Multinational Financial Management, 11th Edition (Shapiro, Hanouna) | Complete Test Bank

TEST BANK
MULTINATIONAL FINANCIAL MANAGEMENT
11TH EDITION

CHAPTER 1: INTRODUCTION

EASY (definitional)

1.1 Historically, the primary motive for U.S. multinationals to produce abroad has been
to
a) lower costs
b) expand markets
c) avoid trade barriers
d) gain tax benefits

Ans: b
Section: evolution of multinational
Level: Easy

1.2 The 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

Ans: a
Section: Multinational Financial Management: Theory and Practice
Level: Easy

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
b) arbitrage
c) financing
d) total risk

Ans: b

,Section: evolution of multinational
Level: Easy

1.4 The 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
b) neutralized
c) enhanced
d) arbitraged away

Ans: c
Section: role of the financial executive
Level: Easy

1.5 When a firm operates globally it offers advantages such as
a) greater political power at home
b) bless taxes on its profits
c) greater negotiating power with foreign minority groups
d) greater negotiating power with labor unions

Ans: d
Section: The rise of the MNC
Level: Easy

1.6 The prime transmitter of global competitive forces is the
a) public utility firm
b) financial management experience of the U.S. markets
c) the multinational corporation
d) the Federal Reserve System of the U.S.

Ans: c
Section: rise of the multinational
Level: Easy

1.7 ___________ were the earliest multinationals.
a) raw-material seekers
b) market seekers
c) cost minimizers

,d) oil companies

Ans: a
Section: raw material seekers
Level: Easy

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

Ans: b
Section: market seekers
Level: Easy

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

Ans: a
Section: cost minimizers
Level: Easy

1.10 Which 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

Ans: d
Section: Consequences of Global Competition
Level: Easy

, 1.11 International ________ 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
c) diversification
d) investment

Ans: c
Section: The Importance of Total Risk
Level: Easy

1.12 Which one of the following has been a major driver of globalization?

a) massive deregulation
b) the collapse of the communist bloc
c) revolution in information technologies
d) all of the above

Ans: d
Section: The rise of the multinational corporation
Level: Easy

1.13 Companies gradually increase their commitment to international business with
strategies that are progressively more sophisticated. Which one of the following steps is
NOT one of the steps?
a) exporting
b) setting up a sales subsidiary
c) setting up a distribution system
d) creating a legal entity in the new target country

Ans: D
Section: The Process of Overseas Expansion by Multinationals
Level: Easy