Question 1

The Corporate Wealth Maximization Model

Accepted Answer

A)  clearly places shareholders as the primary stakeholder. 
B)  combines the interests and inputs of shareholders, creditors, management, employees, and society. 
C)  has financial profit as its goal and is often termed impatient capital. 
D)  is the Anglo-American model of corporate governance. 
A)  clearly places shareholders as the primary stakeholder. 
B)  combines the interests and inputs of shareholders, creditors, management, employees, and society. 
C)  has financial profit as its goal and is often termed impatient capital. 
D)  is the Anglo-American model of corporate governance. B

Question 2

Which of the following is the "signature" clause of the Sarbanes -Oxley Act?

Accepted Answer

A)  CEOs and CFOs of publicly-traded firms must vouch for the veracity of the firm's financial statements. 
B)  Corporate board audit and compensation committee members must come from outside directors. 
C)  Companies may not make loans to their officers and directors. 
D)  Companies must test their internal financial controls against fraud. 
A)  CEOs and CFOs of publicly-traded firms must vouch for the veracity of the firm's financial statements. 
B)  Corporate board audit and compensation committee members must come from outside directors. 
C)  Companies may not make loans to their officers and directors. 
D)  Companies must test their internal financial controls against fraud. A

Question 3

Which of the following is NOT an important concept when distinguishing between international and domestic financial management?

Accepted Answer

A)  corporate governance 
B)  culture, history, and institutions 
C)  political risk 
D)  All of the above are important distinguishing concepts. 
A)  corporate governance 
B)  culture, history, and institutions 
C)  political risk 
D)  All of the above are important distinguishing concepts. D

Question 4

"Maximize corporate wealth"

Accepted Answer

A)  is the primary objective of the European/Japanese model of management. 
B)  as a management objective treats shareholders on a par with other corporate stakeholders such as creditors, labor, and local community. 
C)  has a broader definition than just financial wealth. 
D)  all of the above. 
A)  is the primary objective of the European/Japanese model of management. 
B)  as a management objective treats shareholders on a par with other corporate stakeholders such as creditors, labor, and local community. 
C)  has a broader definition than just financial wealth. 
D)  all of the above.

Question 5

Which of the following is generally NOT considered to be a viable operational goal for a firm?

Accepted Answer

A)  maintaining a strong local currency 
B)  maximization of after-tax income 
C)  minimization of the firm's effective global tax burden 
D)  correct positioning of the firm's income, cash flows and available funds as to country and currency 
A)  maintaining a strong local currency 
B)  maximization of after-tax income 
C)  minimization of the firm's effective global tax burden 
D)  correct positioning of the firm's income, cash flows and available funds as to country and currency

Question 6

Anglo-American equity markets are characterized by widespread ownership of shares. In other parts of the world ownership is often dominated by consortiums of controlling shareholders. Which of the following is NOT an example of a common consortium of controlling shareholders?

Accepted Answer

A)  Japanese keiretsus 
B)  South Korean chaebols 
C)  U.S. labor unions 
D)  all of the above are common controlling consortiums 
A)  Japanese keiretsus 
B)  South Korean chaebols 
C)  U.S. labor unions 
D)  all of the above are common controlling consortiums

Question 7

Unsystematic risk can be defined as

Accepted Answer

A)  the total risk to the firm. 
B)  the risk of the individual security. 
C)  the added risk that a firm's shares bring to a diversified portfolio. 
D)  the risk that can be systematically diversified away. 
A)  the total risk to the firm. 
B)  the risk of the individual security. 
C)  the added risk that a firm's shares bring to a diversified portfolio. 
D)  the risk that can be systematically diversified away.

Question 8

In recent years there has been an increasing focus on the wealth maximization model of corporate governance and a move away from the stakeholder capitalism model among MNEs.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is a common operational financial objective for MNEs?

Accepted Answer

A)  maximization of interest expense 
B)  minimization of revenues from other countries 
C)  correct positioning of the firm's income, cash flow, and available funds as to country and currency 
D)  minimization of total assets held in foreign locations 
A)  maximization of interest expense 
B)  minimization of revenues from other countries 
C)  correct positioning of the firm's income, cash flow, and available funds as to country and currency 
D)  minimization of total assets held in foreign locations

Question 10

The study of how shareholders can motivate management to accept the prescriptions of the shareholder wealth maximization model is ________.

Accepted Answer

A)  Sharpe/Treynor theory 
B)  agency theory 
C)  management theory 
D)  corporate board control theory 
A)  Sharpe/Treynor theory 
B)  agency theory 
C)  management theory 
D)  corporate board control theory

Question 11

It may be (is probably the case) that family owned businesses the world over out-perform their publicly traded brethren. Which of these factors is attributed to family owned firm dominance over public firms?

Accepted Answer

A)  a focus on the long-term 
B)  they stick to their core business 
C)  fewer agency problems (manager-owner conflicts) 
D)  all of the above 
A)  a focus on the long-term 
B)  they stick to their core business 
C)  fewer agency problems (manager-owner conflicts) 
D)  all of the above

Question 12

The Board of Directors

Accepted Answer

A)  consists exclusively of the officers of the corporation. 
B)  is the legal body which is accountable for the governance of the corporation. 
C)  are not subject to the external forces of the marketplace. 
D)  is appointed by the Securities and Exchange Commission (SE
C) . 
A)  consists exclusively of the officers of the corporation. 
B)  is the legal body which is accountable for the governance of the corporation. 
C)  are not subject to the external forces of the marketplace. 
D)  is appointed by the Securities and Exchange Commission (SE
C) .

Question 13

The relationship among stakeholders used to determine and control the strategic direction and performance of an organization is termed ________.

Accepted Answer

A)  corporate governance 
B)  Anglo-American activism 
C)  capital structure 
D)  working capital management 
A)  corporate governance 
B)  Anglo-American activism 
C)  capital structure 
D)  working capital management

Question 14

Under the Shareholder Wealth Maximization Goal of Corporate Governance, poor firm performance is likely to be faced with all but which of the following?

Accepted Answer

A)  sale of shares by disgruntled current shareholders 
B)  shareholder activism to attempt a change in current management 
C)  as a maximum threat, initiation of a corporate takeover 
D)  prison time for executive management 
A)  sale of shares by disgruntled current shareholders 
B)  shareholder activism to attempt a change in current management 
C)  as a maximum threat, initiation of a corporate takeover 
D)  prison time for executive management

Question 15

According to recent research, family-owned firms in some highly-developed economies typically outperform publicly-owned firms.

Accepted Answer

A) True 
 B)False

Question 16

The Shareholder Wealth Maximization Model

Accepted Answer

A)  combines the interests and inputs of shareholders, creditors, management, employees, and society. 
B)  is being usurped by the Corporate Wealth Maximization Model as those types of MNEs dominate their global industry segments. 
C)  clearly places shareholders as the primary stakeholder. 
D)  is the dominant form of corporate management in the European-Japanese governance system. 
A)  combines the interests and inputs of shareholders, creditors, management, employees, and society. 
B)  is being usurped by the Corporate Wealth Maximization Model as those types of MNEs dominate their global industry segments. 
C)  clearly places shareholders as the primary stakeholder. 
D)  is the dominant form of corporate management in the European-Japanese governance system.

Question 17

The stakeholder capitalism model is characterized by the desire of controlling shareholders to maximize long-term return to equity just as in the shareholder wealth maximization model of corporate governance. However, stakeholder capitalism controlling shareholders are more constrained by which of the following groups than in the shareholder wealth maximization model?

Accepted Answer

A)  banks 
B)  governments 
C)  other powerful stakeholders 
D)  all of the above 
A)  banks 
B)  governments 
C)  other powerful stakeholders 
D)  all of the above

Question 18

Which of the following is not a form of direct foreign investment?

Accepted Answer

A)  joint ventures 
B)  acquisitions of existing operations in a foreign country 
C)  franchising 
D)  international trade 
A)  joint ventures 
B)  acquisitions of existing operations in a foreign country 
C)  franchising 
D)  international trade

Question 19

According to the authors, dual classes of voting stock are the norm in non-Anglo-American markets.

Accepted Answer

A) True 
 B)False

Question 20

In recent years the trend has been for markets to increase focus on the shareholder wealth form of wealth maximization.

Accepted Answer

A) True 
 B)False

Exam 2: Financial Goals and Corporate Governance

The Corporate Wealth Maximization Model

Which of the following is the "signature" clause of the Sarbanes -Oxley Act?

Which of the following is NOT an important concept when distinguishing between international and domestic financial management?

"Maximize corporate wealth"

Which of the following is generally NOT considered to be a viable operational goal for a firm?

Anglo-American equity markets are characterized by widespread ownership of shares. In other parts of the world ownership is often dominated by consortiums of controlling shareholders. Which of the following is NOT an example of a common consortium of controlling shareholders?

Unsystematic risk can be defined as

In recent years there has been an increasing focus on the wealth maximization model of corporate governance and a move away from the stakeholder capitalism model among MNEs.

Which of the following is a common operational financial objective for MNEs?

The study of how shareholders can motivate management to accept the prescriptions of the shareholder wealth maximization model is ________.

It may be (is probably the case) that family owned businesses the world over out-perform their publicly traded brethren. Which of these factors is attributed to family owned firm dominance over public firms?

The Board of Directors

The relationship among stakeholders used to determine and control the strategic direction and performance of an organization is termed ________.

Under the Shareholder Wealth Maximization Goal of Corporate Governance, poor firm performance is likely to be faced with all but which of the following?

According to recent research, family-owned firms in some highly-developed economies typically outperform publicly-owned firms.

The Shareholder Wealth Maximization Model

Which of the following is not a form of direct foreign investment?

According to the authors, dual classes of voting stock are the norm in non-Anglo-American markets.

In recent years the trend has been for markets to increase focus on the shareholder wealth form of wealth maximization.

Globalization and the Multinational Enterprise

The International Monetary System

The Balance of Payments

The Foreign Exchange Market

International Parity Conditions

Foreign Exchange Rate Determination and Forecasting

Foreign Currency Derivatives

Transaction Exposure

Operating Exposure

Translation Exposure

Global Cost and Availability of Capital

Sourcing Equity Capital Globally

Financial Structure and International Debt

Interest Rate and Currency Swaps

International Portfolio Theory and Diversification

Foreign Direct Investment Theory and Strategy

Political Risk Assessment and Management

Multinational Capital Budgeting

International Trade Finance

Multinational Tax Management

Working Capital Management

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