Question 1

Higher opportunity costs call for:

Accepted Answer

A) higher cash balances. 
B) more implicit costs. 
C) less working capital. 
D) lower cash balances. 
A) higher cash balances. 
B) more implicit costs. 
C) less working capital. 
D) lower cash balances.

Question 2

The money that a firm uses on a day-to-day basis to carry out transactions with its customers and suppliers is referred to as:

Accepted Answer

A) short-term financing. 
B) accounts receivable and payable. 
C) cash and equivalents. 
D) working capital. 
A) short-term financing. 
B) accounts receivable and payable. 
C) cash and equivalents. 
D) working capital.

Question 3

Securitization of accounts receivable solves two problems for MNCs:

Accepted Answer

A) collecting accounts receivable and writing off bad debts. 
B) managing accounts receivable and obtaining financing. 
C) creating accounts receivable and collecting accounts receivable. 
D) obtaining working capital and avoiding currency risk. 
A) collecting accounts receivable and writing off bad debts. 
B) managing accounts receivable and obtaining financing. 
C) creating accounts receivable and collecting accounts receivable. 
D) obtaining working capital and avoiding currency risk.

Question 4

Banks may not be willing to accept as collateral for a loan:

Accepted Answer

A) accounts receivable in countries that do not support the rights of creditors. 
B) inventory that a firm usually sells very quickly. 
C) accounts receivable that are less than 30 days old. 
D) inventory that is specifically branded with the borrower's name. 
A) accounts receivable in countries that do not support the rights of creditors. 
B) inventory that a firm usually sells very quickly. 
C) accounts receivable that are less than 30 days old. 
D) inventory that is specifically branded with the borrower's name.

Question 5

In the context of working capital management in MNCs,credit policy involves consideration of:

Accepted Answer

A) optimizing cash balances across countries where the MNC operates. 
B) pricing and credit terms. 
C) currency risk and local market conditions. 
D) credit rating of customers and competition. 
A) optimizing cash balances across countries where the MNC operates. 
B) pricing and credit terms. 
C) currency risk and local market conditions. 
D) credit rating of customers and competition.

Question 6

Why might an MNC's working capital situation be more complex than a domestic firm's working capital situation?

Accepted Answer

A) An MNC's current assets and current liabilities are consolidated across its subsidiaries,which means that there are a variety of risks involved in those assets and liabilities. 
B) An MNC is usually much larger than domestic firms,so MNCs have more assets and more liabilities and more need for working capital. 
C) An MNC has more complex financing arrangements than domestic firms. 
D) MNCs are subject to more regulation than domestic firms. 
A) An MNC's current assets and current liabilities are consolidated across its subsidiaries,which means that there are a variety of risks involved in those assets and liabilities. 
B) An MNC is usually much larger than domestic firms,so MNCs have more assets and more liabilities and more need for working capital. 
C) An MNC has more complex financing arrangements than domestic firms. 
D) MNCs are subject to more regulation than domestic firms.

Question 7

What is the risk to an MNC if its receivables are denominated in one currency and its payables are denominated in another currency?

Accepted Answer

A) If the value of the currency in which the payable increases in value relative to the currency in which the receivables are denominated,the default risk on the receivables will increase. 
B) The International Fisher Effect will cause the values of the two currencies to converge,causing the MNC a loss on the receivable it collects. 
C) Since the source of the MNC's collections and the current debts that it owes are in different currencies,a change in the relative values of the two currencies will create either a gain or a loss for the MNC. 
D) If the value of one currency increases relative to the other currency,the MNC will be forced to refinance its debt. 
A) If the value of the currency in which the payable increases in value relative to the currency in which the receivables are denominated,the default risk on the receivables will increase. 
B) The International Fisher Effect will cause the values of the two currencies to converge,causing the MNC a loss on the receivable it collects. 
C) Since the source of the MNC's collections and the current debts that it owes are in different currencies,a change in the relative values of the two currencies will create either a gain or a loss for the MNC. 
D) If the value of one currency increases relative to the other currency,the MNC will be forced to refinance its debt.

Question 8

What is working capital,and how is working capital affected by short-term financing?

Accepted Answer

Working capital is the amount that a fir

Question 9

What are implicit transaction costs that MNCs incur in dealing with their cash balances?

Accepted Answer

A) Implicit transaction costs are costs of dealing with a firm's cash balances that are not disclosed to the firm until after the transaction is completed. 
B) Implicit transaction costs incurred in dealing with an MNC's cash balance involve costs associated with making internal decisions about the firm's cash balance. 
C) Implicit transaction costs are costs of arranging the firm's cash balances that the firm will not have to pay until a later time. 
D) Implicit transaction costs are costs that are charged to a firm in connection with managing its cash balances that will be deducted from the firm's cash balance rather than being billed to the firm. 
A) Implicit transaction costs are costs of dealing with a firm's cash balances that are not disclosed to the firm until after the transaction is completed. 
B) Implicit transaction costs incurred in dealing with an MNC's cash balance involve costs associated with making internal decisions about the firm's cash balance. 
C) Implicit transaction costs are costs of arranging the firm's cash balances that the firm will not have to pay until a later time. 
D) Implicit transaction costs are costs that are charged to a firm in connection with managing its cash balances that will be deducted from the firm's cash balance rather than being billed to the firm.

Question 10

The principle objective of a lockbox system is to:

Accepted Answer

A) ensure the safety of accounts receivable collections. 
B) allow collected accounts receivable to earn interest while they are being processed. 
C) reduce mailing and processing time for accounts receivable. 
D) provide an accurate accounting of accounts receivable collections. 
A) ensure the safety of accounts receivable collections. 
B) allow collected accounts receivable to earn interest while they are being processed. 
C) reduce mailing and processing time for accounts receivable. 
D) provide an accurate accounting of accounts receivable collections.

Question 11

In making short-term investments,firms consider:

Accepted Answer

A) creditworthiness of the company and the interest rate. 
B) maturity,liquidity,risk,and flexibility. 
C) broker's recommendation and competing opportunities. 
D) opportunity costs and flexibility. 
A) creditworthiness of the company and the interest rate. 
B) maturity,liquidity,risk,and flexibility. 
C) broker's recommendation and competing opportunities. 
D) opportunity costs and flexibility.

Question 12

The theory that excessive cash balances lead managers to make bad decisions is called the:

Accepted Answer

A) agency cost of free cash flow. 
B) excessive cash problem. 
C) opportunity cost dilemma. 
D) cash balance trap. 
A) agency cost of free cash flow. 
B) excessive cash problem. 
C) opportunity cost dilemma. 
D) cash balance trap.

Question 13

The equation for calculating working capital is:

Accepted Answer

A) quick assets - current liabilities. 
B) current assets - current liabilities. 
C) assets - liabilities. 
D) current assets - liabilities. 
A) quick assets - current liabilities. 
B) current assets - current liabilities. 
C) assets - liabilities. 
D) current assets - liabilities.

Question 14

A type of bank loan that is more flexible than some other loans but that can save the borrower some interest even though it carries a slightly higher interest rate than other loans is the:

Accepted Answer

A) bridge loan. 
B) line of credit. 
C) term loan. 
D) bankers' acceptance. 
A) bridge loan. 
B) line of credit. 
C) term loan. 
D) bankers' acceptance.

Question 15

The primary drawback of money market accounts is that:

Accepted Answer

A) they may restrict the number of transactions in the account that may take place in a specific period of time. 
B) the higher the interest rate they pay,the shorter their maturity date. 
C) they require an investment that is larger than many firms can make. 
D) the interest rate that they offer is fixed,raising the issue of interest rate risk. 
A) they may restrict the number of transactions in the account that may take place in a specific period of time. 
B) the higher the interest rate they pay,the shorter their maturity date. 
C) they require an investment that is larger than many firms can make. 
D) the interest rate that they offer is fixed,raising the issue of interest rate risk.

Question 16

What is commercial paper,and how does it differ from other financing vehicles that an MNC might use?

Accepted Answer

Commercial paper is the name that is giv

Question 17

The difference between a best-effort loan and an underwritten loan is that:

Accepted Answer

A) an underwritten loan has a guaranteed interest rate and a best-effort loan has a flexible interest rate. 
B) a best-effort loan requires that the borrower make its best-effort to repay the loan on schedule while an underwritten loan requires that specific payments be made on the loan. 
C) a best-effort loan offers the best interest rate that the lender can offer,but an underwritten loan guarantees that a specific interest rate will be charged. 
D) an underwritten loan is guaranteed to be made,while a best-effort loan is not guaranteed and will only be made if enough banks can be found to participate in the loan. 
A) an underwritten loan has a guaranteed interest rate and a best-effort loan has a flexible interest rate. 
B) a best-effort loan requires that the borrower make its best-effort to repay the loan on schedule while an underwritten loan requires that specific payments be made on the loan. 
C) a best-effort loan offers the best interest rate that the lender can offer,but an underwritten loan guarantees that a specific interest rate will be charged. 
D) an underwritten loan is guaranteed to be made,while a best-effort loan is not guaranteed and will only be made if enough banks can be found to participate in the loan.

Question 18

Cash management for MNCs includes considerations of:

Accepted Answer

A) currency,interest rate,and transaction risk. 
B) interest rates,inflation rates,and default rates. 
C) risk,agency cost,and real options. 
D) asset and liability levels. 
A) currency,interest rate,and transaction risk. 
B) interest rates,inflation rates,and default rates. 
C) risk,agency cost,and real options. 
D) asset and liability levels.

Question 19

A time deposit that takes the form of a negotiable instrument is a:

Accepted Answer

A) checking account. 
B) T-bill. 
C) certificate of deposit. 
D) money market account. 
A) checking account. 
B) T-bill. 
C) certificate of deposit. 
D) money market account.

Question 20

What is the primary benefit that a firm can achieve by using multiple-currency financing?

Accepted Answer

A) It will lower cost of capital. 
B) It provides new sources of capital. 
C) It provides access to more capital markets. 
D) It results in diversity and risk reduction. 
A) It will lower cost of capital. 
B) It provides new sources of capital. 
C) It provides access to more capital markets. 
D) It results in diversity and risk reduction.

Higher opportunity costs call for:

The money that a firm uses on a day-to-day basis to carry out transactions with its customers and suppliers is referred to as:

Securitization of accounts receivable solves two problems for MNCs:

Banks may not be willing to accept as collateral for a loan:

In the context of working capital management in MNCs,credit policy involves consideration of:

Why might an MNC's working capital situation be more complex than a domestic firm's working capital situation?

What is the risk to an MNC if its receivables are denominated in one currency and its payables are denominated in another currency?

What is working capital,and how is working capital affected by short-term financing?

What are implicit transaction costs that MNCs incur in dealing with their cash balances?

The principle objective of a lockbox system is to:

In making short-term investments,firms consider:

The theory that excessive cash balances lead managers to make bad decisions is called the:

The equation for calculating working capital is:

A type of bank loan that is more flexible than some other loans but that can save the borrower some interest even though it carries a slightly higher interest rate than other loans is the:

The primary drawback of money market accounts is that:

What is commercial paper,and how does it differ from other financing vehicles that an MNC might use?

The difference between a best-effort loan and an underwritten loan is that:

Cash management for MNCs includes considerations of:

A time deposit that takes the form of a negotiable instrument is a:

What is the primary benefit that a firm can achieve by using multiple-currency financing?

Introduction

International Financial Markets: Structure and Innovation

Currency and Eurocurrency Derivatives

Currency Systems and Valuation

Currency Parity Conditions

Currency Risk Exposure Measurement

Currency Exposure Management

Capital Budgeting

Advanced Capital Budgeting

Long-Term Financing

International Alliances and Acquisitions

International Trade

International Taxation and Accounting

International Portfolio Investments

Filters

Exam 11: Optimizing and Financing Working Capital

Higher opportunity costs call for:

The money that a firm uses on a day-to-day basis to carry out transactions with its customers and suppliers is referred to as:

Securitization of accounts receivable solves two problems for MNCs:

Banks may not be willing to accept as collateral for a loan:

In the context of working capital management in MNCs,credit policy involves consideration of:

Why might an MNC's working capital situation be more complex than a domestic firm's working capital situation?

What is the risk to an MNC if its receivables are denominated in one currency and its payables are denominated in another currency?

What is working capital,and how is working capital affected by short-term financing?

What are implicit transaction costs that MNCs incur in dealing with their cash balances?

The principle objective of a lockbox system is to:

In making short-term investments,firms consider:

The theory that excessive cash balances lead managers to make bad decisions is called the:

The equation for calculating working capital is:

A type of bank loan that is more flexible than some other loans but that can save the borrower some interest even though it carries a slightly higher interest rate than other loans is the:

The primary drawback of money market accounts is that:

What is commercial paper,and how does it differ from other financing vehicles that an MNC might use?

The difference between a best-effort loan and an underwritten loan is that:

Cash management for MNCs includes considerations of:

A time deposit that takes the form of a negotiable instrument is a:

What is the primary benefit that a firm can achieve by using multiple-currency financing?

Introduction

International Financial Markets: Structure and Innovation

Currency and Eurocurrency Derivatives

Currency Systems and Valuation

Currency Parity Conditions

Currency Risk Exposure Measurement

Currency Exposure Management

Capital Budgeting

Advanced Capital Budgeting

Long-Term Financing

International Alliances and Acquisitions

International Trade

International Taxation and Accounting

International Portfolio Investments

Filters