Exam 19: International Managerial Finance

In terms of inventory management, multinational firms ________.

Between two major currencies, the spot exchange rate is the rate ________ and the forward exchange rate is the rate ________.

Countries that experience high inflation rates will see their currencies decline in value relative to the currencies of countries with lower inflation rates.

Fluctuations in foreign exchange markets can affect foreign revenues and profits of a multinational company, but they have no impact on its overall value.

A multi-national corporation (MNC) can give some protection to international cash flows by reducing its liabilities if the currency is appreciating, or by reducing its financial assets if the currency is depreciating.

A partnership under which the participants have contractually agreed to contribute specified amounts of money and expertise in exchange for stated proportions of ownership and profit is called a(n) ________.

Recent years have seen the emergence of a third path to political risk that encompasses "global" events such as terrorism, antiglobalization movements and protests, Internet-based risks, and concerns over poverty, AIDS, and the environment all affect various MNCs' operations worldwide.

A functional currency is the currency of the parent company's country.

The World Trade Organization is an international body established to police world trading practices and to mediate disputes among member countries.

The foreign direct investment (FDI) is a multi-national corporation's transfer of capital, managerial, and technical assets from a foreign country to its home country.

In the grossing up procedure, MNCs add the before-tax subsidiary income to their total taxable income, calculate the U.S. tax liability on the grossed -up income, and the related taxes are paid in the foreign country are applied as a credit against the additional U.S. tax liability.

Foreign exchange risk refers to the risk created by ________.

Mercosur is a major South American trading bloc that includes countries that account for more than half of the total of Latin America's GDP.

The interest rates offered in the Euromarket on the U.S. dollar are greatly affected by the prime rate inside the United States.

The negative implications for the operation of a foreign-based subsidiary due to joint venture laws and restrictions can result in ________.

MNCs have lower long-term financing costs in international capital markets than in domestic markets because ________.

Offshore Centers are cities or states that have achieved prominence as major centers for Euromarket business.

Current U.S. tax laws require the separation of financial statements of subsidiaries and the operating results for some subsidiaries are excluded from the parent entirely for some countries such as China and India.

Harry Mining, a U.S.-based MNC has a foreign subsidiary that earns $1,050,000 before local taxes, with all the after tax funds to be available to the parent in the form of dividends. The foreign income tax rate is 30 percent, the foreign dividend withholding tax rate is 15 percent, and the firm's U.S. tax rate is 35 percent. What are the funds available to the parent MNC if foreign taxes can be applied as a credit against the MNC's U.S. tax liability?

The capital structures of MNCs are influenced by ________.