INTERNATIONAL FINANCE
INTERNATIONAL FINANCE EXAM QUESTIONS AND ANSWER %
VERIFIED.
Multinational corporations (MNCs) answer>>firms that engage in some
form of international business. Has a HQ in one country and subsidies in
others?
why do companies go abroad? answer>>- to increase revenues
- to reduce expenses (land, labor, capital, raw materials, taxes)
-to lower governmental regulation standards
-to increase global exposure
what is the accepted goal of the an MNC? answer>>to maximize
shareholder wealth
What are common finance decisions? (4) answer>>1. whether to
discontinue operations in a particular country
2. Whether to pursue new business in a particular country
3. Whether to expand business in a particular country
4.How to finance expansion in a particular country
,INTERNATIONAL FINANCE
agency problems answer>>the conflict of goals between managers and
shareholders
agency costs answer>>cost of ensuring that managers maximize
shareholder wealth
Costs are normally _______ for for MNCs than for purely domestic
firms for several reasons: (4) answer>>HIGHER:
1. monitoring managers of distant subsidiaries in foreign countries is
more DIFFICULT
2. foreign subsidiary managers raised in different cultures may not
follow uniform goals
3. sheer size of larger MNCs can create large agency problems
4. Some non-US managers tend to downplay the short-term effects of
decisions
Sarbanes-Oxley Act (SOX) answer>>came from ENRON scandal;
ensures a more transparent process for managers to report on the
productivity and financial condition of their firm
How did Sarbanes-Oxley Act (SOX) ensure a more transparent process
for managers to report on the productivity and financial condition of
their firm? (5) answer>>1. established a centralized database of
information
2. Ensures that all data are reported consistently among subsidiaries
, INTERNATIONAL FINANCE
3.Implements a system that automatically checks for unusual
discrepancies relative to norms
4. speeding the process by which all departments and subsidiaries have
access to all the data they need
5.Making executives more accountable for financial statements
Theory of Competitive Advantage answer>>specialization increases
production efficiency
Imperfect Markets Theory answer>>factors of production are
somewhat immobile providing incentive to seek out foreign
opportunities
Product Cycle Theory answer>>as a firm matures, it recognizes
opportunities outside its domestic market
How do firms engage in international business? answer>>International
Trade, licensing, franchising; Direct foreign investment: joint ventures,
acquisitions of existing operations, establishing new foreign subsidiaries
(most expensive)
Who are our two biggest trading partners? answer>>Canada and
Mexico
INTERNATIONAL FINANCE EXAM QUESTIONS AND ANSWER %
VERIFIED.
Multinational corporations (MNCs) answer>>firms that engage in some
form of international business. Has a HQ in one country and subsidies in
others?
why do companies go abroad? answer>>- to increase revenues
- to reduce expenses (land, labor, capital, raw materials, taxes)
-to lower governmental regulation standards
-to increase global exposure
what is the accepted goal of the an MNC? answer>>to maximize
shareholder wealth
What are common finance decisions? (4) answer>>1. whether to
discontinue operations in a particular country
2. Whether to pursue new business in a particular country
3. Whether to expand business in a particular country
4.How to finance expansion in a particular country
,INTERNATIONAL FINANCE
agency problems answer>>the conflict of goals between managers and
shareholders
agency costs answer>>cost of ensuring that managers maximize
shareholder wealth
Costs are normally _______ for for MNCs than for purely domestic
firms for several reasons: (4) answer>>HIGHER:
1. monitoring managers of distant subsidiaries in foreign countries is
more DIFFICULT
2. foreign subsidiary managers raised in different cultures may not
follow uniform goals
3. sheer size of larger MNCs can create large agency problems
4. Some non-US managers tend to downplay the short-term effects of
decisions
Sarbanes-Oxley Act (SOX) answer>>came from ENRON scandal;
ensures a more transparent process for managers to report on the
productivity and financial condition of their firm
How did Sarbanes-Oxley Act (SOX) ensure a more transparent process
for managers to report on the productivity and financial condition of
their firm? (5) answer>>1. established a centralized database of
information
2. Ensures that all data are reported consistently among subsidiaries
, INTERNATIONAL FINANCE
3.Implements a system that automatically checks for unusual
discrepancies relative to norms
4. speeding the process by which all departments and subsidiaries have
access to all the data they need
5.Making executives more accountable for financial statements
Theory of Competitive Advantage answer>>specialization increases
production efficiency
Imperfect Markets Theory answer>>factors of production are
somewhat immobile providing incentive to seek out foreign
opportunities
Product Cycle Theory answer>>as a firm matures, it recognizes
opportunities outside its domestic market
How do firms engage in international business? answer>>International
Trade, licensing, franchising; Direct foreign investment: joint ventures,
acquisitions of existing operations, establishing new foreign subsidiaries
(most expensive)
Who are our two biggest trading partners? answer>>Canada and
Mexico
