Question 1

________ is the process that cancels via offset all, or part, of the debt owed by one entity to another related entity.

Accepted Answer

A) Syndicated banking 
B) Centralized depositing 
C) Multilateral netting 
D) Debt cancellation 
A) Syndicated banking 
B) Centralized depositing 
C) Multilateral netting 
D) Debt cancellation

Question 2

Unbundling of funds by an MNE may be a useful practice for which of the following reasons?

Accepted Answer

A) An increase in the funds flow (charges)in any of the before-tax categories reduces the taxable profits of the foreign subsidiary if the host-country tax authorities acknowledge the charge as a legitimate expense. 
B) An item-by-item matching of remittance to input, such as royalties for intellectual property, and fees for patents and advice, is equitable to the host country and foreign investor alike. 
C) Unbundling facilitates allocation of overhead from a parent''s international division, so-called shared services, to each operating subsidiary in accordance with a predetermined formula. 
D) All of the reasons listed above 
A) An increase in the funds flow (charges)in any of the before-tax categories reduces the taxable profits of the foreign subsidiary if the host-country tax authorities acknowledge the charge as a legitimate expense. 
B) An item-by-item matching of remittance to input, such as royalties for intellectual property, and fees for patents and advice, is equitable to the host country and foreign investor alike. 
C) Unbundling facilitates allocation of overhead from a parent''s international division, so-called shared services, to each operating subsidiary in accordance with a predetermined formula. 
D) All of the reasons listed above

Question 3

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 4

Regarding wire transfers, CHIPS actually clears transactions whereas SWIFT does not.

Accepted Answer

A) True 
 B)False

Question 5

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.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Political constraints can block the transfer of funds either overtly or covertly. OVERT blockage occurs when dividends or other forms of fund remittances are severely limited, heavily taxed, or excessively delayed by the need for bureaucratic approval.

Accepted Answer

A) True 
 B)False

Question 8

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 9

What is a free-trade zone? Identify three techniques and provide examples of how firms and countries can benefit from having free trade zones.

Accepted Answer

Free-trade zones are locations within a

Question 10

A reason for holding all precautionary balances in a central pool is that the total pool, if centralized, can be reduced in size without any loss in the level of protection.

Accepted Answer

A) True 
 B)False

Question 11

Typically, the inventory period and the accounts payable period at least partially overlap in the firms operating cycle.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The proper order of events for the operating cycle is:

Accepted Answer

A) input serving period, accounts receivable period, inventory period, quotation period. 
B) quotation period, accounts receivable period, inventory period, input servicing period. 
C) quotation period, input servicing period, inventory period, accounts receivable period. 
D) accounts receivable period, input servicing period, quotation period, inventory period. 
A) input serving period, accounts receivable period, inventory period, quotation period. 
B) quotation period, accounts receivable period, inventory period, input servicing period. 
C) quotation period, input servicing period, inventory period, accounts receivable period. 
D) accounts receivable period, input servicing period, quotation period, inventory period.

Question 14

Instruction 19.1: Use the information to answer the following question(s).
Sunny Manufacturing 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 Sunny Manufacturing is available at an annual rate of 9.6%. Sunny Manufacturing has just purchased $400,000 of plastic chips from Sun Chemical.
-Refer to Instruction 19.1. What is the amount of money Sunny Manufacturing will save on accounts payable if they accept the discount?

Accepted Answer

A) $400,000 
B) $8,000 
C) $33,333 
D) $20,000 
A) $400,000 
B) $8,000 
C) $33,333 
D) $20,000

Question 15

The authors present empirical evidence that shows the days sales basis for working capital to be 30 days GREATER in the U.S. compared to a similar industry in Europe.

Accepted Answer

A) True 
 B)False

Question 16

A precautionary cash balance:

Accepted Answer

A) is used to replace spoiled or damaged inventory. 
B) is held to facilitate cash disbursements when receipts slow down. 
C) is used for normal day-to-day operations. 
D) is held for the benefit of a sister affiliate. 
A) is used to replace spoiled or damaged inventory. 
B) is held to facilitate cash disbursements when receipts slow down. 
C) is used for normal day-to-day operations. 
D) is held for the benefit of a sister affiliate.

Question 17

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 18

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 19

The MNE would prefer to leave capital with a firm in a country with high growth prospects over the alternative of leaving capital with a firm in a country with low growth prospects (other factors equal).

Accepted Answer

A) True 
 B)False

Question 20

An organizational structure employed by an MNE to reduce its use of bank lending for the support of operations is:

Accepted Answer

A) a centralized depository. 
B) a reinvoicing center. 
C) a cost center. 
D) a syndicated bank. 
A) a centralized depository. 
B) a reinvoicing center. 
C) a cost center. 
D) a syndicated bank.

________ is the process that cancels via offset all, or part, of the debt owed by one entity to another related entity.

Unbundling of funds by an MNE may be a useful practice for which of the following reasons?

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

Regarding wire transfers, CHIPS actually clears transactions whereas SWIFT does not.

Working capital management involves the management of:

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

Political constraints can block the transfer of funds either overtly or covertly. OVERT blockage occurs when dividends or other forms of fund remittances are severely limited, heavily taxed, or excessively delayed by the need for bureaucratic approval.

An in-house bank:

What is a free-trade zone? Identify three techniques and provide examples of how firms and countries can benefit from having free trade zones.

A reason for holding all precautionary balances in a central pool is that the total pool, if centralized, can be reduced in size without any loss in the level of protection.

Typically, the inventory period and the accounts payable period at least partially overlap in the firms operating cycle.

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

The proper order of events for the operating cycle is:

The authors present empirical evidence that shows the days sales basis for working capital to be 30 days GREATER in the U.S. compared to a similar industry in Europe.

A precautionary cash balance:

Days working capital is equal to:

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

The MNE would prefer to leave capital with a firm in a country with high growth prospects over the alternative of leaving capital with a firm in a country with low growth prospects (other factors equal).

An organizational structure employed by an MNE to reduce its use of bank lending for the support of operations is:

Current Multinational Challenges and the Global Economy

Corporate Ownership, Goals, and Governance

The International Monetary System

The Balance of Payments

The Continuing Global Financial Crisis

The Foreign Exchange Theory and Markets

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Portfolio Theory and Diversification

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

International Trade Finance

Filters

Exam 19: Working Capital Management

________ is the process that cancels via offset all, or part, of the debt owed by one entity to another related entity.

Unbundling of funds by an MNE may be a useful practice for which of the following reasons?

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

Regarding wire transfers, CHIPS actually clears transactions whereas SWIFT does not.

Working capital management involves the management of:

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

Political constraints can block the transfer of funds either overtly or covertly. OVERT blockage occurs when dividends or other forms of fund remittances are severely limited, heavily taxed, or excessively delayed by the need for bureaucratic approval.

An in-house bank:

What is a free-trade zone? Identify three techniques and provide examples of how firms and countries can benefit from having free trade zones.

A reason for holding all precautionary balances in a central pool is that the total pool, if centralized, can be reduced in size without any loss in the level of protection.

Typically, the inventory period and the accounts payable period at least partially overlap in the firms operating cycle.

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

The proper order of events for the operating cycle is:

The authors present empirical evidence that shows the days sales basis for working capital to be 30 days GREATER in the U.S. compared to a similar industry in Europe.

A precautionary cash balance:

Days working capital is equal to:

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

The MNE would prefer to leave capital with a firm in a country with high growth prospects over the alternative of leaving capital with a firm in a country with low growth prospects (other factors equal).

An organizational structure employed by an MNE to reduce its use of bank lending for the support of operations is:

Current Multinational Challenges and the Global Economy

Corporate Ownership, Goals, and Governance

The International Monetary System

The Balance of Payments

The Continuing Global Financial Crisis

The Foreign Exchange Theory and Markets

International Parity Conditions

Foreign Currency Derivatives and Swaps

Foreign Exchange Rate Determination and Forecasting

Transaction Exposure

Translation Exposure

Operating Exposure

The Global Cost and Availability of Capital

Raising Equity and Debt Globally

Multinational Tax Management

International Portfolio Theory and Diversification

Foreign Direct Investment and Political Risk

Multinational Capital Budgeting and Cross-Border Acquisitions

International Trade Finance

Filters

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