Exam 1: Multinational Financial Management: an Overview

The valuation of an MNC accounts for all the cash flows received by the foreign subsidiaries plus all the cash flows remitted by the subsidiaries.

​The valuation of an MNC should rise when an event causes the expected cash flows from foreign subsidiaries to ____ and when the foreign currencies denominating these cash flows are expected to ____.

Due to the risks involved in international business, firms should:

Assume that an MNC purchases a foreign building, and then leases the building to another party and allows that party to operate the business in the building for 30 years if the party follows standards set by the MNC. This process is referred to as:

MNCs commonly consider establishing a new foreign subsidiary to replace their exporting business because it allows them to avoid exchange rate risk.

Four MNCs generate the same level of sales. The MNC that _____________would likely have the most direct foreign investment.

Licensing is the process by which a firm provides its technology (copyrights, patents, trademarks, or trade names) in exchange for fees or some other specified benefits.

Which of the following could reduce agency problems for an MNC?

According to the text, licensing allows a firm to:

One of the most prevalent factors conflicting with the realization of the goal of an MNC is the existence of agency problems.

Although MNCs may need to convert currencies occasionally, they do not face any exchange rate risk, as exchange rates are stable over time.

When conducting international business, firms generally face the most risk when they:

If a publicly traded MNC's managers make poor decisions that reduce its value, that may encourage other firms to acquire the MNC.

Which of the following is not one of the more common methods used by MNCs to improve their internal control process?

Compared to other methods of international business, international trade generally results in ____ exposure to international political risk and ____ exposure to international economic conditions. ​

International trade is the most common form of direct foreign investment (DFI).

​Which of the following is not a way in which agency problems can be reduced through corporate control?

An MNC may be more exposed to agency problems if most of its shares are held by:

A product cycle is the process by which a firm provides a specialized sales or service strategy, support assistance, and possibly an initial investment in a franchise in exchange for periodic fees.