Question 1

Which of the following actions will result in an increase in NWC?

Accepted Answer

A) An increase in A/P that exceeds an increase in A/R. 
B) A reduction in inventory. 
C) A reduction in A/P plus a smaller reduction in A/R. 
D) An increase in A/P and a smaller reduction in inventory. 
A) An increase in A/P that exceeds an increase in A/R. 
B) A reduction in inventory. 
C) A reduction in A/P plus a smaller reduction in A/R. 
D) An increase in A/P and a smaller reduction in inventory.

Question 2

Each of the following is listed by your authors as a constraint on repositioning funds by an MNE EXCEPT:

Accepted Answer

A) political constraints. 
B) tax constraints. 
C) transaction costs. 
D) All of the above are listed by your authors. 
A) political constraints. 
B) tax constraints. 
C) transaction costs. 
D) All of the above are listed by your authors.

Question 3

If all investment inputs are unbundled, part of what might have been classified as residual profits may turn out to be tax-deductible expenses related to a specific purchased benefit.

Accepted Answer

A) True 
 B)False

Question 4

In anticipation of a foreign exchange loss, an MNE may speed up the transfer of funds out of the company via dividends. When undertaking such an activity the MNE must be concerned with all of the following EXCEPT:

Accepted Answer

A) interest rate differences between the two countries. 
B) the negative impact on host country relations. 
C) defection on the part of executives in the home headquarters. 
D) MNEs must be concerned with all of the above. 
A) interest rate differences between the two countries. 
B) the negative impact on host country relations. 
C) defection on the part of executives in the home headquarters. 
D) MNEs must be concerned with all of the above.

Question 5

An in-house bank

Accepted Answer

A) is a separate bank chartered to operate within a business firm. 
B) is in fact a set of functions performed by the firm's existing treasury department. 
C) assesses the credit standing of the bank's customers. 
D) provides banking services for employees. 
A) is a separate bank chartered to operate within a business firm. 
B) is in fact a set of functions performed by the firm's existing treasury department. 
C) assesses the credit standing of the bank's customers. 
D) provides banking services for employees.

Question 6

In an inflationary economy, demand for credit usually exceeds supply.

Accepted Answer

A) True 
 B)False

Question 7

Other things equal, a firm would rather have ________ in a depreciating currency, and ________ in an appreciating currency.

Accepted Answer

A) accounts receivable; accounts payable 
B) accounts receivable; accounts receivable 
C) accounts payable; accounts receivable 
D) none of the above 
A) accounts receivable; accounts payable 
B) accounts receivable; accounts receivable 
C) accounts payable; accounts receivable 
D) none of the above

Question 8

Local liquidity needs sometimes impact a firm's worldwide optimal cash position.

Accepted Answer

A) True 
 B)False

Question 9

Other things equal, managers prefer a lower "days working capital" to a higher one.

Accepted Answer

A) True 
 B)False

Question 10

For disbursement purposes, it is to the benefit of the firm to minimize float.

Accepted Answer

A) True 
 B)False

Question 11

Central depositories are used for international cash management. What is a central depository? Identify and provide examples of at least three advantages to MNEs of having a central depository.

Accepted Answer

A central depository for cash management

Question 12

In principle, the firm tries to minimize its NWC balance.

Accepted Answer

A) True 
 B)False

Question 13

Days working capital is equal to

Accepted Answer

A) days payables + days receivables - days inventory. 
B) days inventory + days receivables - days payables. 
C) days payables + days inventory + days receivables. 
D) none of the above 
A) days payables + days receivables - days inventory. 
B) days inventory + days receivables - days payables. 
C) days payables + days inventory + days receivables. 
D) none of the above

Question 14

The Clearing House Interbank Payment System (CHIPS)is

Accepted Answer

A) the largest publicly operated payments system in the world. 
B) owned and operated by the world's seven largest central banks. 
C) a computerized network that connects banks globally. 
D) none of the above 
A) the largest publicly operated payments system in the world. 
B) owned and operated by the world's seven largest central banks. 
C) a computerized network that connects banks globally. 
D) none of the above

Question 15

The accounts payable period of the operating cycle

Accepted Answer

A) is equal to the inventory period. 
B) may run concurrently but shorter than the inventory period. 
C) may run concurrently but longer than the inventory period. 
D) any one of the above may be true. 
A) is equal to the inventory period. 
B) may run concurrently but shorter than the inventory period. 
C) may run concurrently but longer than the inventory period. 
D) any one of the above may be true.

Question 16

A foreign banking office that is separately incorporated in the host country is

Accepted Answer

A) a correspondent bank. 
B) a representative office. 
C) a bank subsidiary. 
D) an Edge Act corporation. 
A) a correspondent bank. 
B) a representative office. 
C) a bank subsidiary. 
D) an Edge Act corporation.

Question 17

Which of the following statements is true?

Accepted Answer

A) A/R provide part of the funding for inventory. 
B) A/P provide part of the funding for A/R and inventory. 
C) Inventory pays for A/R and A/P. 
D) None of the above is true. 
A) A/R provide part of the funding for inventory. 
B) A/P provide part of the funding for A/R and inventory. 
C) Inventory pays for A/R and A/P. 
D) None of the above is true.

Question 18

Use the information to answer the following question(s).
SureDrip Irrigation Systems Inc. is supplied with plastic chips for their plastic injection molding manufacturing process. Their supplier, Sun Chemical, Inc. offers financing terms of a 2% discount if the accounts payable are paid in 10 days or less with the full balance due in 45 days. Short-term financing available to SureDrip is available at an annual rate of 9.6%. SureDrip has just purchased $400,000 of plastic chips from Sun Chemical.
-Refer to Instruction 21.1. What is the effective annual interest cost of supplier financing offered by Sun Chemical?

Accepted Answer

A) 7.3% 
B) 9.5% 
C) 10.4% 
D) 22.9% 
A) 7.3% 
B) 9.5% 
C) 10.4% 
D) 22.9%

Question 19

Because they are direct payments, dividends are among the most efficient way for foreign subsidiaries to remit funds back to the parent.

Accepted Answer

A) True 
 B)False

Question 20

Working capital management involves the management of

Accepted Answer

A) current and long-term assets. 
B) current assets and current liabilities. 
C) current liabilities and long-term assets. 
D) current liabilities and long-term debt and equity. 
A) current and long-term assets. 
B) current assets and current liabilities. 
C) current liabilities and long-term assets. 
D) current liabilities and long-term debt and equity.

Exam 21: Working Capital Management

Which of the following actions will result in an increase in NWC?

Each of the following is listed by your authors as a constraint on repositioning funds by an MNE EXCEPT:

If all investment inputs are unbundled, part of what might have been classified as residual profits may turn out to be tax-deductible expenses related to a specific purchased benefit.

In anticipation of a foreign exchange loss, an MNE may speed up the transfer of funds out of the company via dividends. When undertaking such an activity the MNE must be concerned with all of the following EXCEPT:

An in-house bank

In an inflationary economy, demand for credit usually exceeds supply.

Other things equal, a firm would rather have ________ in a depreciating currency, and ________ in an appreciating currency.

Local liquidity needs sometimes impact a firm's worldwide optimal cash position.

Other things equal, managers prefer a lower "days working capital" to a higher one.

For disbursement purposes, it is to the benefit of the firm to minimize float.

Central depositories are used for international cash management. What is a central depository? Identify and provide examples of at least three advantages to MNEs of having a central depository.

In principle, the firm tries to minimize its NWC balance.

Days working capital is equal to

The Clearing House Interbank Payment System (CHIPS)is

The accounts payable period of the operating cycle

A foreign banking office that is separately incorporated in the host country is

Which of the following statements is true?

Because they are direct payments, dividends are among the most efficient way for foreign subsidiaries to remit funds back to the parent.

Working capital management involves the management of

Globalization and the Multinational Enterprise

Financial Goals and Corporate Governance

The International Monetary System

The Balance of Payments

Current Multinational Financial Challenges: the Credit Crisis of 2007-2009

The Foreign Exchange Market

International Parity Conditions

Foreign Currency Derivatives

Interest Rate and Currency Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Operating Exposure

Translation Exposure

The Global Cost and Availability of Capital

Sourcing Equity Globally

Sourcing Debt Globally

International Portfolio Theory and Diversification

Foreign Direct Investment Theory and Political Risk

Multinational Capital Budgeting

Multinational Tax Management

International Trade Finance

Filters

Other things equal, a firm would rather have in a depreciating currency, and in an appreciating currency.