Foreign Exchange Market and Currency

Only available on StudyMode
  • Download(s) : 122
  • Published : March 26, 2012
Open Document
Text Preview
Chapter 1 Multinational Financial Management:An Overview
1. 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.
ANSWER: B
2. With regard to corporate goals, an MNC is mostly concerned with maximizing  ____________, and a purely domestic firm 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
ANSWER: B
3. For the MNC, agency costs are typically: 
A) non-existent. 
B) larger than agency costs of a small purely domestic firm.  C) smaller than agency costs of a small purely domestic firm.  D) the same as agency costs of a small purely domestic firm. ANSWER: B
----------------------- Page 5-----------------------
4. Which of the following is not a form of corporate control that could reduce agency  problems for an MNC? 
A) stock options. 
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.
ANSWER: D 
5. A recent study by McKinsey & Co. found that investors assign a higher value to firms  that exhibit ________ corporate governance standards and are likely to ________ ethical  constraints. 
A) high; not obey 
B) high; obey 
C) low; not obey 
D) low; obey
ANSWER: B
6. 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
ANSWER: A
7. 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
ANSWER: B
8. Which of the following theories suggests that firms 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
ANSWER: C
9. 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.
ANSWER: A
10. Due to the risks involved in international business, firms 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

ANSWER: D 
11. A product cycle is the process by which a firm provides a specialized sales or service  strategy, support assistance, and possibly an initial investment in the franchise in  exchange for periodic fees. 

A) true. 
B) false.
ANSWER: B
12. Licensing is the process by which a firm provides its technology (copyrights, patents, trademarks, or trade names) in exchange for fees or some other specified benefits.  A) true. 
B) false.
ANSWER: A
13. The agency costs of an MNC are likely to be lower if it:  A) scatters its subsidiaries across many foreign countries.  B) increases its volume of international business. 
C) uses a centralized management style. 
D) A and B.
ANSWER: C
14. An indirect benefit to the MNC of following a worldwide code of ethics is:  A) it allows them to receive special tax breaks in less developed countries.  B) it puts them at a competitive advantage in foreign markets.  C) the worldwide credibility associated with maintaining such standards can increase  global demand for the MNC's products. 

D) A and B.
ANSWER: C
15. The term privatization is typically used to describe: 
A) firms that are purchased by their...
tracking img