Topic 1 Flashcards
Overview
The commonly accepted goal of the MNC is to:
a. maximize short-term earnings.
b. maximize shareholder wealth.
c. minimize risk.
d. A and C.
e. maximize international sales.
b)
With regard to corporate goals, an MNC is mostly concerned with maximizing ____, and a purely
domestic Company is mostly concerned with maximizing ____.
a. shareholder wealth; short-term earnings
b. shareholder wealth; shareholder wealth
c. short-term earnings; sales volume
d. short-term earnings; shareholder wealth
b)
Which of the following theories identifies the non-transferability of resources as a reason for
international business?
a. theory of comparative advantage.
b. imperfect markets theory.
c. product cycle theory.
d. none of the above
b)
Which of the following theories suggests that Companies seek to penetrate new markets over time?
a. theory of comparative advantage.
b. imperfect markets theory.
c. product cycle theory.
d. none of the above
c)
Which of the following industries would most likely take advantage of lower costs in some less
developed foreign countries?
a. assembly line production.
b. specialized professional services.
c. nuclear missile planning.
d. planning for more sophisticated computer technology
a)
Due to the risks involved in international business, Companies should:
a. only consider international business in major countries.
b. maintain international business to no more than 20% of total business.
c. maintain international business to no more than 35% of total business.
d. none of the above
d)
For the MNC, agency costs are typically:
a. non-existent.
b. larger than agency costs of a small purely domestic Company.
c. smaller than agency costs of a small purely domestic Company.
d. the same as agency costs of a small purely domestic Company.
b)
Which of the following could reduce agency problems for an MNC?
a. stock options as managerial compensation.
b. hostile takeover threat.
c. investor monitoring.
d. all of the above are forms of corporate control that could reduce agency problems for an
MNC.
d)
The valuation of an MNC should rise when an event causes the expected cash flows from foreign subsidiary to
____ and when foreign currencies denominating these cash flows are expected to ____.
a. decrease; appreciate
b. increase; appreciate
c. decrease; depreciate
d. increase; depreciate
b)
Which of the following theories identifies specialization as a reason for international business?
a. theory of comparative advantage.
b. imperfect markets theory.
c. product cycle theory.
d. none of the above
a)
