Question 1

In specialized international lending activity, firms may engage in ________, where they buy foreign accounts receivable at a discount from face value.

Accepted Answer

A)   factoring
B)   lading
C)   documentary collecting
D)   financial drafting A

Question 2

You are a financial officer at an MNC. What types of foreign exchange risks do you frequently face? What capital budgeting techniques do you use to manage these risks?

Accepted Answer

International firms must strive to minimize the impact of exchange rate fluctuations on the firms' operations. Three main types of exchange rate exposure exist. Transaction exposure refers to the impact of exchange rate fluctuations on the profitability of a business transaction denominated in a foreign currency. Translation exposure reflects the impact of exchange rate fluctuations on the book value of foreign operations in a firm's accounting records. Economic exposure is the impact unanticipated exchange rate movements have on the value of the firm's operations. Financial officers of international firms must adjust capital budgeting techniques to meet the unique requirements of international business. Standard investment evaluation techniques, such as net present value, internal rate of return, and payback period analysis, must be changed to account for differences in risk.

Question 3

Which of the following is not one of the commonly used methods for evaluating investment projects among international financial officers?

Accepted Answer

A)   net present value
B)   internal rate of return
C)   payback period
D)   return on equity D

Question 4

The most difficult form of countertrade is barter.

Accepted Answer

A) True 
 B)False

Question 5

When does a firm face transaction exposure?

Accepted Answer

The answer of When does a firm face transaction exposure?...

Question 6

Exporters prefer that payments in advance be made by check.

Accepted Answer

A) True 
 B)False

Question 7

The hurdle rate refers to the number of years it will take the firm to recover the original cash investment from a project's earnings.

Accepted Answer

A) True 
 B)False

Question 8

What role does the Export-Import Bank play in financing international trade?

Accepted Answer

The answer of What role does the Export-Import Bank play...

Question 9

A firm faces translation exposure when the financial benefits and costs of an international transaction can be affected by exchange rate movements that occur after the firm is legally obligated to complete the transaction.

Accepted Answer

A) True 
 B)False

Question 10

The benefit of a firm going naked is making no capital outlays.

Accepted Answer

A) True 
 B)False

Question 11

If exchange rates were fixed, translation exposure would not exist.

Accepted Answer

A) True 
 B)False

Question 12

Company X sold its products to Company Z in September. Company X will be compnsated with Company Z's products in December. Which term best describes this transaction?

Accepted Answer

A)   offset purchase
B)   parallel switch
C)   counterpurchase
D)   clearinghouse accounts

Question 13

Theresa, an importer, uses a variety of payment methods when paying for goods. Which of the following is most likely Theresa's LEAST preferred form of payment?

Accepted Answer

A)   letter of credit
B)   wire transfer
C)   open account
D)   payment in advance

Question 14

Economic exposure is the impact on the value of a firm's operations of unanticipated exchange rate changes.

Accepted Answer

A) True 
 B)False

Question 15

Martin Exporting requests ABC Bank to add its own guarantee of payment to a letter of credit, which creates a(n) ________.

Accepted Answer

A)   advised letter of credit
B)   confirmed letter of credit
C)   irrevocable letter of credit
D)   unconfirmed letter of credit

Question 16

Which of the following is not a type of letter of credit?

Accepted Answer

A)   advised letter of credit
B)   confirmed letter of credit
C)   irrevocable letter of credit
D)   unconfirmed letter of credit

Question 17

Why does Eximbank offer a working capital guarantee loan program?

Accepted Answer

A)   promote foreign imports
B)   encourage U.S. exports
C)   protect emerging economies
D)   encourage trade in U.S. dollars

Question 18

How does a leads and lags strategy work? How does this type of strategy minimize foreign-exchange risk?

Accepted Answer

The answer of How does a leads and lags strategy...

Question 19

What are the three corporate financial goals involved in managing working capital?

Accepted Answer

The answer of What are the three corporate financial goals...

Question 20

A sogo sosha might assist in the sale of Mitsubishi trucks in Ghana, taking payment in cocoa, which then can be sold to keiretsu-linked food processors back in Japan or to independent candy makers anywhere. This is an example of ________.

Accepted Answer

A)   counterpurchase
B)   switching arrangements
C)   offset purchase
D)   clearinghouse accounts

Exam 18: International Financial Management

In specialized international lending activity, firms may engage in ________, where they buy foreign accounts receivable at a discount from face value.

You are a financial officer at an MNC. What types of foreign exchange risks do you frequently face? What capital budgeting techniques do you use to manage these risks?

Which of the following is not one of the commonly used methods for evaluating investment projects among international financial officers?

The most difficult form of countertrade is barter.

When does a firm face transaction exposure?

Exporters prefer that payments in advance be made by check.

The hurdle rate refers to the number of years it will take the firm to recover the original cash investment from a project's earnings.

What role does the Export-Import Bank play in financing international trade?

A firm faces translation exposure when the financial benefits and costs of an international transaction can be affected by exchange rate movements that occur after the firm is legally obligated to complete the transaction.

The benefit of a firm going naked is making no capital outlays.

If exchange rates were fixed, translation exposure would not exist.

Company X sold its products to Company Z in September. Company X will be compnsated with Company Z's products in December. Which term best describes this transaction?

Theresa, an importer, uses a variety of payment methods when paying for goods. Which of the following is most likely Theresa's LEAST preferred form of payment?

Economic exposure is the impact on the value of a firm's operations of unanticipated exchange rate changes.

Martin Exporting requests ABC Bank to add its own guarantee of payment to a letter of credit, which creates a(n) ________.

Which of the following is not a type of letter of credit?

Why does Eximbank offer a working capital guarantee loan program?

How does a leads and lags strategy work? How does this type of strategy minimize foreign-exchange risk?

What are the three corporate financial goals involved in managing working capital?

A sogo sosha might assist in the sale of Mitsubishi trucks in Ghana, taking payment in cocoa, which then can be sold to keiretsu-linked food processors back in Japan or to independent candy makers anywhere. This is an example of ________.