Exam 20: Financial Management and Accounting in the Global Firm

Describe the three types of currency exposure, and explain the benefits of the consolidation of financial statements.

Financing Corporate Expansion (Scenario) Intensity Games is an MNE based in San Francisco that manufactures a popular line of video game consoles and accessories. Intensity owns manufacturing facilities in China and Russia where the components of the game consoles are manufactured and assembled before being shipped around the world. Intensity also owns numerous subsidiaries that manufacture game cartridges for Intensity game platforms. Intensity managers have determined that the firm needs to expand its Chinese facility to accommodate the increasing demand. The firm needs to raise several million dollars to finance the expansion. The financial managers of Intensity are discussing the various financing options available to the firm. -Which of the following questions would be more important for Intensity financial managers to evaluate when deciding the best method for the firm to raise funds?

Multilateral netting is the means by which subsidiaries and affiliates charge each other as they exchange goods and services.

In international financial management, after assessing the financial attractiveness of major investment projects, the MNE ________.

If one U.S. dollar equaled one euro last year, and then the exchange rate shifted so that today one dollar equals two euros, which of the following will most likely occur?

In international financial management, after raising funds for the firms, the MNE immediately ________.

________ is the number of units of foreign currency obtained for one unit of domestic currency.

Which of the following is a benefit for firms that participate in the global capital market?

The volume and complexity of a firm's intracorporate transfers depends on ________.

A lack of transparency in emerging market economies leads to less FDI because investors are unable to make financially sound decisions due to a shortage of reliable information.

Transaction exposure occurs when ________ are denominated in foreign currencies.

Which of the following is the final task in international financial management?

Explain the difference between working capital and net working capital, and discuss why managers employ net present value (NPV) analysis to evaluate domestic and international capital investment projects.

Unlike exporters and licensors, who both face currency risk, managers of foreign investment portfolios are sheltered from the rise and fall of exchange rates.

The current rate method is typically employed when translating records of ________.

A project perspective approach in capital budgeting can be employed by managers interested in initially screening the appropriateness of an international capital investment project.

Direct quote is the number of units of foreign currency obtained for one unit of domestic currency.

Freedom Energy Group (Scenario) Freedom Energy Group (FEG) is a major American energy services group based in Oklahoma. FEG manufactures products to facilitate oil and gas exploration and is involved in the construction of oil refineries and gas pipelines around the world. FEG managers are considering the purchase of a Canadian energy firm, Maple Leaf Energy, which manufactures pipeline stabilization products. The financial management division of FEG is considering the risks and benefits of purchasing Maple Leaf. -Which of the following questions would be more important for FEG financial managers to evaluate before the firm purchases Maple Leaf?

When using equity financing, firms run the risk of ________.

Multilateral netting would enable an MNE with numerous subsidiaries to ________.