FIN 480 pre test Flashcards
chapter 1
T/F
If managers of foreign subsidiaries make decisions that maximize the values of their respective subsidiaries, they automatically maximize the value of the entire corporation.
F
使支部利益最大化，不代表总公司也最大会
T/F
A centralized management style, where major decisions about a foreign subsidiary are made by the parent company, results in an automatic increase in agency costs.
F
centralized management would not increase agency cost, but decentralized management would
T/F
A decentralized management style, where subsidiary managers make the relevant decisions regarding their subsidiary, may result in better decision making, as subsidiary managers are generally better informed about their subsidiary’s operations
T
T/F
A decentralized management style, where subsidiary managers make the relevant decisions regarding their subsidiary, may result in better decision making, as subsidiary managers are generally better informed about their subsidiary’s operation
T
T/F
The Theory of Comparative Advantage begins by assuming that a given firm first becomes established in its home country and may subsequently penetrate foreign markets via geographic or product differentiation.
F
Theory of Comparative Advantage: Specialization
increases production efficiency.
T/F
Under the Product Cycle Theory, foreign demand can be initially satisfied by exporting.
T
T/F
In a joint venture, one firm is obligated to provide another firm with a specialized sales or service strategy in exchange for periodic fees.
F
Joint Ventures
• A venture that is jointly owned and operated by two or more firms. A firm may enter the foreign market by engaging in a joint venture with firms that reside in those markets.
T/F
International trade is the most common form of direct foreign investment (DFI).
F
Acquisitions of Existing Operations is the most common form of direct foreign investment
T/F
Although MNCs may need to convert currencies occasionally, they do not face any exchange rate risk, as exchange rates are stable over time.
F
Once you may need to convert currencies, you are facing the exchange rate risk
The goal of a multinational corporation (MNC) is
a. The establishment of subsidiaries in any country where operations would provide a return over and above the cost of capital, even if better projects are available domestically.
b. The maximization of shareholder wealth.
c. The minimization of taxes remitted from foreign subsidiaries.
d. The maximization of social benefits resulting from actions such as the employment of foreign managers.
B
The goal of MNC is the maximization of shareholder wealth.
Agency costs faced by multinational corporations (MNCs) may be larger than those faced by purely domestic firms because
a. Monitoring of managers located in foreign countries is more difficult.
b. MNCs are relatively large.
c. Foreign subsidiary managers raised in different cultures may not follow uniform goals.
d. All of these choices are correct.
D
Which of the following is not a form of corporate control that can be used to reduce agency problems in MNCs?
a. Stock options
b. Investor monitoring
c. A decentralized management style
d. Hostile takeover threat
e. All of these choices are forms of corporate control that can be used to reduce agency problems in MNCs.
c
Which of the following is not one of the more common methods used by MNCs to improve their internal control process?
a. Ensuring that all data are reported consistently among subsidiaries
b. Establishing a centralized database of information
c. Making executives more accountable for financial statements by personally verifying their accuracy
d. Speeding the process by which all departments and all subsidiaries have access to the data that they need
e. All of these choices are common methods used by MNCs to improve their internal control process.
e
Which of the following events would confirm the Theory of Comparative Advantage?
a. A U.S. firm manufacturing widgets builds a plant in Mexico to reduce labor costs.
b. A U.S. firm manufacturing computers establishes a plant in Germany in order to reduce transportation costs and to retain its advantage over its German competitors.
c. A U.S. firm manufacturing computers imports the needed components from Taiwan.
d. All of these choices are correct.
e. None of these choices are correct.
c
Which of the following events would confirm the Product Cycle Theory?
a. A U.S. firm manufacturing computers imports the needed components from Taiwan.
b. A U.S. firm manufacturing widgets builds a plant in Mexico to reduce labor costs.
c. A U.S. firm manufacturing computers establishes a plant in Germany in order to reduce transportation costs and to retain its advantage over its German competitors.
d. All of these choices are correct.
e. None of these choices are correct.
c
The most risky method(s) by which firms conduct international business is (are):
a. The establishment of new subsidiaries.
b. The acquisitions of existing operations.
c. Franchising.
d. [The acquisitions of existing operations.] and [The establishment of new subsidiaries.] only
e. All of these choices are correct.
d
The least risky method by which firms conduct international business is:
a. International Trade.
b. The establishment of new subsidiaries.
c. The acquisitions of existing operations.
d. Licensing
e. Franchising.
a
________ obligates a firm to provide a specialized sales or service strategy, support assistance, and possible an initial investment in exchange for periodic fees.
a. Licensing
b. A joint venture
c. International trade
d. Franchising
e. None of these choices are correct.
D
Which of the following is not mentioned in the text as a reason for the increased globalization of business?
a. Increased privatization in recent years
b. An increase in GNP of virtually all countries in recent years
c. Growth in direct foreign investment in recent years
d. An increased standardization of products and services across countries in recent years
e. An increase in international trade
B
并未涉及GNP数量在所有国家都明显增加
Which of the following is not mentioned in the text as an additional risk resulting from international business?
a. Exchange rate fluctuations
b. Financial risk
c. Political risk
d. Exposure to foreign economies
e. Country risk
B
Financial risk is not the additional risk resulting form international business
the risk of cash flow MNC
international economic condition
not from interest rate risk
Which of the following is not an example of how an MNC can be affected by exchange rate movements?
a. Remitted earnings from the foreign subsidiary of a U.S.-based MNC may increase due to a stronger home currency.
b. When the home currency weakens, products denominated in that currency become cheaper to foreign customers, which may increase foreign demand for the MNC’s products.
c. When the home currency strengthens, products denominated in that currency become more expensive to foreign customers, which may reduce foreign demand for the MNC’s products.
d. Remitted earnings from the foreign subsidiary of a U.S.-based MNC may increase due to a weaker home currency.
e. Due to exchange rate fluctuations, the number of units of a firm’s home currency needed to purchase foreign supplies can change even if suppliers have not adjusted their prices.
A，美元贬值，收入也会减少
不理解
Licensing obligates a firm to provide ________, while franchising obligates a firm to provide ________.
a. A specialized sales or service strategy; its technology
b. A specialized sales or service strategy; a specialized sales or service strategy
c. Its technology; its technology
d. Its technology; a specialized sales or service strategy
e. Its technology; an initial investment
D
Which of the following is not a way in which agency problems can be reduced through corporate control?
a. Acquisition of a foreign subsidiary
b. Executive compensation
c. Monitoring by large shareholders
d. Threat of hostile takeover
e. None of these choices are correct.
A
The valuation of an MNC should decline when an event causes the expected cash flows from foreign subsidiaries to ____ and when the foreign currencies denominating these cash flows are expected to ____.
a. increase; depreciate
b. decrease; appreciate
c. decrease; depreciate
d. increase; appreciate
C
?
The agency costs of an MNC are likely to be higher if it
a. scatters its subsidiaries across many foreign countries.
b. decreases its volume of international business.
c. uses a centralized management style.
d. B and C.
A
The agency costs of an MNC are likely to be higher if it
a. scatters its subsidiaries across many foreign countries.
b. decreases its volume of international business.
c. uses a centralized management style.
d. B and C.
C
According to the text, the valuation of an MNC with foreign subsidiaries is directly affected by:
a. exchange rate fluctuations
b. foreign political conditions
c. foreign economic conditions
d. It is affected by all of the above.
D
Assume that an American firm wants to engage in international business in which it establishes a large subsidiary in the foreign country. This strategy definitely represents ______________.
a. a joint venture
b. direct foreign investment
c. franchising
d. licensing
b
Which of the following is the most direct example of political risk in Spain for a U.S.-based MNC with a subsidiary in Spain?
a. Consumers in the U.S. may purchase products from companies in Spain.
b. Spain’s economy may decrease.
c. Spain’s government may impose special taxes on the subsidiary.
d. Spain’s government may change tax rates on income earned by local citizens.
C
Compared to international trade, direct foreign investment generally results in ____ exposure to international political risk and ____ exposure to international economic conditions.
a. lower; higher
b. higher; lower
c. higher; higher
d. lower; lower
C
Zest Co. has a subsidiary in Mexico. The expected cash flows in pesos to be received in the future from this subsidiary have not changed since last month, but the valuation of Zest Co. has increased since last month. What could have caused this increase in value?
a. a stronger Mexican economy
b. higher Mexican interest rates
c. appreciation of the Mexican peso
d. depreciation of the Mexican peso
C
Which of the following is not one of the more common methods used by MNCs to improve their internal control process?
a. requiring executives to forecast future exchange rates
b. establishing a centralized database of information
c. speeding the process by which all departments and all subsidiaries have access to the data that they need
d. ensuring that all data are reported consistently among subsidiaries
A
Which of the following is mentioned in the text as a theory of international business?
a. theory of comparative advantage
b. imperfect markets theory
c. product cycle theory
d. All of the above are mentioned in the text as theories of international business.
D
T/F
The Sarbanes-Oxley Act ensures a more transparent process for managers to report on the productivity and financial condition of their firm.
T
Which of the following events would confirm the Imperfect Markets Theory?
a. A U.S. firm manufacturing widgets builds a plant in Mexico to reduce labor costs. b. A U.S. firm manufacturing computers establishes a plant in Germany in order to reduce transportation costs and to retain its advantage over its German competitors. c. A U.S. firm manufacturing computers imports the needed components from Taiwan. d. All of these choices are correct. e. None of these choices are correct.
A
The agency costs of an MNC are likely to be higher if it
a. scatters its subsidiaries across many foreign countries. b. decreases its volume of international business. c. uses a centralized management style. d. B and C.
a. scatters its subsidiaries across many foreign countries.
The Sarbanes-Oxley Act caused corporate governance of MNCs to _________; it makes executives ____ accountable for verifying financial statements.
a. deteriorate; more b. improve; less c. deteriorate; less d. improve; more
D
According to the text, the valuation of an MNC with foreign subsidiaries is directly affected by:
a. exchange rate fluctuations b. foreign political conditions c. foreign economic conditions d. It is affected by all of the above.
D
Chapter 2
The balance of payments measures all transactions between domestic residents over time.
a. True
b. False
False
Balance of Payments
Summary of transactions between domestic and foreign residents, rather than between domestic residents, for a specific country over a specified period of time.
Portfolio investment represents transactions involving long-term financial assets (such as stocks and bonds) between countries that affect the transfer of control.
a. True
b. False
False
• Portfolio investment
Transactions involving long term financial assets (such as stocks and bonds) between countries
But the control does not transfer.
A balance of trade deficit indicates an excess of imports over exports.
a. True
b. False
True
The capital account reflects changes in country ownership of long-term (but not short-term) assets.
a. True
b. False
False
• Capital Account: summary of flow of funds resulting from the sale of assets between one specified country and all other countries over a specified period of time.
An increase in the U.S. inflation rate relative to Japan would increase the U.S. current account balance, as foreign importers would find U.S. goods more attractive (cheaper) than their own products.
a. True
b. False
F
the inflation rate increase that increases the import. The foreign importer would find goods more expensive
An expected strengthening of a country’s home currency will attract more capital from foreign investors and thus improve the country’s capital account balance.
a. True
b. False
T
The great expectation would attract more investor to invest that in turn increase the capital account
In order to use the IMF’s compensatory financing facility (CFF), a country must show that its financial problems are temporary and must be willing to work with the IMF in resolving the problem.
a. True
b. False
T
Its compensatory financing facility (CFF) attempts to reduce the impact of export instability on countries.
A special drawing right (SDR) is an actual currency used by Germany, France, Japan, and Britain to counteract the instability in these currencies.
a. True
b. False
F
Financing is measured in special drawing rights (SDRs)
The SDR serves as the unit of account of the IMF and some other international organizations. The SDR is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies of IMF members.
The World Bank frequently enters into cofinancing agreements. Under these agreements, financing is provided by the World Bank and/or official aid agencies, export credit agencies, or commercial banks.
a. True
b. False
T
Funds are distributed through cofinancing agreements:
• Official aid agencies
• Export credit agencies
• Commercial banks
The capital account includes the value of financial assets transferred across country borders by people who move to a different country.
a. True
b. False
T
• Includes the value of financial assets transferred across country borders by people who move to a different country.
A summary of transactions between domestic and foreign residents for a specific country over a specified period of time is the
a. Balance on goods and services. b. Current account. c. Capital account. d. Balance of payments. e. Balance of trade.
d. Balance of payments.
Summary of transactions between domestic and foreign residents for a specific country over a specified period of time
