Question 1

Which of the following is not mentioned in the text as a theory of international business?

Accepted Answer

A)  Theory of Comparative Advantage 
B)  Imperfect Markets Theory 
C)  Product Cycle Theory 
D)  Globalization of Business Theory 
E)  All of the above are mentioned in the text as theories of international business 
A)  Theory of Comparative Advantage 
B)  Imperfect Markets Theory 
C)  Product Cycle Theory 
D)  Globalization of Business Theory 
E)  All of the above are mentioned in the text as theories of international business

Question 2

MNCs can improve their internal control process by all of the following, except:

Accepted Answer

A)  establishing a centralized data base of information 
B)  ensuring that all data are reported consistently among subsidiaries 
C)  ensuring that the MNC always borrows from countries where interest rates are lowest 
D)  using a system that checks internal data for unusual discrepancies 
A)  establishing a centralized data base of information 
B)  ensuring that all data are reported consistently among subsidiaries 
C)  ensuring that the MNC always borrows from countries where interest rates are lowest 
D)  using a system that checks internal data for unusual discrepancies

Question 3

Agency costs faced by multinational corporations (MNCs) may be larger than those faced by purely domestic firms because

Accepted Answer

A)  Monitoring of managers located in foreign countries is more difficult. 
B)  Foreign subsidiary managers raised in different cultures may not follow uniform goals. 
C)  MNCs are relatively large. 
D)  All of the above 
E)  A and B only 
A)  Monitoring of managers located in foreign countries is more difficult. 
B)  Foreign subsidiary managers raised in different cultures may not follow uniform goals. 
C)  MNCs are relatively large. 
D)  All of the above 
E)  A and B only

Question 4

International trade:

Accepted Answer

A)  is a relatively conservative approach to foreign market penetration. 
B)  entails minimal risk. 
C)  does not require large amount of investment. 
D)  all of the above. 
A)  is a relatively conservative approach to foreign market penetration. 
B)  entails minimal risk. 
C)  does not require large amount of investment. 
D)  all of the above.

Question 5

International trade generally results in ____ exposure to international political risk and ____ exposure to international economic conditions, when compared to other methods of international business.

Accepted Answer

A)  higher; lower 
B)  higher; higher 
C)  lower; higher 
D)  lower; lower 
A)  higher; lower 
B)  higher; higher 
C)  lower; higher 
D)  lower; lower

Question 6

Which of the following theories suggests that firms seek to penetrate new markets over time?

Accepted Answer

A)  theory of comparative advantage. 
B)  imperfect markets theory. 
C)  product cycle theory. 
D)  none of the above 
A)  theory of comparative advantage. 
B)  imperfect markets theory. 
C)  product cycle theory. 
D)  none of the above

Question 7

The valuation of an MNC should rise when an event causes the expected cash flows from foreign to ____ and when foreign currencies denominating these cash flows are expected to ____.

Accepted Answer

A)  decrease; appreciate 
B)  increase; appreciate 
C)  decrease; depreciate 
D)  increase; depreciate 
A)  decrease; appreciate 
B)  increase; appreciate 
C)  decrease; depreciate 
D)  increase; depreciate

Question 8

With regard to corporate goals, an MNC is mostly concerned with maximizing ____, and a purely domestic firm is mostly concerned with maximizing ____.

Accepted Answer

A)  shareholder wealth; short-term earnings 
B)  shareholder wealth; shareholder wealth 
C)  short-term earnings; sales volume 
D)  short-term earnings; shareholder wealth 
A)  shareholder wealth; short-term earnings 
B)  shareholder wealth; shareholder wealth 
C)  short-term earnings; sales volume 
D)  short-term earnings; shareholder wealth

Question 9

According to the text, a disadvantage of licensing is that:

Accepted Answer

A)  it prevents a firm from importing. 
B)  it is difficult to ensure quality control of the production process. 
C)  it prevents a firm from exporting. 
D)  none of the above 
A)  it prevents a firm from importing. 
B)  it is difficult to ensure quality control of the production process. 
C)  it prevents a firm from exporting. 
D)  none of the above

Question 10

Which of the following theories identifies the non-transferability of resources as a reason for international business?

Accepted Answer

A)  theory of comparative advantage. 
B)  imperfect markets theory. 
C)  product cycle theory. 
D)  none of the above 
A)  theory of comparative advantage. 
B)  imperfect markets theory. 
C)  product cycle theory. 
D)  none of the above

Question 11

The MNC's value depends on all of the following, except:

Accepted Answer

A)  MNC's required rate of return 
B)  Amount of MNC's cash flows in particular currency 
C)  The exchange rate at which cash flows are converted to dollars 
D)  The value of MNC depends on all of the above factors 
A)  MNC's required rate of return 
B)  Amount of MNC's cash flows in particular currency 
C)  The exchange rate at which cash flows are converted to dollars 
D)  The value of MNC depends on all of the above factors

Question 12

Imperfect markets represent conditions under which factors of production are immobile.

Accepted Answer

A) True 
 B)False

Question 13

Under the Product Cycle Theory, foreign demand can be initially satisfied by exporting.

Accepted Answer

A) True 
 B)False

Question 14

Assume that an American firm wants to engage in international business without major investment in the foreign country. Which method is least appropriate in this situation?

Accepted Answer

A)  International Trade 
B)  Licensing 
C)  Franchising 
D)  Direct foreign investment 
A)  International Trade 
B)  Licensing 
C)  Franchising 
D)  Direct foreign investment

Question 15

Licensing allows firms to use their technology in foreign markets without a major investment in foreign countries.

Accepted Answer

A) True 
 B)False

Question 16

The Sarbanes-Oxley Act improves corporate governance of MNCs because it:

Accepted Answer

A)  makes executives more accountable for verifying financial statements 
B)  eliminates stock options as a form of compensation 
C)  ties executive compensation to firm performance 
D)  places a limit on the amount of funds that managers can spend 
A)  makes executives more accountable for verifying financial statements 
B)  eliminates stock options as a form of compensation 
C)  ties executive compensation to firm performance 
D)  places a limit on the amount of funds that managers can spend

Question 17

If markets were perfect, then labor and other costs of production would be easily transferable.

Accepted Answer

A) True 
 B)False

Question 18

The agency costs of an MNC are likely to be lower if it:

Accepted Answer

A)  scatters its subsidiaries across many foreign countries. 
B)  increases its volume of international business. 
C)  uses a centralized management style. 
D)  A and B. 
A)  scatters its subsidiaries across many foreign countries. 
B)  increases its volume of international business. 
C)  uses a centralized management style. 
D)  A and B.

Question 19

A centralized management style, where major decisions about a foreign subsidiary are made by the parent company, results in an increase in agency costs.

Accepted Answer

A) True 
 B)False

Question 20

Licensing is the process by which a firm provides its technology (copyrights, patents, trademarks, or trade names) in exchange for fees or some other specified benefits.

Accepted Answer

A) True 
 B)False

Exam 1: Multinational Financial Management: An Overview

Which of the following is not mentioned in the text as a theory of international business?

MNCs can improve their internal control process by all of the following, except:

Agency costs faced by multinational corporations (MNCs) may be larger than those faced by purely domestic firms because

International trade:

International trade generally results in ____ exposure to international political risk and ____ exposure to international economic conditions, when compared to other methods of international business.

Which of the following theories suggests that firms seek to penetrate new markets over time?

The valuation of an MNC should rise when an event causes the expected cash flows from foreign to ____ and when foreign currencies denominating these cash flows are expected to ____.

With regard to corporate goals, an MNC is mostly concerned with maximizing ____, and a purely domestic firm is mostly concerned with maximizing ____.

According to the text, a disadvantage of licensing is that:

Which of the following theories identifies the non-transferability of resources as a reason for international business?

The MNC's value depends on all of the following, except:

Imperfect markets represent conditions under which factors of production are immobile.

Under the Product Cycle Theory, foreign demand can be initially satisfied by exporting.

Assume that an American firm wants to engage in international business without major investment in the foreign country. Which method is least appropriate in this situation?

Licensing allows firms to use their technology in foreign markets without a major investment in foreign countries.

The Sarbanes-Oxley Act improves corporate governance of MNCs because it:

If markets were perfect, then labor and other costs of production would be easily transferable.

The agency costs of an MNC are likely to be lower if it:

A centralized management style, where major decisions about a foreign subsidiary are made by the parent company, results in an increase in agency costs.

Licensing is the process by which a firm provides its technology (copyrights, patents, trademarks, or trade names) in exchange for fees or some other specified benefits.

International Flow of Funds

International Financial Markets

Exchange Rate Determination

Currency Derivatives

Government Influence on Exchange Rates

International Arbitrage and Interest Rate Parity

Relationships among Inflation, Interest Rates, and Exchange Rates

Forecasting Exchange Rates

Measuring Exposure to Exchange Rate Fluctuations

Managing Transaction Exposure

Managing Economic Exposure and Translation Exposure

Direct Foreign Investment

Multinational Capital Budgeting

International Corporate Governance and Control

Country Risk Analysis

Multinational Cost of Capital and Capital Structure

Long-Term Debt Financing

Financing International Trade

Short-Term Financing

International Cash Management

Filters

International trade generally results in exposure to international political risk and exposure to international economic conditions, when compared to other methods of international business.

The valuation of an MNC should rise when an event causes the expected cash flows from foreign to and when foreign currencies denominating these cash flows are expected to .

With regard to corporate goals, an MNC is mostly concerned with maximizing , and a purely domestic firm is mostly concerned with maximizing .