drury and Roland Fox ISBN 978-1-40803-213-9 ISBN 978-1-4080-3229-9 2011 Cengage 2011 Cengage Learning Learning EMEAEMEA
Cost and Management International Accounting: FinancialAn Management, Introduction, 2nd 7th edition edition Jeff Colin Madura Drury and Roland Fox ISBN 978-1-40803-213-9 ISBN 978-1-4080-3229-9 2011 Cengage 2011 Cengage Learning Learning EMEAEMEA
Cost and Management Accounting: An Introduction, 7th edition Colin Drury ISBN 978-1-40803-213-9 2011 Cengage Learning EMEA
Cost and Management International Accounting: FinancialAn Management, Introduction, 2nd 7th edition edition Jeff Colin Madura Drury and Roland Fox ISBN 978-1-40803-213-9 ISBN 978-1-4080-3229-9 2011 Cengage 2011 Cengage Learning Learning EMEAEMEA
Cost and Management Accounting: An Introduction, 7th edition Colin Drury ISBN 978-1-40803-213-9 2011 Cengage Learning EMEA
Cost and Management Accounting: An Introduction, 7th edition Colin Drury ISBN 978-1-40803-213-9 2011 Cengage Learning EMEA
Cost and Management International Accounting: FinancialAn Management, Introduction, 2nd 7th edition edition Jeff Colin Madura Drury and Roland Fox ISBN 978-1-40803-213-9 ISBN 978-1-4080-3229-9 2011 Cengage 2011 Cengage Learning Learning EMEAEMEA
Export/ Import
Foreign Subsidiaries