Question 1

Describe the three types of currency exposure, and explain the benefits of the consolidation of financial statements.

Accepted Answer

The answer of Describe the three types of currency exposure,...

Question 2

Financing Corporate Expansion (Scenario)
Intensity Games is an MNE based in San Francisco that manufactures a popular line of video game consoles and accessories. Intensity owns manufacturing facilities in China and Russia where the components of the game consoles are manufactured and assembled before being shipped around the world. Intensity also owns numerous subsidiaries that manufacture game cartridges for Intensity game platforms. Intensity managers have determined that the firm needs to expand its Chinese facility to accommodate the increasing demand. The firm needs to raise several million dollars to finance the expansion. The financial managers of Intensity are discussing the various financing options available to the firm.
-Which of the following questions would be more important for Intensity financial managers to evaluate when deciding the best method for the firm to raise funds?

Accepted Answer

A)  What percentage of stock is owned by the CEO of Intensity Games? 
B)  How will the dividend be paid to shareholders if the firm expands its Chinese facility? 
C)  What type of debt financing would be most economical for Intensity? 
D)  At which bank does Intensity do the majority of its business transactions?

Question 3

Multilateral netting is the means by which subsidiaries and affiliates charge each other as they exchange goods and services.

Accepted Answer

A) True 
 B)False

Question 4

In international financial management, after assessing the financial attractiveness of major investment projects, the MNE ________.

Accepted Answer

A)  oversees transactions in various foreign currencies and manages risk exposure resulting from exchange-rate fluctuations 
B)  administers funds passing in and out of the firm's value-adding activities 
C)  obtains financing for funding value-adding activities and investment projects 
D)  learns to operate in a global environment with diverse accounting practices and international taz regimes

Question 5

If one U.S. dollar equaled one euro last year, and then the exchange rate shifted so that today one dollar equals two euros, which of the following will most likely occur?

Accepted Answer

A)  Europeans will purchase more U.S. products. 
B)  Americans will have a lower standard of living. 
C)  Americans will cancel vacations to Europe. 
D)  Europeans will purchase fewer U.S. products.

Question 6

In international financial management, after raising funds for the firms, the MNE immediately ________.

Accepted Answer

A)  assesses the financial attractiveness of major investment projects, such as foreign expansion 
B)  determines the ideal long-term mix of financing for the firm's international operations 
C)  learns to operate in a global environment with diverse accounting practices and international tax regimes 
D)  administer funds passing in and out of the firm's value-adding activities

Question 7

________ is the number of units of foreign currency obtained for one unit of domestic currency.

Accepted Answer

A)  Indirect quote 
B)  Prime rate 
C)  Direct quote 
D)  Repo rate

Question 8

Which of the following is a benefit for firms that participate in the global capital market?

Accepted Answer

A)  availability of short-term financing 
B)  availability of a large pool of financing sources at a lower, competitive rate 
C)  access to larger funds exclusively in the domestic market 
D)  access to unregulated and secured returns on investment

Question 9

The volume and complexity of a firm's intracorporate transfers depends on ________.

Accepted Answer

A)  the amount of cash available from loans 
B)  the value of the shareholders' stock 
C)  the country from which the firm originates 
D)  the number of firm subsidiaries and alliances around the world

Question 10

A lack of transparency in emerging market economies leads to less FDI because investors are unable to make financially sound decisions due to a shortage of reliable information.

Accepted Answer

A) True 
 B)False

Question 11

Transaction exposure occurs when ________ are denominated in foreign currencies.

Accepted Answer

A)  accounts receivables 
B)  financial reports 
C)  bank loans 
D)  wages and salaries

Question 12

Which of the following is the final task in international financial management?

Accepted Answer

A)  manage currency risk 
B)  manage the diversity of international accounting and tax practices 
C)  raise funds for the firm 
D)  manage working capital and cash flow

Question 13

Explain the difference between working capital and net working capital, and discuss why managers employ net present value (NPV) analysis to evaluate domestic and international capital investment projects.

Accepted Answer

The answer of Explain the difference between working capital and...

Question 14

Unlike exporters and licensors, who both face currency risk, managers of foreign investment portfolios are sheltered from the rise and fall of exchange rates.

Accepted Answer

A) True 
 B)False

Question 15

The current rate method is typically employed when translating records of ________.

Accepted Answer

A)  foreign subsidiaries that are part of the parent firm's operations 
B)  domestic affiliates that conduct business abroad occasionally 
C)  foreign subsidiaries that are considered stand-alone legal entities 
D)  joint venture partnerships that participate in global operations

Question 16

A project perspective approach in capital budgeting can be employed by managers interested in initially screening the appropriateness of an international capital investment project.

Accepted Answer

A) True 
 B)False

Question 17

Direct quote is the number of units of foreign currency obtained for one unit of domestic currency.

Accepted Answer

A) True 
 B)False

Question 18

Freedom Energy Group (Scenario)
Freedom Energy Group (FEG) is a major American energy services group based in Oklahoma. FEG manufactures products to facilitate oil and gas exploration and is involved in the construction of oil refineries and gas pipelines around the world. FEG managers are considering the purchase of a Canadian energy firm, Maple Leaf Energy, which manufactures pipeline stabilization products. The financial management division of FEG is considering the risks and benefits of purchasing Maple Leaf.
-Which of the following questions would be more important for FEG financial managers to evaluate before the firm purchases Maple Leaf?

Accepted Answer

A)  What is the anticipated impact of hybrid technology and alternative fuel sources on the gas and oil industry? 
B)  Should FEG continue to employ Maple Leaf personnel after the acquisition, or should they be given severance packages? 
C)  What type of global marketing package should be created to inform potential customers about FEG's purchase of Maple Leaf? 
D)  What mix of debt and equity financing should FEG employ in the purchase and ownership of Maple Leaf?

Question 19

When using equity financing, firms run the risk of ________.

Accepted Answer

A)  diluting the firm's ownership 
B)  regular monthly payments of principal and interest 
C)  incurring a high debt ratio 
D)  severe penalties for late or missed payments of interest

Question 20

Multilateral netting would enable an MNE with numerous subsidiaries to ________.

Accepted Answer

A)  consolidate intracorporate cash transfers and reduce transaction fees 
B)  charge its subsidiaries as they exchange goods and services with the parent company 
C)  transfer goods and services within the firm without paying host-country taxes 
D)  channel funds from small subsidiaries to large ones without paying interest

Exam 20: Financial Management and Accounting in the Global Firm

Describe the three types of currency exposure, and explain the benefits of the consolidation of financial statements.

Multilateral netting is the means by which subsidiaries and affiliates charge each other as they exchange goods and services.

In international financial management, after assessing the financial attractiveness of major investment projects, the MNE ________.

If one U.S. dollar equaled one euro last year, and then the exchange rate shifted so that today one dollar equals two euros, which of the following will most likely occur?

In international financial management, after raising funds for the firms, the MNE immediately ________.

________ is the number of units of foreign currency obtained for one unit of domestic currency.

Which of the following is a benefit for firms that participate in the global capital market?

The volume and complexity of a firm's intracorporate transfers depends on ________.

A lack of transparency in emerging market economies leads to less FDI because investors are unable to make financially sound decisions due to a shortage of reliable information.

Transaction exposure occurs when ________ are denominated in foreign currencies.

Which of the following is the final task in international financial management?

Explain the difference between working capital and net working capital, and discuss why managers employ net present value (NPV) analysis to evaluate domestic and international capital investment projects.

Unlike exporters and licensors, who both face currency risk, managers of foreign investment portfolios are sheltered from the rise and fall of exchange rates.

The current rate method is typically employed when translating records of ________.

A project perspective approach in capital budgeting can be employed by managers interested in initially screening the appropriateness of an international capital investment project.

Direct quote is the number of units of foreign currency obtained for one unit of domestic currency.

When using equity financing, firms run the risk of ________.

Multilateral netting would enable an MNE with numerous subsidiaries to ________.