INTERNATIONAL FINANCIAL
INTERNATIONAL FINANCIAL MANAGEMENT EXAM QUESTIONS AND ANSWERS
LATEST UPADATE.
Multinational Corporation Answer >>Firms that engage in some form of
international business.
MNCs Answer >>Are based in the United States and that wholly own their foreign
subsidiaries.
Maximize shareholder wealth Answer >>The commonly accepted goal of an MNC
is to
Whether to discontinue operations in a particular country
Whether to pursue new business in a particular country
Whether to expand business in a particular country
How to finance expansion in a particular country Answer >>Common Finance
decisions include
Marketing
Management
Accounting and information systems Answer >>Finance decisions are influenced
by other business discipline functions
Conflict of goals between managers and shareholders Answer >>Agency problem
,INTERNATIONAL FINANCIAL
Costs of ensuring that managers maximize shareholder wealth Answer >>Agency
costs
The sheer size of the large MNC.
The scattering of distant subsidiaries.
The culture of foreign managers.
Subsidiary value versus overall MNC value. Answer >>Agency costs are normally
larger for MNCs than for purely domestic firms
Clear communication of the goals for each subsidiary and implementation of
compensation plans to align the interest Answer >>Parent Control of agency
problems
Threat of a takeover or actions by institutional investors Answer >>Corporate
control of agency problems
Ensures a more transparent process for managers to report on the productivity
and financial condition of their firm. Answer >>Sarbanes-Oxley Act (2002) SOX
Establishing a centralized database of information.
Ensuring that all data are reported consistently among subsidiaries.
Implementing a system that automatically checks for unusual discrepancies
relative to norms.
Speeding the process by which all departments and subsidiaries have access to all
the data they need.
Making executives more accountable for financial statements Answer >>SOX act
2002 methods to improve internal control process
,INTERNATIONAL FINANCIAL
Allows managers of the parent to control foreign subsidiaries and therefore
reduce the power of subsidiary managers Answer >>Management Structure of
MNC
Give more control to subsidiary managers who are closer to the subsidiary's
operation and environment Answer >>Management Structure of MNC
Specialization by countries increases production efficiency.
Each country should use its comparative advantage to specialize in its production
and rely on other countries to meet other needs. Answer >>Theory of
Competitive Advantage.
Facts of production are somewhat immobile providing incentive to seek out
foreign opportunities.
Because of imperfect markets, factors of production are immobile, which
encourages countries to specialize based on the resources they have. Answer
>>Imperfect markets theory
As a firm matures, it recognizes opportunities outside its domestic market Answer
>>Product cycle theory
International trade
Licensing
Franchising
Joint Ventures
Acquisitions of existing operations
, INTERNATIONAL FINANCIAL
Establishing new foreign subsidiaries Answer >>How firms engage in international
business
Relatively conservative approach that can be used by firms to:
Penetrate markets (by exporting)
Obtain supplies at a low cost (by importing) Answer >>International Trade
Firm does not put any of its capital at risk Answer >>Minimal risk
Agreement to provide its technology (copyrights, patents, trademarks, or trade
names) in exchange for fees or some other specified benefits.
Allows firms to use their technology in foreign markets without a major
investment and without transportation costs that result from exporting.
Major disadvantage: difficult to ensure quality control in foreign production
process Answer >>Licensing
Obligates firm to provide a specialized sales or service strategy, support
assistance, and possibly an initial investment in the franchise in exchange for
periodic fees.
Allows penetration into foreign markets without a major investment in foreign
countries. Answer >>Franchising
A venture that is jointly owned and operated by two or more firms. A firm may
enter the foreign market by engaging in a joint venture with firms that reside in
those markets.
Allows two firms to apply their respective cooperative advantages in a given
project. Answer >>Joint Ventures
INTERNATIONAL FINANCIAL MANAGEMENT EXAM QUESTIONS AND ANSWERS
LATEST UPADATE.
Multinational Corporation Answer >>Firms that engage in some form of
international business.
MNCs Answer >>Are based in the United States and that wholly own their foreign
subsidiaries.
Maximize shareholder wealth Answer >>The commonly accepted goal of an MNC
is to
Whether to discontinue operations in a particular country
Whether to pursue new business in a particular country
Whether to expand business in a particular country
How to finance expansion in a particular country Answer >>Common Finance
decisions include
Marketing
Management
Accounting and information systems Answer >>Finance decisions are influenced
by other business discipline functions
Conflict of goals between managers and shareholders Answer >>Agency problem
,INTERNATIONAL FINANCIAL
Costs of ensuring that managers maximize shareholder wealth Answer >>Agency
costs
The sheer size of the large MNC.
The scattering of distant subsidiaries.
The culture of foreign managers.
Subsidiary value versus overall MNC value. Answer >>Agency costs are normally
larger for MNCs than for purely domestic firms
Clear communication of the goals for each subsidiary and implementation of
compensation plans to align the interest Answer >>Parent Control of agency
problems
Threat of a takeover or actions by institutional investors Answer >>Corporate
control of agency problems
Ensures a more transparent process for managers to report on the productivity
and financial condition of their firm. Answer >>Sarbanes-Oxley Act (2002) SOX
Establishing a centralized database of information.
Ensuring that all data are reported consistently among subsidiaries.
Implementing a system that automatically checks for unusual discrepancies
relative to norms.
Speeding the process by which all departments and subsidiaries have access to all
the data they need.
Making executives more accountable for financial statements Answer >>SOX act
2002 methods to improve internal control process
,INTERNATIONAL FINANCIAL
Allows managers of the parent to control foreign subsidiaries and therefore
reduce the power of subsidiary managers Answer >>Management Structure of
MNC
Give more control to subsidiary managers who are closer to the subsidiary's
operation and environment Answer >>Management Structure of MNC
Specialization by countries increases production efficiency.
Each country should use its comparative advantage to specialize in its production
and rely on other countries to meet other needs. Answer >>Theory of
Competitive Advantage.
Facts of production are somewhat immobile providing incentive to seek out
foreign opportunities.
Because of imperfect markets, factors of production are immobile, which
encourages countries to specialize based on the resources they have. Answer
>>Imperfect markets theory
As a firm matures, it recognizes opportunities outside its domestic market Answer
>>Product cycle theory
International trade
Licensing
Franchising
Joint Ventures
Acquisitions of existing operations
, INTERNATIONAL FINANCIAL
Establishing new foreign subsidiaries Answer >>How firms engage in international
business
Relatively conservative approach that can be used by firms to:
Penetrate markets (by exporting)
Obtain supplies at a low cost (by importing) Answer >>International Trade
Firm does not put any of its capital at risk Answer >>Minimal risk
Agreement to provide its technology (copyrights, patents, trademarks, or trade
names) in exchange for fees or some other specified benefits.
Allows firms to use their technology in foreign markets without a major
investment and without transportation costs that result from exporting.
Major disadvantage: difficult to ensure quality control in foreign production
process Answer >>Licensing
Obligates firm to provide a specialized sales or service strategy, support
assistance, and possibly an initial investment in the franchise in exchange for
periodic fees.
Allows penetration into foreign markets without a major investment in foreign
countries. Answer >>Franchising
A venture that is jointly owned and operated by two or more firms. A firm may
enter the foreign market by engaging in a joint venture with firms that reside in
those markets.
Allows two firms to apply their respective cooperative advantages in a given
project. Answer >>Joint Ventures
