Marshall School of Business University of Southern California
Global Investors, Inc. Teaching Note
Purpose of Case This case was written to illustrate a transfer pricing problem in a service setting, here an investment management company. The issues and solutions are not as obvious as in a manufacturing setting where one division produces parts that are transferred to another division for further processing. The case is a disguised version of a real conflict in which emotions were running high. The case exposes students to a broad range of issues that can be raised when negotiating transfer pricing. These include cost allocation methods, managers’ interests and perceptions, organizational roles and conflicts, taxes, No justification was provided for the 50% royalty rate. This measurement method would make all the subsidiaries look hugely profitable. That, in itself, would provide some tax savings for GI because the New York tax rates were higher than those GI faced in any other tax jurisdiction. Alternative 3—Davis’ first proposal Jack Davis, the corporate Operations VP, rejected Hoskins’ method. He argued that to a large extent the subsidiaries were just following instructions from headquarters. And, further, many of the funds the subsidiaries were managing belonged to New York clients. He proposed instead to allocate revenues based on the origin of the clients, not the current location providing the service. This transfer pricing method would cause all the subsidiaries to report large losses on their operating income line. Alternative 4—Hoskins’ second proposal Hoskins then did some industry benchmarking and found that the “industry standard” was to split fee revenues equally between Client Services and Investment Management. We inquired GI management as to the rationale behind this standard, and no one could explain it to us. The primary rationale seemed to be a general recognition that both functions created value, but that it was too difficult or too costly to
The Cindy Shearin Group: Global Investors Looking for Real Estate Bargains Flock to Spain As one of the most moribund housing markets in Europe, Spain has become a magnet for global bargain hunters. Real estate prices are down as much as 50 percent from their peak during a housing bubble, and investors from Asia to the United States and Britain are flocking to Spain to try to catch the uptick. British Airways flights to Madrid are packed with London-based real estate executives. The hedge…
insight and understanding of this market segment. Write a six to eight (6-8) page paper in which you: Explain why investors may be attracted to high-risk investments such as exchange-traded derivatives, global funds, and other complex investment vehicles. Analyze the risk…
“high-reward, low-risk” ways to invest in one of the world’s shiniest commodities is through a silver exchange traded fund (ETF). The first silver ETF arrived on the scene in 2006—in the form of the iShares Silver Trust, managed by Barclays Global Investors. Today, the ETF has over $13 billion in assets and has returned 25.17% in average annualized returns since inception. Not only iShare Silver Trust, the spot price of silver (per ounce) crested $35.12 in April 2011, for the first time since 1980…
mutual fund if you do no choose to buy individual stocks. A mutual fund is an investment company that pools the money of investors and buys a collection of investments. The Advantage of Expert Management • Many investors lack the financial know-how to manage their own portfolio so professionals manage non-index. These professionals have dedicated careers to helping investors get the best risk-return according to their objectives. Capital Gains • Every time you sell a stock, you’re taxed n your…
and outside of Japan for stakeholders, potential investors and the company itself (Fujitsu Global 2013 & Fujitsu Global 2014). Firstly, IFRS will enhance the comparability and consistency of Fujitsu’s financial information in global capital markets (Fujitsu Global 2014). This is particularly attractive to overseas investors due to the ease at which relevant financial information can be compared between foreign businesses, allowing investors to make better and more informed decisions. According…
As willingness to trade increases, cross-border investment and integration of capital markets are easier with greater market liquidity and lower cost of capital (Hail 12). This means that investor bases would increase as the financial reports become more comparable Second, we expect convergence benefits to be more pronounced in industries where many non-U.S. peer firms have already adopted IFRS. Widespread adoption of IFRS in a particular industry may be an indication that the benefits (such as…
how the price of gold is rising due to fewer resources on the market of the yellow metal. He explains in this article that Gold has been predicted for some time in Europe and global currency is going to be kept high. He says this is due to Investors seeing gold as “safe haven”, despite of all warnings. The risks in the global financial and currency markets, especially since 2006 having it increased in the clamour for the yellow metal. Due to gold being sought after when other assets turn out to be…
Introduction With the increasingly development of internationalisation, global finance and business have been interlinked so strong that the consequences of the financial crisis have been more and more serious and widely spreading. Thus international business is very often affected and attacked under financial crisis. Two financial crisis Charles Kindleberger (2011) argued that financial crisis occurs periodically and regularly in the business cycle. It is then documented by Reinhart and Rogoff…
going public with an IPO, the company should first consider selecting and hiring an investment banker, “a person who brings together investors and firms”, even though an investment banker is usually not a banker but instead part of a brokerage firm. An IPO is a way for businesses to bring in new funds by selling securities on the open stock market to willing investors. Depending on the company’s history and stability some brokerage firms will give a “firm Commitment,” guaranteeing a specific amount…
Global Long-term Debt Market The quantity of global long-term debt issues kept increasing trend generally for recent years. The governments, banks and corporate in every country are issuing more long-term debt instead of short-term debt, which means the increasing of confidence among investors on the prospects for global economy. Long-term debt issues will reduce refinancing risks for the year, and easing worries which build-up of debt maturing may make it more difficult for governments and companies…