MCQ - Seminar Five Flashcards
Based on observations of firms that have successfully invested abroad, we can conclude that one of the competitive advantages enjoyed by MNE’s is:
A) financial strength
B) competitiveness of their home markets
C) managerial expertise
D) all of the above are competitive advantages
D) all of the above are competitive advantages
Based on observations of firms that have successfully invested abroad, we can conclude companies are more competitive when:
A) located in countries that are naturally endowed with the appropriate factors of production
B) facing sophisticated and demanding customers in the home market
C) surrounded by a critical mass of related industries and suppliers
D) all of the above are true
D) all of the above are true
The OLI paradigm is an attempt to create a framework to explain why MNE’s choose ______ rather than some other form of international venture
A) strategic alliances
B) licensing
C) joint ventures
D) foreign direct investment
D) foreign direct investment
The owner-specific advantages of OLI must be:
A) firm-specific
B) transferable to foreign subsidiaries
C) not easily copied
D) all of the above
D) all of the above
Which of the following is not a market imperfection or genuine comparative advantage that attracts FDI to particular locations?
A) defensive investments
B) unique sources of raw materials
C) low cost and productive labour force
D) an expansive monetary policy
D) an expansive monetary policy
A/an ________ would be an example of an internalisation advantage for an MNE
A) possession of proprietary information
B) economy of scale
C) unique sources of raw materials
D) patent
A) possession of proprietary information
Which of the following in NOT true regarding behavioural observations of firms making a decision to invest internationally?
A) initial investments tend to be much larger than subsequent ones
B) MNE’s initially invest in countries with a similar “national psychic”
C) firms eventually take greater risks in terms of the national psychic of countries in which they invest
D) all of the above have been observed
A) initial investments tend to be much larger than subsequent ones
Which of the following is NOT an advantage to exporting goods to reach international markets rather than entering into some form of FDI?
A) lower front-end investment
B) greater agency costs
C) fewer political risks
D) all of the above are advantages
B) greater agency costs
Which of the following is NOT a form of FDI?
A) exporting
B) wholly-owned affiliate
C) joint venture
D) greenfield
A) exporting
Which of the following is NOT a potential disadvantage of licensing relative to FDI?
A) possible loss of quality control
B) possible improvement of the technology by the local licensee, which then enters the original firms home market
C) establishment of a potential competitor in third-country markets
D) all of above are potential disadvantages to licensing
D) all of above are potential disadvantages to licensing
A ________ is a shared ownership in a foreign business.
A) greenfield investment
B) joint venture
C) licensing agreement
D) wholly-owned affiliate
B) joint venture
Which of the following is NOT an advantage to a joint venture?
A) The local partner can provide competent management at many levels.
B) The local partner understands the customs and mores of the foreign market.
C) Possible loss of opportunity to enter the foreign market with FDI later.
D) May be a realistic alternative when 100% foreign ownership is not allowed.
C) possible loss of opportunity to enter the foreign market with FDI later
Greenfield investments are typically ________ and ________ than cross-border acquisition.
A) faster; of greater certainty
B) faster; more uncertain
C) slower; more uncertain
D) slower; of greater certainty
C) slower; more uncertain
________ risks are those that affect the MNE at the local or project level, but originate at the country level.
A) Country-specific
B) Global-specific
C) Firm-specific
D) none of the above
A) country-specific
Which of the following is NOT an example of a country-specific risk?
A) war and ethnic strife
B) transfer risk
C) cultural and religious heritage
D) All of the above are examples of country-specific risk.
D) all of the above are a examples of country-specific risk
According to your authors, MNEs can anticipate government regulations that are discriminatory or wealth depriving from a/an ________ or ________ level view.
A) foreign; domestic
B) local; global
C) internal; external
D) micro; macro
D) micro; macro
Of the following, which would NOT be considered an issue for an investment agreement prior to investing in a foreign country?
A) the right to export to third-country markets
B) the basis for setting transfer prices
C) provision for arbitration of disputes
D) All of the above could be negotiated prior to investing.
D) all of the above could be negotiated prior to investing
________ is the risk that the host government will take specific steps that prevent the foreign affiliate from exercising control over the firm’s assets.
A) Expropriation
B) Inconvertibility
C) Business income risk
D) none of the above
A) expropriation
Which of the following is NOT one of the stages at which MNEs can react to the potential for blocked funds?
A) during operations
B) prior to investing
C) reinvesting in the local country when funds cannot be moved
D) All of the above are stages at which MNEs can react.
D) all of the above are stages at which MNE’s can react
A ________ loan, also known as ________, is a parent-to-affiliate loan channeled through a financial intermediary such as a large commercial bank.
A) link financing; a parallel loan
B) fronting; link financing
C) fronting; a back-to-back loan
D) parallel; a back-to-back loan
B) fronting; link financing
Which of the following could be considered an example of forced reinvestment if the blockage of funds was expected to be temporary?
A) a lumber cutting company subsequently builds a paper mill with blocked funds
B) vertical reinvestment by an automobile manufacturer to buy parts suppliers and showrooms
C) purchase of local money market instruments and short-term loans
D) all of the above
C) purchase of local money market instruments and short-term loans
Which of the following is NOT a typical characteristic of a fronting loan made to an international subsidiary?
A) The lending bank is located in the subsidiary’s country.
B) The parent makes a deposit equal to the size of the desired loan into a large commercial bank.
C) The bank lends to the subsidiary firm an amount equal to the parent deposit at a slightly higher interest rate.
D) All of the above are typical characteristics of a fronting loan.
A) the lending bank is located in the subsidiaries country
The traditional financial analysis applied to foreign or domestic projects, to determine the project’s value to the firm is called:
A) agency theory.
B) cost of capital analysis.
C) capital budgeting.
D) capital structure analysis.
C) capital budgeting
Which of the following is NOT a basic step in the capital budgeting process?
A) Estimate the cash flows to be derived from the project over time.
B) Identify the appropriate interest rate at which to discount future cash flows.
C) Identify the initial capital invested.
D) All of the above are steps in the capital budgeting process.
D) all of the above are steps in the capital budgeting process