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While there are many factors that lead to an organization’s success or failure, it is important to identify the risk associated with the endeavor—financial or nonfinancial. Once the risks have been identified, management has a responsibility to develop measures to mitigate those risks.
Use the publicly-traded company you chose in
and imagine it has made a strategic decision to start doing business in China. Using the discussion, Currency Exchange Rates: A Case in China with Country Risk, (Chapter 7, Global Finance, page 192 of your textbook) as a model for the report you will write, prepare a report in which you:
- Develop a brief country risk assessment.
- Determine the political, economic, social, and capital risks associated with doing business in China. What are the most important factors to consider? Why?
- After years of keeping the Yuan pegged to the US dollar, in 2015 the Chinese allowed it to float freely in international currency exchange rate markets. You may read more about the Yuan reforms here. Many economists believe that keeping the Yuan pegged to the US dollar has caused it to be undervalued by 30 to 50 percent. Discuss what impact a revaluation of the Yuan might have on US multinationals doing business there, on China’s exports, and on Chinese citizens’ standard of living. What impact would a revaluation have on Chinese inflation and on purchasing power parity? Explain. Your paper should be about 2,000 words.
****(paper attached with publicly traded company from module 1)
Develop a brief country risk assessment
HUMAN RESOURCES 6 Financial Statements Camille Latham Argosy University Financial Statements Wells Fargo This is a banking company of international reputation that has cut a name in the financial services business and also the banking sector.Th company is based in San Francisco in California and its headquarters are scattered everywhere in the country. The company is said to be the second largest in the banking market in terms of capitalization and it is also number three in terms of assets in the United States. Financial statements in from a company helps to make decisions that directs an organization in a certain way. Financial statements can be put into ratios to communicate a certain kind of message. Financial statements become important in regards to how a particular financial issue is shaping out (Bull, 2008).The financial ratios are also used to look at the trends and do a comparison of a firm’s business standing to other firms.Frequenty calculated ratios in a bank are; dividend policy ratios, profitability ratios, ratios regarding turn over, liquidity ratios among others. Current Ratio This is calculated by dividing the current assets by the current liabilities. We can get the current ratio of the Wells Fargo company by using the figures provided in the financial statement. The current assets to be used is that of the year 2012.The figure is $451,854,000 while the current liability is$76,668,000.When the figure is divided the answer is $5,894.The figure that is seen indicates that the company is able to meet its financial obligations for the short term (Bull, 2008).The ratio is high compared to ratios of other businesses meaning the creditors cannot have a risk. Asset Turnover This is an important component as it shows the efficiency of a company on how it uses its assets. The ratio are also called efficiency ratios and more so known as the asset management ratios. Here we will find the receivable Turnover which is calculated by dividing the annual credit sales with the accounts receivable. Here we will divide $97,528,000 by $893,300.The answer is $109.This indicates that the time that the firm collects the accounts is of three months and more (Leach, 2010).The days are favorable as the company is able to carry on with its tasks. Financial Leverage Ratios Here we will try and find the debt ratio and it is divided by taking the total debt and dividing it by the total assets. This is used to indicate the long term of how a firm undertakes its solvency this analyzes how a firm will use the debts for a long term. In our case we will divide $23,057,000 by $3,288,000.The answer that we get here is $ 7.This is in terms of months and it indicates that the firm is not using the long term loan for petty activities. Profitability Ratios These ratios do give the measures of the company’s success by showing the profits. A good example is a return on assets that shows how effective a firm’s assets are used to give the profits. It is calculated by dividing the net income with total assets. Here the net income is $18,897,000 while the total assets is $6,804,000.The answer here is $2.78.The frequency of profit generation is high in this case. Dividend Policy Ratio This type of ratios tries to explain the future growth prospects. Here we will get the dividend yield. This is divided by taking the dividends per share and dividing it by the share price (Leach, 2010).In the Wells Fargo financial statement it is not indicated. At times the company may keep this from the public. Summary of the Ratios Current ratio financial leverage ratio Asset Turn over Profitability Ratio Dividend Ratio $5,894 $7 $109 $2.78 $ References Bull, R. (2008). Financial ratios: how to use financial ratios to maximize value and success for Your business. Amsterdam Boston: Elsevier/CIMA Pub. Leach, R. (2010). Ratios made simple: a beginner’s guide to the key financial ratios. Peter’s field, Hampshire: Harriman House.