Chapter 01: Multinational Financial Management: An Overview
s! s! s! s! s! s!
1.
,Chapter 01: Multinational Financial Management: An Overview
s! s! s! s! s! s!
1.The commonly accepted goal of an MNC is to:
s! s! s! s! s! s! s! s!
a. maximize short-term earnings. s! s!
b. maximize shareholder wealth. s! s!
c. minimize risk. s!
d. A and C. s! s!
e. maximize international sales. s! s!
ANSWER: b
DIFFICULTY: Easy
LEARNING OBJECTIVES: INFM.MADU.15.01.01
s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS: s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Knowledge s!
2. With regard to corporate goals, an MNC is mostly concerned with maximizing
s! s! s! s! s! s! s! s! s! s! s! s!
, and a purely domestic firm is mostly concerned with maximizing
s! s! s! s! s! s! s! s! s! s! s! .
a. shareholder wealth; short- s! s!
term earnings s!
b. shareholder wealth; shareholder wealth s! s! s!
c. short-term earnings; sales volume s! s! s!
d. short-
term earnings; shareholder wealt
s! s! s!
h
ANSWER: b
DIFFICULTY: Easy
LEARNING OBJECTIVES: INFM.MADU.15.01.01
s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS: s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Knowledge s!
3. For an MNC, agency costs are typically:
s! s! s! s! s! s!
a. nonexistent
b. larger than agency costs of a small purely domestic firm.
s! s! s! s! s! s! s! s! s!
c. smaller than agency costs of a small purely domestic
s! s! s! s! s! s! s! s! s!
firm.
d. the same as agency costs of a small purely domestic firm.
s! s! s! s! s! s! s! s! s! s!
ANSWER: b
DIFFICULTY: Easy
LEARNING OBJECTIVES: INFM.MADU.15.01.01
s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS: s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Knowledge s!
,Chapter 01: Multinational Financial Management: An Overview
s! s! s! s! s! s!
4. Which of the following could reduce agency problems for an MNC?
s! s! s! s! s! s! s! s! s! s!
a. stock options as managerial compensation
s! s! s! s!
b. hostile takeover threat s! s!
c. investor monitoring s!
d. all of the above are forms of corporate control that could reduce agency problems for an
s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s
MNC. !
ANSWER: d
DIFFICULTY: Moderate
LEARNING OBJECTIVES: INFM.MADU.15.01.01s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS: s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Comprehension s!
5. The valuation of an MNC should rise when an event causes the expected cash flows from foreign subsidiaries to
s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s!
and when the foreign currencies denominating these cash flows are expected
s! s! s! s! s! s! s! s! s! s! s
to
! s! .
a. decrease; s!
appreciate
b. increase; appreciate s!
c. decrease; s!
depreciate
d. increase; depreciate s!
ANSWER: b
DIFFICULTY: Easy
LEARNING OBJECTIVES: INFM.MADU.15.01.04s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS: s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Comprehension s!
6. Which of the following theories identifies specialization as a reason for international business?
s! s! s! s! s! s! s! s! s! s! s! s!
a. theory of comparative advantage s! s! s!
b. imperfect markets theory s! s!
c. product cycle theory s! s!
d. none of the above s! s! s!
ANSWER: a
DIFFICULTY: Easy
LEARNING OBJECTIVES: INFM.MADU.15.01.02s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS: s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Knowledge s!
, Chapter 01: Multinational Financial Management: An Overview
s! s! s! s! s! s!
7. Which of the following theories identifies the nontransferability of resources as a reason for international business?
s! s! s! s! s! s! s! s! s! s! s! s! s! s! s!
a. theory of comparative advantage
s! s! s!
b. imperfect markets theory s! s!
c. product cycle theory s! s!
d. none of the above s! s! s!
ANSWER: b
DIFFICULTY: Easy
LEARNING OBJECTIVES: INFM.MADU.15.01.02
s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS:
s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Knowledge s!
8. Which of the following theories suggests that firms seek to penetrate new markets over time?
s! s! s! s! s! s! s! s! s! s! s! s! s! s!
a. theory of comparative advantage
s! s! s!
b. imperfect markets theory s! s!
c. product cycle theory s! s!
d. none of the above s! s! s!
ANSWER: c
DIFFICULTY: Easy
LEARNING OBJECTIVES: INFM.MADU.15.01.02
s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS:
s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Knowledge s!
9. An industry based on which of the following would most likely take advantage of lower costs in some less developed
s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s!
foreign countries?
s!
a. assembly line production s! s!
b. specialized professional services s! s!
c. nuclear missile programs s! s!
d. development of more sophisticated computer s! s! s! s! s!
technology
ANSWER: a
DIFFICULTY: Moderate
LEARNING OBJECTIVES: INFM.MADU.15.01.02
s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS:
s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Application s!
s! s! s! s! s! s!
1.
,Chapter 01: Multinational Financial Management: An Overview
s! s! s! s! s! s!
1.The commonly accepted goal of an MNC is to:
s! s! s! s! s! s! s! s!
a. maximize short-term earnings. s! s!
b. maximize shareholder wealth. s! s!
c. minimize risk. s!
d. A and C. s! s!
e. maximize international sales. s! s!
ANSWER: b
DIFFICULTY: Easy
LEARNING OBJECTIVES: INFM.MADU.15.01.01
s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS: s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Knowledge s!
2. With regard to corporate goals, an MNC is mostly concerned with maximizing
s! s! s! s! s! s! s! s! s! s! s! s!
, and a purely domestic firm is mostly concerned with maximizing
s! s! s! s! s! s! s! s! s! s! s! .
a. shareholder wealth; short- s! s!
term earnings s!
b. shareholder wealth; shareholder wealth s! s! s!
c. short-term earnings; sales volume s! s! s!
d. short-
term earnings; shareholder wealt
s! s! s!
h
ANSWER: b
DIFFICULTY: Easy
LEARNING OBJECTIVES: INFM.MADU.15.01.01
s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS: s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Knowledge s!
3. For an MNC, agency costs are typically:
s! s! s! s! s! s!
a. nonexistent
b. larger than agency costs of a small purely domestic firm.
s! s! s! s! s! s! s! s! s!
c. smaller than agency costs of a small purely domestic
s! s! s! s! s! s! s! s! s!
firm.
d. the same as agency costs of a small purely domestic firm.
s! s! s! s! s! s! s! s! s! s!
ANSWER: b
DIFFICULTY: Easy
LEARNING OBJECTIVES: INFM.MADU.15.01.01
s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS: s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Knowledge s!
,Chapter 01: Multinational Financial Management: An Overview
s! s! s! s! s! s!
4. Which of the following could reduce agency problems for an MNC?
s! s! s! s! s! s! s! s! s! s!
a. stock options as managerial compensation
s! s! s! s!
b. hostile takeover threat s! s!
c. investor monitoring s!
d. all of the above are forms of corporate control that could reduce agency problems for an
s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s
MNC. !
ANSWER: d
DIFFICULTY: Moderate
LEARNING OBJECTIVES: INFM.MADU.15.01.01s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS: s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Comprehension s!
5. The valuation of an MNC should rise when an event causes the expected cash flows from foreign subsidiaries to
s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s!
and when the foreign currencies denominating these cash flows are expected
s! s! s! s! s! s! s! s! s! s! s
to
! s! .
a. decrease; s!
appreciate
b. increase; appreciate s!
c. decrease; s!
depreciate
d. increase; depreciate s!
ANSWER: b
DIFFICULTY: Easy
LEARNING OBJECTIVES: INFM.MADU.15.01.04s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS: s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Comprehension s!
6. Which of the following theories identifies specialization as a reason for international business?
s! s! s! s! s! s! s! s! s! s! s! s!
a. theory of comparative advantage s! s! s!
b. imperfect markets theory s! s!
c. product cycle theory s! s!
d. none of the above s! s! s!
ANSWER: a
DIFFICULTY: Easy
LEARNING OBJECTIVES: INFM.MADU.15.01.02s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS: s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Knowledge s!
, Chapter 01: Multinational Financial Management: An Overview
s! s! s! s! s! s!
7. Which of the following theories identifies the nontransferability of resources as a reason for international business?
s! s! s! s! s! s! s! s! s! s! s! s! s! s! s!
a. theory of comparative advantage
s! s! s!
b. imperfect markets theory s! s!
c. product cycle theory s! s!
d. none of the above s! s! s!
ANSWER: b
DIFFICULTY: Easy
LEARNING OBJECTIVES: INFM.MADU.15.01.02
s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS:
s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Knowledge s!
8. Which of the following theories suggests that firms seek to penetrate new markets over time?
s! s! s! s! s! s! s! s! s! s! s! s! s! s!
a. theory of comparative advantage
s! s! s!
b. imperfect markets theory s! s!
c. product cycle theory s! s!
d. none of the above s! s! s!
ANSWER: c
DIFFICULTY: Easy
LEARNING OBJECTIVES: INFM.MADU.15.01.02
s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS:
s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Knowledge s!
9. An industry based on which of the following would most likely take advantage of lower costs in some less developed
s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s! s!
foreign countries?
s!
a. assembly line production s! s!
b. specialized professional services s! s!
c. nuclear missile programs s! s!
d. development of more sophisticated computer s! s! s! s! s!
technology
ANSWER: a
DIFFICULTY: Moderate
LEARNING OBJECTIVES: INFM.MADU.15.01.02
s! s !
NATIONAL STANDARDS: United States - BUSPROG.INFM .MADU.15.03
s! s ! s! s! s! s!
STATE STANDARDS:
s! United States - OH - DISC.INFM.MADU.15.02 s! s! s! s! s!
KEYWORDS: Bloom's: Application s!
