Question 1

The process of identifying, evaluating, and selecting projects that require substantial amounts of resources and are expected to generate benefits for many years into the future is called:

Accepted Answer

A) strategy formulation. 
B) short-term planning. 
C) capital budgeting. 
D) operational budgeting.

Question 2

The possibility of loss due to unexpected changes in currency values or interest rates is called:

Accepted Answer

A) economic risk. 
B) business risk. 
C) financial risk. 
D) political risk.

Question 3

In designing an effective management control system for a multinational corporation, the accountant should measure factors appropriate for each unit's level of responsibility.Which of the following measures would be appropriate for evaluating the performance of an investment center?

Accepted Answer

A) Output on costs of input 
B) Residual income 
C) EBIT 
D) All of the above

Question 4

A company that recognizes and adapts its business practices to differences across cultures in which it operates is referred to as being:

Accepted Answer

A) geocentric. 
B) ethnocentric. 
C) polycentric. 
D) egocentric.

Question 5

Which of the following is a non-financial measure of performance?

Accepted Answer

A) Return on investment 
B) Market share 
C) Earnings per share 
D) Return on equity

Question 6

Why is it believed that Japanese companies prefer the payback period over the discounted cash flow methods for evaluating capital investment alternatives?

Accepted Answer

A) It is consistent with their corporate strategy of investing in new technology. 
B) Japanese companies compete using very short product life cycles. 
C) Cash flows over a long period of time are difficult to predict with much accuracy. 
D) All of the above

Question 7

The balanced scorecard includes non-financial measures of performance with the financial measures of performance traditionally used.Which of the following are included in the balanced scorecard?

Accepted Answer

A) Customer satisfaction 
B) Internal business processes 
C) Innovation and learning 
D) All of the above

Question 8

What measures may be used in the performance evaluation system of a multinational corporation?

Accepted Answer

A) Financial measures such as profit, cost, and return on investment 
B) Quality and customer satisfaction 
C) Market share 
D) All of the above

Question 9

Senior management of Bina Confections Ltd., a multinational corporation, has taken a polycentric approach to manufacturing, marketing, and distributing its candies.What would be evidence of this perspective?

Accepted Answer

A) Explicit policy and procedures manuals for managing foreign operations 
B) High degree of decentralization of decision-making authority 
C) Standard product branding and packaging throughout the organization 
D) Implementing strategies perfected by managers at the home office

Question 10

What term is used to describe the process involving revising existing goals and adopting new goals?

Accepted Answer

A) Strategy formulation 
B) Strategic planning 
C) Strategy implementation 
D) Capital budgeting

Question 11

Assume that an initial investment is $100,000 and that the estimated annual cash flows for the next 5 years are $25,000.What is the internal rate of return (IRR) for this investment?

Accepted Answer

A) 5.56% 
B) 18% 
C) 1% 
D) 8%

Question 12

Schlamp & Co.is considering building a manufacturing facility in Country Z, which has changed it labor laws frequently and dramatically in the past decade.What kind of risk is created by these legislative actions?

Accepted Answer

A) Physical risk 
B) Political risk 
C) Financial risk 
D) Economic risk

Question 13

SSM Corporation, a multinational healthcare system, measures the number of minutes between a patient's arrival at the emergency room and the time he/she is seen by a physician.This measure focuses on what aspect of the balanced scorecard?

Accepted Answer

A) Financial perspective 
B) Customer perspective 
C) Internal business processes perspective 
D) Innovation and learning perspective

Question 14

Why is management control particularly complex in decentralized multinational organizations?

Accepted Answer

A) Managers abroad are not as well-trained as managers of domestic operations. 
B) Decision-making authority is not delegated to the local managers of foreign operations. 
C) Managers of foreign operations may be motivated by local goals rather than parent's goals. 
D) Financial risks are always higher for the local managers of foreign operations than for managers of domestic operations.

Question 15

MSM Ltd has a strategy of being the first to market with new products and so it measures the number of new products introduced each year.Where does this measure fit in the balanced scorecard?

Accepted Answer

A) Financial perspective 
B) Customer perspective 
C) Internal business process perspective 
D) Innovation and learning perspective

Question 16

Conceptually, what is the internal rate of return?

Accepted Answer

A) Number of years required for a project to return the cash invested in it 
B) Discount rate that equates the present value of cash inflows to present value of cash outflows 
C) Interest rate a company can generate on its corporate bonds and preferred stock 
D) Average annual net income divided by initial investment in a project

Question 17

What is the role of accounting in formulating strategy?

Accepted Answer

A) Quantifying opportunities and threats 
B) Preparing budgets 
C) Making estimates of costs and benefits of various alternatives 
D) All of the above

Question 18

Assume that the Chinese government allowed the yuan to float relative to the U.S.dollar.Appreciation in the yuan could have an adverse affect on sales of Chinese goods to the U.S.This possible impact on Chinese exports is referred to as:

Accepted Answer

A) translation exposure. 
B) transaction exposure. 
C) economic exposure. 
D) accounting exposure.

Question 19

Which of the following factors is generally considered in performing the environmental analysis phase of strategy formulation?

Accepted Answer

A) Competitors 
B) Government regulations 
C) Customer demand 
D) All of the above

Question 20

What is a capital investment?

Accepted Answer

A) Using money to buy goods or services 
B) Issuing shares of stock of the corporation 
C) Authorizing and issuing shares of common stock by a multinational corporation 
D) Committing resources to projects that have long period costs and benefits

Exam 13: Strategic Accounting Issues in Multinational Corporations