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Chapter 1 Through 7
Chapter
1—Multinational Financial Management: An Overview
1. The
commonly accepted goal of the MNC is to:
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a.
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maximize short-term earnings.
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b.
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maximize shareholder wealth.
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c.
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minimize risk.
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d.
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A and C.
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e.
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maximize international sales.
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PTS: 1 DIF: Easy OBJ: INFM.MADU.15.01.01
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Knowledge
2. With
regard to corporate goals, an MNC is mostly concerned with maximizing ____, and
a purely domestic firm is mostly concerned with maximizing ____.
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a.
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shareholder wealth; short-term earnings
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b.
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shareholder wealth; shareholder wealth
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c.
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short-term earnings; sales volume
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d.
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short-term earnings; shareholder wealth
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PTS: 1 DIF: Easy OBJ: INFM.MADU.15.01.01
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Knowledge
3. For
the MNC, agency costs are typically:
|
a.
|
non-existent.
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b.
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larger than agency costs of a small purely
domestic firm.
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c.
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smaller than agency costs of a small purely
domestic firm.
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d.
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the same as agency costs of a small purely
domestic firm.
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PTS: 1 DIF: Easy OBJ: INFM.MADU.15.01.01
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Knowledge
4. Which
of the following could reduce agency problems for an MNC?
|
a.
|
stock options as managerial compensation.
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b.
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hostile takeover threat.
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c.
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investor monitoring.
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|
d.
|
all of the above are forms of corporate control
that could reduce agency problems for an MNC.
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PTS: 1 DIF: Moderate OBJ: INFM.MADU.15.01.01
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Comprehension
5. 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 ____.
|
a.
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decrease; appreciate
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|
b.
|
increase; appreciate
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c.
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decrease; depreciate
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d.
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increase; depreciate
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PTS: 1 DIF: Easy OBJ: INFM.MADU.15.01.04
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Comprehension
6. Which
of the following theories identifies specialization as a reason for
international business?
|
a.
|
theory of comparative advantage.
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b.
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imperfect markets theory.
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|
c.
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product cycle theory.
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d.
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none of the above
|
PTS: 1 DIF: Easy OBJ: INFM.MADU.15.01.02
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Knowledge
7. Which
of the following theories identifies the non-transferability of resources as a
reason for international business?
|
a.
|
theory of comparative advantage.
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|
b.
|
imperfect markets theory.
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|
c.
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product cycle theory.
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d.
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none of the above
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PTS: 1 DIF: Easy OBJ: INFM.MADU.15.01.02
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Knowledge
8. Which
of the following theories suggests that firms seek to penetrate new markets
over time?
|
a.
|
theory of comparative advantage.
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|
b.
|
imperfect markets theory.
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|
c.
|
product cycle theory.
|
|
d.
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none of the above
|
PTS: 1 DIF: Easy OBJ: INFM.MADU.15.01.02
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Knowledge
9. Which
of the following industries would most likely take advantage of lower costs in
some less developed foreign countries?
|
a.
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assembly line production.
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b.
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specialized professional services.
|
|
c.
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nuclear missile planning.
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d.
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planning for more sophisticated computer
technology.
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PTS: 1 DIF: Moderate OBJ: INFM.MADU.15.01.02
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Application
10. Due
to the risks involved in international business, firms should:
|
a.
|
only consider international business in major
countries.
|
|
b.
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maintain international business to no more than
20% of total business.
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|
c.
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maintain international business to no more than
35% of total business.
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|
d.
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none of the above
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PTS: 1 DIF: Moderate OBJ: INFM.MADU.15.01.02
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Comprehension
11. A
product cycle is the process by which a firm provides a specialized sales or service
strategy, support assistance, and possibly an initial investment in the
franchise in exchange for periodic fees.
a.
True
b.
False
PTS: 1 DIF: Easy OBJ: INFM.MADU.15.01.02
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Knowledge
12. 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.
a.
True
b.
False
PTS: 1 DIF: Easy OBJ: INFM.MADU.15.01.03
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Knowledge
13. The
agency costs of an MNC are likely to be lower if it:
|
a.
|
scatters its subsidiaries across many foreign
countries.
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b.
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increases its volume of international business.
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c.
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uses a centralized management style.
|
|
d.
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A and B.
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PTS: 1 DIF: Easy OBJ: INFM.MADU.15.01.01
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Comprehension
14. An
MNC may be more exposed to agency problems if most of its shares are held by:
|
a.
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a few mutual funds
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|
b.
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a widely dispersed set of individual investors
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c.
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a few pension funds
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d.
|
all of the above would prevent agency problems
|
PTS: 1 DIF: Easy OBJ: INFM.MADU.15.01.01
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Comprehension
15. The
Sarbanes-Oxley Act improves corporate governance of MNCs because it:
|
a.
|
makes executives more accountable for verifying
financial statements
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b.
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eliminates stock options as a form of compensation
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c.
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ties executive compensation to firm performance
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d.
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places a limit on the amount of funds that
managers can spend
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PTS: 1 DIF: Easy OBJ: INFM.MADU.15.01.01
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Comprehension
16. MNCs
can improve their internal control process by all of the following, except:
|
a.
|
establishing a centralized data base of
information
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b.
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ensuring that all data are reported consistently
among subsidiaries
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c.
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ensuring that the MNC always borrows from
countries where interest rates are lowest
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d.
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using a system that checks internal data for
unusual discrepancies
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PTS: 1 DIF: Easy OBJ: INFM.MADU.15.01.01
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Knowledge
17. Franchising
is the process by which national governments sell state owned operations to
corporations and other investors.
a.
True
b.
False
PTS: 1 DIF: Easy OBJ: INFM.MADU.15.01.03
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Knowledge
18. The
parent of MNC can implement compensation plans that directly reward the
subsidiary managers for enhancing the value of the MNC.
a.
True
b.
False
PTS: 1 DIF: Easy OBJ: INFM.MADU.15.01.01
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Comprehension
19. If
a publicly-traded MNC's managers make poor decisions that reduce its value, it
may encourage other firms to acquire it.
a.
True
b.
False
PTS: 1 DIF: Easy OBJ: INFM.MADU.15.01.01
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Knowledge
20. Institutional
investors such as mutual funds or pension funds which have large holdings of an
MNC's stock do not normally want to take control of it and therefore have no
influence over management of the MNC.
a.
True
b.
False
PTS: 1 DIF: Easy OBJ: INFM.MADU.15.01.01
NAT: BUSPROG.INFM .MADU.15.03 STA: DISC.INFM.MADU.15.02
KEY: Bloom's: Knowledge
21. In
comparing exporting to direct foreign investment (DFI), an exporting operation
will likely incur ____ fixed production costs and ____ transportation costs
than DFI.
|
a.
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higher; higher
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b.
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higher; lower
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c.
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lower; lower
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d.
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lower; higher
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