Blades, Inc.

Case
Exposure to International Flow of Funds 1. How could a higher level of inflation in Thailand affect Blades (assume U.S inflation remains constant)? Answer: Blades had a decreasing demand for Speedos (in chapter 1). A higher level of inflation, it will affect the current account (a summary of the flow of funds between one specified country and all other countries due to purchases of goods or services, or the provision of income on financial assets) of Thailand would be expected to decrease and exports will also decline. 2. How could competition from firms in Thailand and from U.S firms conducting business in Thailand affect Blades? Answer: As with a view of point of local firms they will be affected by the tax rates on interest and dividends because the local investor or firms in Thailand would normally invest with in the country due to the interest on taxes and dividends income are relatively low. They will access their earnings from investing in foreign securities. Competitors in U.S firms the investors and other firms may decide to purchase securities from other countries, rather purchasing Thailand securities the reason is that due to the currency of Thailand (Thai Baht) is continuously depreciating. 3. How could a decreasing level of national income in Thailand affect Blades? Answer: If the national income of Thailand declined, and causing the decline in demand for imported goods which was manufactured by firms based in Thailand. Due to the decrease in national income the current account of Thailand would also tends to decrease. 4. How could a continued depreciation of the Thai baht affect Blades? How would it affect Blades relative to U.S exporters invoicing their roller blades in U.S dollars? Answer: Continued depreciation of Thai baht affects the U.S exporters will increase their demand from Thai baht as the U.S exporters are invoicing their roller blades in dollars. 5. If blades increases its business in Thailand and experiences serious financial problems, are there any international agencies that the company could approach for loans or other financial assistance? Answer: International Financial Corporation (IFC) is the international agency that would approach for loans or assistance in financial crisis. Its not only provides loans to corporations but also purchase stocks thereby becoming part owner in some cases rather than just a creditor.