round tripping
navaneeta
(Querist) 03 June 2008
This query is : Resolved
Can someone please tell me where I can find material on roundtripping?
Guest
(Expert) 03 June 2008
What is round tripping. In what context has this term come about.
Guest
(Expert) 05 June 2008
Navaneeta,
please explain the term.
If it is connected with Finance, here is the link, from where you will get more .
http://www.financialexpress.com/old/fe_full_story.php?content_id=10418
Round-tripping, also known as round-trip transactions or "Lazy Susans", is defined by The Wall Street Journal, as a form of barter that involves a company selling "an unused asset to another company while at the same time agreeing to buy back the same or similar assets at about the same price." Round trips are characteristic of the New Economy companies. They played a crucial part in temporarily inflating the market capitalization of energy traders such as Enron, CMS Energy, Reliant Energy, and Dynegy.
Other companies making unconventional round-tripping deals include AOL with Sun Microsystems and Global Crossing with Qwest Communications. It is alleged that when some telecommunications companies swapped capacity, they booked the value of the incoming capacity as revenue and the value of the outgoing capacity as an investment. These transactions had the effect of inflating profits. The SEC ruled that booking revenues from swaps in telecommunications capacity was improper.
Many such companies have used round-tripping to distort the market by establishing false revenue benchmarks, aiming to meet or beat the numbers put out by Wall Street stock analysts. As a result of abusive round trips, barter between publicly held companies has become discredited among professional investors.
http://en.wikipedia.org/wiki/Round-tripping
What is Round-Tripping?
- it refers to the capital belonging to a country, which leaves the country & then is reinvested in the form of FDI. investors find many incentives in doing so. first , enterprise set up through FDI enjoy many tax benefits, more administrative support & easier access to financial services. second, benefit is that in whichever country property right laws are still weak for the local citizens, round-tripping is profitable. reinvesting profits is not always easy & it is preferred to remove profits from the country & invest abroad which enjoys property rights from government.
Fudging :
in case of china, the bureau responsible for attrating FDI is also one which publishes FDI data. this indicates a severe conflicts of interests.
