Fin426, Chapter1 Testbank Questions

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EASY (factual)
1.1Historically, the primary motive for U.S. multinationals to produce abroad has been to a.lower costs
b.respond more quickly to the marketplace
c.avoid trade barriers
d.gain tax benefits
ANSWER:b: p.8, evolution of multinational

1.2The primary objective of the multinational corporation is to
a.maximize shareholder wealth
b.maximize world production
c.minimize debt
d.minimize the cost of doing business globally
ANSWER:a: p.21, Multinational Financial Management: Theory and Practice

1.3____________ is defined as the purchase of assets or commodities on one market for immediate resale on another in order to profit form a price discrepancy. a.internationalization
c.financing risk
ANSWER:b: p.8, evolution of multinational

1.4The value of good financial management is ___________ in the global markets because of the much greater probability of market imperfections and multiple tax rates. a.minimized
d.arbitraged away
ANSWER:c: p.26, role of the financial executive

1.5When a firm operates globally it offers advantages such as a.greater political power at home
b.less taxes on its profits
c.greater negotiating power with foreign minority groups
d.greater negotiating power with labor unions
ANSWER:d: p. 3, rise of the multinational

1.6The prime transmitter of global competitive forces is the a.public utility firm management experience of the U.S. markets
c.the multinational corporation
d.the Federal Reserve System of the U.S.
ANSWER:c: p.3, rise of the multinational

1.7___________ were the earliest multinationals.
a.raw-material seekers seekers
c.cost minimizers
d.oil companies
e.the Federal Reserve System of the U.S.
ANSWER:a: p.10, raw material seekers

1.8The ___________ are the archetype of the modern multinational firm that goes overseas to produce and sell in foreign markets. a.cost minimizers seekers
c.raw-material seekers
d.whaling companies
ANSWER:b: p.10, market seekers

1.9___________ are a recent category of multinationals that seek out and invest in lower cost production sites overseas.
a.Cost minimizers
b.Market seekers
c.Raw-material seekers
d.High tech firms
ANSWER:a: p.11 cost minimizers

1.10Which one of the following is a consequence of increased global competition? a.the creation of new steel plants in the old industrial countries b.the end of free-trade agreements between governments of the world c.increased comfort level of trade unions with the consequences d.increased anxiety among workers in the old industrial countries ANSWER:d: p. 18, Consequences of Global Competition

1.11The defenders of multinationals believe that __________ are the appropriate reward for efficiently providing the global economy with products and services. a.profits
b.subsidies holidays
d.low-interest, government-subsidized loans
ANSWER:a: p.22 Criticisms of the Multinational Corporation 1.12International ________ can reduce the volatility of an investment portfolio because national financial markets tend to move independently of each other. a.arbitrage

b.centralization of the MNC’s cash
ANSWER:c: p. 26, The Importance of Total Risk

MODERATE (applied)

1.13Into which category of multinational is IBM most likely to fall?
a.raw materials seeker seeker
c.cost minimizer
d.all of the above
ANSWER:b: p.10, market seeker

1.14Which one of the following accelerated the growth of the global economy in the past decade? a.the U.S.-Canada-Mexico free-trade pact
b.the creation of the European Union
c.China’s entrance into the WTO
d.All of the above
ANSWER:d: p.19, Consequences of Global Competition

1.15The multinational financial system enables companies to
a.avoid currency...
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