Question 1

What are the shortcomings of IASB?

Accepted Answer

To issue a new standard, 75 percent of the 15 members of the board must agree. It can be difficult to get three-quarters agreement, particularly since members come from different cultures and legal systems. Another hindrance to the development of international accounting standards is that compliance is voluntary; the IASB has no power to enforce its standards.

Question 2

A fronting loan is a loan between a parent and its subsidiary channeled through a financial intermediary.

Accepted Answer

A) True 
 B)False  True

Question 3

Which of the following is a disadvantage of pursuing a transfer pricing policy?

Accepted Answer

A)  It is not useful in shifting earnings from a high-tax country to a low-tax one. 
B)  Transfer pricing does not treat each subsidiary as a profit center. 
C)  It is not effective when significant currency devaluation is expected. 
D)  A transfer price policy cannot be used to move funds when dividends are restricted. 
A)  It is not useful in shifting earnings from a high-tax country to a low-tax one. 
B)  Transfer pricing does not treat each subsidiary as a profit center. 
C)  It is not effective when significant currency devaluation is expected. 
D)  A transfer price policy cannot be used to move funds when dividends are restricted. B

Question 4

Define tax credit and tax treaty.

Accepted Answer

A tax credit allows an entity to reduce

Question 5

Financial management in an international business includes three sets of related decisions. Which of these involves making decisions about what activities to finance?

Accepted Answer

A)  Investment decisions 
B)  Money management decisions 
C)  Multilateral decisions 
D)  Financing decisions 
A)  Investment decisions 
B)  Money management decisions 
C)  Multilateral decisions 
D)  Financing decisions

Question 6

What are the advantages of using royalties and fees to move money across borders?

Accepted Answer

Royalties and fees have certain tax adva

Question 7

Extensive empirical studies have shown that:

Accepted Answer

A)  there is only a short-run relationship between a country's relative inflation rates and changes in exchange rates; no long-run relationship exists. 
B)  there is a long-run relationship between a country's relative inflation rates and changes in exchange rates. 
C)  that there exists both short-run and long-run relationships between a country's relative inflation rates and changes in exchange rates. 
D)  a country's relative inflation rates and changes in exchange rates are not related to each other. 
A)  there is only a short-run relationship between a country's relative inflation rates and changes in exchange rates; no long-run relationship exists. 
B)  there is a long-run relationship between a country's relative inflation rates and changes in exchange rates. 
C)  that there exists both short-run and long-run relationships between a country's relative inflation rates and changes in exchange rates. 
D)  a country's relative inflation rates and changes in exchange rates are not related to each other.

Question 8

Which of the following combinations of exchange rates was ruled out by Lessard and Lorange as illogical and unreasonable?

Accepted Answer

A)  Translating budget using ending rate and translating actual performance using initial rate 
B)  Translating both actual performance and budget using projected rate 
C)  Translating both actual performance and budget using initial rate 
D)  Translating budget using projected rate and translating actual performance using ending rate 
A)  Translating budget using ending rate and translating actual performance using initial rate 
B)  Translating both actual performance and budget using projected rate 
C)  Translating both actual performance and budget using initial rate 
D)  Translating budget using projected rate and translating actual performance using ending rate

Question 9

A tax treaty between two countries is formed to fix the exchange rates between the two countries.

Accepted Answer

A) True 
 B)False

Question 10

Evaluation of a subsidiary should not be separate from the evaluation of its manager.

Accepted Answer

A) True 
 B)False

Question 11

_____ is a term used to describe the practice of transferring liquid funds from a foreign subsidiary to the parent company.

Accepted Answer

A)  Deferral principle 
B)  Bilateral netting 
C)  Unbundling 
D)  Multilateral netting 
A)  Deferral principle 
B)  Bilateral netting 
C)  Unbundling 
D)  Multilateral netting

Question 12

_____ enables top managers to compare, in a reasonably objective fashion, different investment alternatives within and across countries so they can make informed choices about where the firm should invest its scarce financial resources.

Accepted Answer

A)  Auditing 
B)  Money management 
C)  Capital budgeting 
D)  Multilateral accounting 
A)  Auditing 
B)  Money management 
C)  Capital budgeting 
D)  Multilateral accounting

Question 13

A _____ allows an entity to reduce the taxes paid to the home government by the amount of taxes paid to the foreign government.

Accepted Answer

A)  tax amnesty 
B)  tax credit 
C)  waiver 
D)  tax treaty 
A)  tax amnesty 
B)  tax credit 
C)  waiver 
D)  tax treaty

Question 14

Describe three factors that complicate the process of an international business.

Accepted Answer

Among the factors complicating the proce

Question 15

Multilateral netting is used primarily to:

Accepted Answer

A)  reduce the number of transactions between subsidiaries. 
B)  avail tax credit from governments. 
C)  establish a tax treaty amongst multiple countries. 
D)  to reduce the fixed costs of establishing a subsidiary. 
A)  reduce the number of transactions between subsidiaries. 
B)  avail tax credit from governments. 
C)  establish a tax treaty amongst multiple countries. 
D)  to reduce the fixed costs of establishing a subsidiary.

Question 16

A European subsidiary of a U.S. firm will usually prepare its budgets in _____.

Accepted Answer

A)  U.S. dollars 
B)  Euro 
C)  a third party currency 
D)  Eurocurrency 
A)  U.S. dollars 
B)  Euro 
C)  a third party currency 
D)  Eurocurrency

Question 17

Performance of international subsidiaries depends on the transfer price set-up by the corporate.

Accepted Answer

A) True 
 B)False

Question 18

It is common for a parent company to charge its foreign subsidiaries _____ for the technology, patents, or trade names it has transferred to them.

Accepted Answer

A)  transfer fees 
B)  royalties 
C)  an internal forward rate 
D)  usage fees 
A)  transfer fees 
B)  royalties 
C)  an internal forward rate 
D)  usage fees

Question 19

Which of the following is one of the gains derived by adjusting transfer prices?

Accepted Answer

A)  The firm can reduce its tax liabilities by using transfer prices to shift earnings from a low-tax country to a high-tax one. 
B)  The firm can use transfer prices to move funds out of a country where a significant currency appreciation is expected. 
C)  The firm can use transfer prices to move funds from a parent company to the subsidiary (or a tax haven) when financial transfers in the form of dividends are restricted or blocked by host-country government policies. 
D)  The firm can use transfer prices to reduce the import duties it must pay when an ad valorem tariff is in force-a tariff assessed as a percentage of value. 
A)  The firm can reduce its tax liabilities by using transfer prices to shift earnings from a low-tax country to a high-tax one. 
B)  The firm can use transfer prices to move funds out of a country where a significant currency appreciation is expected. 
C)  The firm can use transfer prices to move funds from a parent company to the subsidiary (or a tax haven) when financial transfers in the form of dividends are restricted or blocked by host-country government policies. 
D)  The firm can use transfer prices to reduce the import duties it must pay when an ad valorem tariff is in force-a tariff assessed as a percentage of value.

Question 20

Which of the following statements is true of the capital budgeting used in international businesses?

Accepted Answer

A)  Capital budgeting does not provide connection between cash flows to the parent and subsidiaries. 
B)  Its basic framework is vastly different from the framework of domestic capital budgeting. 
C)  Capital budgeting does not consider the cash flows between subsidiaries of a firm. 
D)  It enables top managers to compare different investment alternatives in an objective fashion. 
A)  Capital budgeting does not provide connection between cash flows to the parent and subsidiaries. 
B)  Its basic framework is vastly different from the framework of domestic capital budgeting. 
C)  Capital budgeting does not consider the cash flows between subsidiaries of a firm. 
D)  It enables top managers to compare different investment alternatives in an objective fashion.

What are the shortcomings of IASB?

A fronting loan is a loan between a parent and its subsidiary channeled through a financial intermediary.

Which of the following is a disadvantage of pursuing a transfer pricing policy?

Define tax credit and tax treaty.

Financial management in an international business includes three sets of related decisions. Which of these involves making decisions about what activities to finance?

What are the advantages of using royalties and fees to move money across borders?

Extensive empirical studies have shown that:

Which of the following combinations of exchange rates was ruled out by Lessard and Lorange as illogical and unreasonable?

A tax treaty between two countries is formed to fix the exchange rates between the two countries.

Evaluation of a subsidiary should not be separate from the evaluation of its manager.

_____ is a term used to describe the practice of transferring liquid funds from a foreign subsidiary to the parent company.

_____ enables top managers to compare, in a reasonably objective fashion, different investment alternatives within and across countries so they can make informed choices about where the firm should invest its scarce financial resources.

A _____ allows an entity to reduce the taxes paid to the home government by the amount of taxes paid to the foreign government.

Describe three factors that complicate the process of an international business.

Multilateral netting is used primarily to:

A European subsidiary of a U.S. firm will usually prepare its budgets in _____.

Performance of international subsidiaries depends on the transfer price set-up by the corporate.

It is common for a parent company to charge its foreign subsidiaries _____ for the technology, patents, or trade names it has transferred to them.

Which of the following is one of the gains derived by adjusting transfer prices?

Which of the following statements is true of the capital budgeting used in international businesses?

Globalization

National Differences in Political Economy, and Legal Systems

National Differences in Economic Development

Differences in Culture

Ethics, Corporate Social Responsibility, and Sustainability

International Trade Theory

Government Policy and International Trade

Foreign Direct Investment

Regional Trade Pacts Give the Mexican Auto Industry an Edge

The Foreign Exchange Market

The International Monetary System

The Global Capital Market

The Strategy of International Business

The Organization of International Business

Entry Strategy and Strategic Alliances

Exporting, Importing, and Countertrade

Global Production and Supply Chain Management

Global Marketing and RD

Global Human Resource Management

Filters

Exam 20: Accounting and Finance in the International Business

What are the shortcomings of IASB?

A fronting loan is a loan between a parent and its subsidiary channeled through a financial intermediary.

Which of the following is a disadvantage of pursuing a transfer pricing policy?

Define tax credit and tax treaty.

Financial management in an international business includes three sets of related decisions. Which of these involves making decisions about what activities to finance?

What are the advantages of using royalties and fees to move money across borders?

Extensive empirical studies have shown that:

Which of the following combinations of exchange rates was ruled out by Lessard and Lorange as illogical and unreasonable?

A tax treaty between two countries is formed to fix the exchange rates between the two countries.

Evaluation of a subsidiary should not be separate from the evaluation of its manager.

_____ is a term used to describe the practice of transferring liquid funds from a foreign subsidiary to the parent company.

_____ enables top managers to compare, in a reasonably objective fashion, different investment alternatives within and across countries so they can make informed choices about where the firm should invest its scarce financial resources.

A _____ allows an entity to reduce the taxes paid to the home government by the amount of taxes paid to the foreign government.

Describe three factors that complicate the process of an international business.

Multilateral netting is used primarily to:

A European subsidiary of a U.S. firm will usually prepare its budgets in _____.

Performance of international subsidiaries depends on the transfer price set-up by the corporate.

It is common for a parent company to charge its foreign subsidiaries _____ for the technology, patents, or trade names it has transferred to them.

Which of the following is one of the gains derived by adjusting transfer prices?

Which of the following statements is true of the capital budgeting used in international businesses?

Globalization

National Differences in Political Economy, and Legal Systems

National Differences in Economic Development

Differences in Culture

Ethics, Corporate Social Responsibility, and Sustainability

International Trade Theory

Government Policy and International Trade

Foreign Direct Investment

Regional Trade Pacts Give the Mexican Auto Industry an Edge

The Foreign Exchange Market

The International Monetary System

The Global Capital Market

The Strategy of International Business

The Organization of International Business

Entry Strategy and Strategic Alliances

Exporting, Importing, and Countertrade

Global Production and Supply Chain Management

Global Marketing and RD

Global Human Resource Management

Filters