| Course | FIN 355 International Finance and Trade (FIN/355) |
|---|---|
| Week | 1 |
| Paper type | International trade and financial system paper |
| Length | about 1,056 words, 4 double-spaced pages plus title page and references |
| Format | APA 7 student paper |
| School | University of Phoenix |
| Program | BS in Finance |
| Updated | September 2026 |
Free sample paper for FIN 355 Week 1
Why a Kansas Parts Maker Sells to Brazil and Buys From Korea: Comparative Advantage, the Balance of Payments and the Institutions That Keep Trade and Payments Moving
[Student Name]
University of Phoenix
FIN/355: International Finance and Trade
Week 1 Assignment
[Instructor Name]
[Date]
The parts maker and its figures are composites written for a model paper; economic concepts and research findings come from the sources listed.
A composite company in central Kansas makes replacement parts for combines and harvesters, including gearboxes, rotor parts and precision shafts. About 30% of its $64 million of sales go to dealers in Brazil, where large grain farms run American-built equipment. It buys rough iron castings from a foundry in South Korea, then machines and assembles them in Kansas. The company's shipping records are a small map of the world economy: each crate follows a comparative advantage, and each payment passes through a global financial system. This paper explains that map.
Comparative Advantage
Ricardo (1817) showed that trade benefits both parties when each specializes where its opportunity cost is lowest, even if one is better at everything. The Kansas company could cast iron itself, and its engineers could make better castings than many foundries. But the company's skilled machinists and engineers are expensive, and every hour they spend on rough casting is an hour not spent on precision machining, where their productivity advantage is greatest. The Korean foundry's opportunity cost of casting is lower. By buying castings and specializing in machining, the company produces more value with the same people, and so does the foundry (Krugman et al., 2022).
The same logic explains the exports. Brazil has a comparative advantage in grain, with vast land and a long growing season, and its farms buy machinery and parts rather than building an industry to make them. The Kansas company has an advantage in designing and machining parts for equipment it knows well.
Gains and Costs of Trade
Trade raises total output and lowers costs for buyers, but it also shifts work. The company's decision to buy castings abroad ended casting jobs at a small Kansas foundry that closed a decade ago, while the machining work it kept pays more. The gains are real and widespread; the costs are concentrated on particular workers and communities, which is why trade policy remains contested.
The Balance of Payments
Every cross-border transaction appears in the balance of payments. When the company ships $1.5 million of parts to a Brazilian dealer, the sale is a US export in the current account. When the dealer pays, perhaps by drawing on a dollar credit line from a Brazilian bank, the financing appears in the financial account. When the company buys $4 million of castings from Korea, the purchase is an import in the current account, and its payment appears as a financial flow. Because every payment must be financed somehow, the current account and financial account offset each other, apart from statistical discrepancy. A US current account deficit is matched by net financial inflows, foreigners buying US assets.
Services and Income in the Accounts
The current account includes more than goods. When the company pays a Dutch firm for software that runs its machining centers, that is an import of services. When its Brazilian sales representative, a contractor, is paid a commission, that is also a services payment. If the company someday owned a warehouse in Brazil and earned profits there, those earnings would appear as primary income in the current account, and the original investment in the warehouse would appear in the financial account as direct investment. These entries show that the balance of payments captures the full web of a company's international relationships, not only its shipments.
Exchange Rates in Brief
The company invoices Brazilian dealers in dollars, so dealers bear the currency risk; when the Brazilian real weakens, parts become more expensive for them and orders slow. The company pays the Korean foundry in dollars as well, shifting risk to the foundry. Under floating exchange rates, these rates move daily with trade, investment flows and interest rates, a subject the course develops in later weeks.
The Institutions
Three institutions shape the system the company operates in. The World Trade Organization sets rules for trade among its members, including tariff commitments and dispute settlement; Brazil's tariffs on agricultural parts, for example, are bound by its WTO commitments. The International Monetary Fund monitors members' economies and exchange rate policies and lends to countries facing balance of payments crises, which helps prevent the kind of currency collapse that would stop Brazilian dealers from paying. The World Bank finances development projects, such as rural roads and irrigation, that expand agricultural output and, indirectly, demand for machinery.
Trade Finance
The company also relies on the financial system to reduce the risk of selling abroad. For new Brazilian dealers, it requires a letter of credit from the dealer's bank, confirmed by a US bank, so that it will be paid if the documents it presents match the terms. For established dealers, it sells on open account with credit insurance from a private insurer. These tools cost between 0.5% and 1.5% of the sale but allow the company to extend credit across borders without taking on unknown risk.
Why Only Some Firms Trade
Bernard et al. (2007) documented that exporting firms are a minority, are larger and more productive and pay higher wages than firms that do not export, and that most exports come from a small number of firms. The Kansas company fits: it began exporting only after it reached a size at which it could support a Portuguese-speaking sales representative, meet Brazilian certification requirements and absorb the cost of shipping and credit risk.
What This Means for the Company
The global system brings the company opportunities, a large market for its parts and cheaper inputs, and risks: tariff changes, currency swings that affect customers' purchasing power and disruptions in shipping. Its management should monitor WTO disputes and Brazilian trade policy, track the real's value against the dollar and keep a second foundry qualified in case the Korean supplier is disrupted.
Conclusion
The Kansas parts maker exports precision parts and imports castings because of comparative advantage at the level of both countries and firms. Its transactions appear in the balance of payments as trade in the current account and financing in the financial account. The WTO, IMF and World Bank shape the rules, stability and growth that make that trade possible, and research on exporters explains why a company of its size and productivity trades when many smaller firms do not.
References
Bernard, A. B., Jensen, J. B., Redding, S. J., & Schott, P. K. (2007). Firms in international trade. Journal of Economic Perspectives, 21(3), 105-130. https://doi.org/10.1257/jep.21.3.105
Krugman, P. R., Obstfeld, M., & Melitz, M. J. (2022). International economics: Theory and policy (12th ed.). Pearson.
Ricardo, D. (1817). On the principles of political economy and taxation. John Murray.
What the FIN 355 Week 1 instructions ask
The first FIN 355 assignment usually covers the basics of international trade and of the global financial system that settles it. Common requirements include absolute and comparative advantage, the gains and costs of trade, the structure of the balance of payments, including the current and financial accounts, exchange rate systems in broad terms and the roles of international institutions such as the IMF, the World Bank and the WTO. Many prompts ask students to connect these ideas to a country, an industry or a company. The paper should explain concepts accurately, apply them to a specific case and support its analysis with economics and finance sources in APA style.
How this FIN 355 Week 1 example is built
A mid-sized manufacturer that both exports and imports shows trade and finance working together in ordinary business. The paper first explains comparative advantage using the company's actual choices, why it makes precision parts at home and buys rough castings abroad. It then records the company's sales and purchases in the balance of payments to show how trade flows and financial flows offset each other. The institutions section explains what each organization does and how its work reaches the company, such as tariff rules and financial stability. A research section explains why exporters differ from other firms, and the paper ends with what the global system means for the company's risks and opportunities.
FIN 355 Week 1 grading rubric: where the points go
Graders here look for an accurate account of comparative advantage, correct use of the balance of payments accounts, a correct description of international institutions and application to a real or described case. Faculty check that comparative advantage is explained through opportunity cost rather than absolute productivity, that exports and imports appear in the current account and their financing in the financial account and that the IMF, World Bank and WTO are distinguished by function. Applying each idea to the company's decisions earns more credit than definitions. Research on trading firms adds depth. Clear organization and APA citations complete the rubric, with credit for noting who loses as well as who gains from trade.
FIN 355 Week 1 help: mistakes to avoid
A frequent FIN 355 Week 1 error is confusing comparative with absolute advantage. A country or firm can be better at everything and still gain by specializing where its opportunity cost is lowest. Another is placing trade financing, such as a Brazilian customer's payment or a loan, in the current account; the goods go in the current account, and the payment's financing goes in the financial account. Students also blur the IMF, which supports monetary stability, with the World Bank, which finances development. Keep the case central. Explain the company's trade pattern with the theory. Finally, note the costs of trade as well as the gains, since some workers and firms lose.
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FIN 355 Week 1 questions, answered
What does FIN 355 Week 1 usually cover?
It usually covers the basics of international trade and the global financial system, including comparative advantage, the balance of payments and the roles of the IMF, World Bank and WTO.
Where can I find a free FIN 355 Week 1 sample paper?
This page explains a Kansas parts maker's exports and imports through comparative advantage and the balance of payments, annotated beside each section, and it costs nothing to read. Send your assignment and a first draft is on us.
What is comparative advantage?
The ability to produce a good at a lower opportunity cost than others; countries and firms gain by specializing in goods where their opportunity cost is lowest and trading for the rest.
What is the balance of payments?
A record of a country's transactions with the rest of the world, including the current account for goods, services and income and the financial account for investment and borrowing.
What is the difference between the IMF and the World Bank?
The IMF monitors the international monetary system and lends to countries facing balance of payments problems; the World Bank finances development projects and poverty reduction.
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