Question 1

The principle of transparent disclosure of information is

Accepted Answer

A)  regulatory compliance limited to domestic market operations. 
B)  serious impediment forcing companies to publish confidential and proprietary information. 
C)  universal set of global standards enforced by SEC. 
D)  helpful for current and potential investors to assess the investment outlook of the company. 
A)  regulatory compliance limited to domestic market operations. 
B)  serious impediment forcing companies to publish confidential and proprietary information. 
C)  universal set of global standards enforced by SEC. 
D)  helpful for current and potential investors to assess the investment outlook of the company.

Question 2

When discussing the structure of corporate governance, the authors distinguish between internal and external factors. ________ is an example of an internal factor, and ________ is an example of an external factor.

Accepted Answer

A)  Equity markets; executive management 
B)  Debt markets; board of directors 
C)  Executive management; auditors 
D)  Auditors; regulators 
A)  Equity markets; executive management 
B)  Debt markets; board of directors 
C)  Executive management; auditors 
D)  Auditors; regulators

Question 3

Fissler AG, headquartered in Germany, records all of it sales worldwide in euros. Its USA division realized sales of €2,675,000 last year when the exchange rate was $1.33/€ and sales of €2,355,000 this year when the exchange rate was $1.48/€. What was the percent change in USD revenues for the USA division over the last year?

Accepted Answer

A)  -13.99% 
B)  -11.96% 
C)  -2.03% 
D)  -20.89% 
A)  -13.99% 
B)  -11.96% 
C)  -2.03% 
D)  -20.89%

Question 4

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

Accepted Answer

A)  maximization of consolidated after-tax income 
B)  maximization of interest expense 
C)  minimization of revenues from other countries 
D)  minimization of total assets held in foreign locations 
A)  maximization of consolidated after-tax income 
B)  maximization of interest expense 
C)  minimization of revenues from other countries 
D)  minimization of total assets held in foreign locations

Question 5

Accountants and lawyers have found the costs to corporations to meet Sarbanes-Oxley regulatory requirements to be disappointingly small and less than anticipated when the legislation was enacted in 2002.

Accepted Answer

A) True 
 B)False

Question 6

During the 1990s, rapidly increasing stock prices exposed a flaw in the shareholder wealth maximization model, the seeking of short-term value maximization. Such behavior by management is characterized by all but which of the following?

Accepted Answer

A)  a focus on quarterly earnings 
B)  overly generous use of stock options to motivate management 
C)  improper reporting of earnings by management 
D)  All of the above may be characteristics of short-term value maximization. 
A)  a focus on quarterly earnings 
B)  overly generous use of stock options to motivate management 
C)  improper reporting of earnings by management 
D)  All of the above may be characteristics of short-term value maximization.

Question 7

During the IPO, typically only a small portion of the company is initially sold to the public (10-20%). This results in the company still being controlled by

Accepted Answer

A)  government. 
B)  small number of private investors. 
C)  family. 
D)  All of the above can be in control of the company. 
A)  government. 
B)  small number of private investors. 
C)  family. 
D)  All of the above can be in control of the company.

Question 8

The shareholder wealth maximization model assumes as a universal truth that the market is efficient.

Accepted Answer

A) True 
 B)False

Question 9

The authors reference empirical evidence that family-controlled firms all over the world may outperform publicly traded firms. What factors are cited as reasons for this occurring?

Accepted Answer

The authors note three primary reasons.

Question 10

Anglo-American is defined to mean

Accepted Answer

A)  North, Central, and South America. 
B)  the United States, Canada, and Western Europe. 
C)  the United States, United Kingdom, Canada, Australia and New Zealand. 
D)  the United States, France, Britain, and Germany. 
A)  North, Central, and South America. 
B)  the United States, Canada, and Western Europe. 
C)  the United States, United Kingdom, Canada, Australia and New Zealand. 
D)  the United States, France, Britain, and Germany.

Question 11

According to a 2010 McKinsey survey, family-influenced businesses tend to underperform the public sector in each of five major markets worldwide.

Accepted Answer

A) True 
 B)False

Question 12

Mary Chalmers, who lives in Minnesota, purchased 100 shares of Delton Cables, a diversified machinery company headquartered in Germany. She purchased the stock in January of 2011 for €62.50 per share when the exchange rate was at $1.330/€. Today, the stock is trading for €68.00 per share and the exchange rate is $1.48/€. If Mary sells her shares today, what is the total return on her investment?

Accepted Answer

A)  11.28% 
B)  20.08% 
C)  8.80% 
D)  26.41% 
A)  11.28% 
B)  20.08% 
C)  8.80% 
D)  26.41%

Question 13

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 14

Privatization is a term used to describe

Accepted Answer

A)  firms that are purchased by the government. 
B)  government operations that are purchased by corporations and other investors. 
C)  firms that do not use publicly available debt. 
D)  non-public meetings held by members of interlocking directorates. 
A)  firms that are purchased by the government. 
B)  government operations that are purchased by corporations and other investors. 
C)  firms that do not use publicly available debt. 
D)  non-public meetings held by members of interlocking directorates.

Question 15

Unsystematic risk can be defined as

Accepted Answer

A)  the total risk to the firm. 
B)  the risk of a well-diversified portfolio. 
C)  the added risk that a firm's shares bring to a diversified portfolio. 
D)  beta. 
A)  the total risk to the firm. 
B)  the risk of a well-diversified portfolio. 
C)  the added risk that a firm's shares bring to a diversified portfolio. 
D)  beta.

Question 16

What are frequently taught as universal truths in a finance classroom may in fact just be cultural norms.

Accepted Answer

A) True 
 B)False

Question 17

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.

Question 18

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 19

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 20

Describe the management objectives of a firm governed by the shareholder wealth maximization model and one governed by the stakeholder wealth maximization model. Give an example of how these two models may lead to different decision-making by executive management.

Accepted Answer

Shareholder wealth maximization attempts

The principle of transparent disclosure of information is

When discussing the structure of corporate governance, the authors distinguish between internal and external factors. is an example of an internal factor, and is an example of an external factor.

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

Accountants and lawyers have found the costs to corporations to meet Sarbanes-Oxley regulatory requirements to be disappointingly small and less than anticipated when the legislation was enacted in 2002.

During the 1990s, rapidly increasing stock prices exposed a flaw in the shareholder wealth maximization model, the seeking of short-term value maximization. Such behavior by management is characterized by all but which of the following?

During the IPO, typically only a small portion of the company is initially sold to the public (10-20%). This results in the company still being controlled by

The shareholder wealth maximization model assumes as a universal truth that the market is efficient.

The authors reference empirical evidence that family-controlled firms all over the world may outperform publicly traded firms. What factors are cited as reasons for this occurring?

Anglo-American is defined to mean

According to a 2010 McKinsey survey, family-influenced businesses tend to underperform the public sector in each of five major markets worldwide.

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?

Privatization is a term used to describe

Unsystematic risk can be defined as

What are frequently taught as universal truths in a finance classroom may in fact just be cultural norms.

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

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

Describe the management objectives of a firm governed by the shareholder wealth maximization model and one governed by the stakeholder wealth maximization model. Give an example of how these two models may lead to different decision-making by executive management.

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

Exam 4: Financial Goals and Corporate Governance

The principle of transparent disclosure of information is

When discussing the structure of corporate governance, the authors distinguish between internal and external factors. ________ is an example of an internal factor, and ________ is an example of an external factor.

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

Accountants and lawyers have found the costs to corporations to meet Sarbanes-Oxley regulatory requirements to be disappointingly small and less than anticipated when the legislation was enacted in 2002.

During the 1990s, rapidly increasing stock prices exposed a flaw in the shareholder wealth maximization model, the seeking of short-term value maximization. Such behavior by management is characterized by all but which of the following?

During the IPO, typically only a small portion of the company is initially sold to the public (10-20%). This results in the company still being controlled by

The shareholder wealth maximization model assumes as a universal truth that the market is efficient.

The authors reference empirical evidence that family-controlled firms all over the world may outperform publicly traded firms. What factors are cited as reasons for this occurring?

Anglo-American is defined to mean

According to a 2010 McKinsey survey, family-influenced businesses tend to underperform the public sector in each of five major markets worldwide.

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?

Privatization is a term used to describe

Unsystematic risk can be defined as

What are frequently taught as universal truths in a finance classroom may in fact just be cultural norms.

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

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

Describe the management objectives of a firm governed by the shareholder wealth maximization model and one governed by the stakeholder wealth maximization model. Give an example of how these two models may lead to different decision-making by executive management.

Multinational Financial Management: Opportunities and Challenges

The International Monetary System

The Balance of Payments

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Trade Finance

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

Filters

When discussing the structure of corporate governance, the authors distinguish between internal and external factors. is an example of an internal factor, and is an example of an external factor.