Chapter 1

Question 1

A company that is incorporated in one country and has production and distribution facilities in other countries

Answer 1

Multinational enterprise

Question 2

Managers are expected to make decisions that will ___________ the stock price.

Answer 2

Maximize

Question 3

MNE Goals are the same as the domestic firm, but the steps for recording and reporting require ___________

Answer 3

consolidation

Question 4

A collection of institutions and securities, which are all linked via a global network; the Interbank Market

Answer 4

The global capital market

Question 5

Debt securities issued by governments (e.g, U.S. Treasury Bonds)

Answer 5

Assets

Question 6

Central banks, commercial, and investment banks

Answer 6

Institutions

Question 7

The interbank networks using currency. Without ready exchange of currencies, the market is hard-pressed to operate efficiently.

Answer 7

Linkages

Question 8

The interbank market, which must use currencies, bases its pricing through the single most widely quoted interest rate in the world

Answer 8

LIBOR (the London Interbank Offered Rate).

Question 9

the home currency price of a unit of foreign currency (e.g., in the US, a direct quote will have the US$ value in the numerator)

Answer 9

Direct quotation or Home Currency Terms:

Question 10

Domestic currencies of one country on deposit in a second country.

Answer 10

Eurocurrencies

Question 11

What are the goals of an MNE?

Answer 11

The goals of an MNE are to take advantage of imperfections in national markets for products, factors of production, and financial assets.

Question 12

Why are eurocurrencies important?

Answer 12

-Eurocurrency deposits are an efficient and convenient money market device for holding excess corporate liquidity
- The eurocurrency market is a major source of short-term bank loans to finance corporate working capital needs, including the financing of imports and exports

Question 13

A theory that everyone gains if each nation specializes in the production of those goods that it produces relatively most efficiently and imports those goods that other countries produce relatively most efficiently. The theory supports free trade arguments.

Answer 13

Theory of Comparative Advantage

Question 14

Produce in foreign markets either to satisfy local demand or to export to markets other than their home market. U.S automobile firms manufacturing in Europe for local consumption are an example of market seeking motivation

Answer 14

Market seekers

Question 15

Extract raw materials wherever they can be found, either for export or for further processing and sale in the country in which they are found – the host country. Firms in the oil, mining, plantation, and forest industries fall into this category.

Answer 15

Raw material seekers

Question 16

Produce in countries where one or more of the factors of production are underpriced relative to their productivity. Labor-intensive production of electronic components in Taiwan, Malaysia, and Mexico is an example of this motivation.

Answer 16

Production efficiency seekers

Question 17

Operate in foreign countries to gain access to technology or managerial expertise. For example, German, Dutch, and Japanese firms have purchased U.S. electronics firms for their technology.

Answer 17

Knowledge seekers