Test Bank for International Financial Management, 11t
l l l l l l
h Edition by Jeff Madura
l l l l
,Chapterl1—MultinationallFinanciallManagement
1. ThelcommonlylacceptedlgoalloflthelMNClislto:
a. maximizelshort-termlearnings.
b. maximizelshareholderlwealth.
c. minimizelrisk.
d. AlandlC.
e. maximizelinternationallsales.
ANS:l B PTS:l l 1
2. Withlregardltolcorporatelgoals,lanlMNClislmostlylconcernedlwithlmaximizingl
,landlalpurelyldomesticlfirmlislmostlylconcernedlwithlmaximizingl .
a. shareholderlwealth;lshort-termlearnings
b. shareholderlwealth;lshareholderlwealth
c. short-termlearnings;lsaleslvolume
d. short-termlearnings;lshareholderlwealth
ANS:l B PTS:l l 1
3. ForlthelMNC,lagencylcostslareltypically:
a. non-existent.
b. largerlthanlagencylcostsloflalsmalllpurelyldomesticlfirm.
c. smallerlthanlagencylcostsloflalsmalllpurelyldomesticlfirm.
d. thelsamelaslagencylcostsloflalsmalllpurelyldomesticlfirm.
ANS:l B PTS:l l 1
4. WhichloflthelfollowinglcouldlreducelagencylproblemslforlanlMNC?
a. stockloptionslaslmanageriallcompensation.
b. hostileltakeoverlthreat.
c. investorlmonitoring.
d. allloflthelabovelarelformsloflcorporatelcontrollthatlcouldlreducelagencylproblemslforlan
MNC.
ANS:l D PTS:l l 1
5. ThelvaluationloflanlMNClshouldlriselwhenlanleventlcauseslthelexpectedlcashlflowslfromlforeignltol
andlwhenlforeignlcurrenciesldenominatingltheselcashlflowslar
elexpectedltol .
a. decrease;lappreciate
b. increase;lappreciate
c. decrease;ldepreciate
d. increase;ldepreciate
ANS:l B PTS:l l 1
, 6. Whichloflthelfollowingltheorieslidentifieslspecializationlaslalreasonlforlinternationallbusiness?
a. theoryloflcomparativeladvantage.
b. imperfectlmarketsltheory.
c. productlcycleltheory.
d. noneloflthelabove
ANS:l A PTS:l l 1
7. Whichloflthelfollowingltheorieslidentifieslthelnon-transferabilityloflresourceslaslalreasonlforlinternationallbusiness?
a. theoryloflcomparativeladvantage.
b. imperfectlmarketsltheory.
c. productlcycleltheory.
d. noneloflthelabove
ANS:l B PTS:l l 1
8. Whichloflthelfollowingltheorieslsuggestslthatlfirmslseekltolpenetratelnewlmarketsloverltime?
a. theoryloflcomparativeladvantage.
b. imperfectlmarketsltheory.
c. productlcycleltheory.
d. noneloflthelabove
ANS:l C PTS:l l 1
9. Whichloflthelfollowinglindustrieslwouldlmostllikelyltakeladvantagelofllowerlcostslinlsomellessldevelopedlforeignlcountries?
a. assemblyllinelproduction.
b. specializedlprofessionallservices.
c. nuclearlmissilelplanning.
d. planninglforlmorelsophisticatedlcomputerltechnology.
ANS:l A PTS:l l 1
10. Dueltolthelriskslinvolvedlinlinternationallbusiness,lfirmslshould:
a. onlylconsiderlinternationallbusinesslinlmajorlcountries.
b. maintainlinternationallbusinessltolnolmorelthanl20%lofltotallbusiness.
c. maintainlinternationallbusinessltolnolmorelthanl35%lofltotallbusiness.
d. noneloflthelabove
ANS:l D PTS:l l 1
11. Alproductlcyclelislthelprocesslbylwhichlalfirmlprovideslalspecializedlsaleslorlservicelstrategy,lsupportlassistance,landlpos
siblylanlinitiallinvestmentlinlthelfranchiselinlexchangelforlperiodiclfees.
a. True
b. False
ANS:l F PTS:l l 1
, 12. Licensinglislthelprocesslbylwhichlalfirmlprovideslitsltechnologyl(copyrights,lpatents,ltrademarks,lorltradelnames)linlex
changelforlfeeslorlsomelotherlspecifiedlbenefits.
a. True
b. False
ANS:l T PTS:l l 1
13. ThelagencylcostsloflanlMNClarellikelyltolbellowerliflit:
a. scatterslitslsubsidiarieslacrosslmanylforeignlcountries.
b. increaseslitslvolumeloflinternationallbusiness.
c. useslalcentralizedlmanagementlstyle.
d. AlandlB.
ANS:l C PTS:l l 1
14. AnlMNClmaylbelmorelexposedltolagencylproblemsliflmostloflitslshareslarelheldlby:
a. alfewlmutuallfunds
b. alwidelyldispersedlsetloflindividuallinvestors
c. alfewlpensionlfunds
d. allloflthelabovelwouldlpreventlagencylproblems
ANS:l B PTS:l l 1
15. ThelSarbanes-OxleylActlimproveslcorporatelgovernanceloflMNCslbecauselit:
a. makeslexecutiveslmorelaccountablelforlverifyinglfinanciallstatements
b. eliminateslstockloptionslaslalformloflcompensation
c. tieslexecutivelcompensationltolfirmlperformance
d. placeslallimitlonlthelamountloflfundslthatlmanagerslcanlspend
ANS:l A PTS:l l 1
16. MNCslcanlimproveltheirlinternallcontrollprocesslbylallloflthelfollowing,lexcept:
a. establishinglalcentralizedldatalbaseloflinformation
b. ensuringlthatlallldatalarelreportedlconsistentlylamonglsubsidiaries
c. ensuringlthatlthelMNClalwayslborrowslfromlcountrieslwherelinterestlrateslarellowest
d. usinglalsystemlthatlcheckslinternalldatalforlunusualldiscrepancies
ANS:l C PTS:l l 1
17. Franchisinglislthelprocesslbylwhichlnationallgovernmentslselllstatelownedloperationsltolcorporationslandlotherlinvestors.
a. True
b. False
ANS:l F PTS:l l 1
18. ThelparentloflMNClcanlimplementlcompensationlplanslthatldirectlylrewardlthelsubsidiarylmanagerslforlenhancinglthelvalueloflt
helMNC.
a. True
b. False
ANS:l T PTS:l l 1
19. Iflalpublicly-tradedlMNC'slmanagerslmakelpoorldecisionslthatlreducelitslvalue,litlmaylencouragelotherlfirmsltolacquirelit.
l l l l l l
h Edition by Jeff Madura
l l l l
,Chapterl1—MultinationallFinanciallManagement
1. ThelcommonlylacceptedlgoalloflthelMNClislto:
a. maximizelshort-termlearnings.
b. maximizelshareholderlwealth.
c. minimizelrisk.
d. AlandlC.
e. maximizelinternationallsales.
ANS:l B PTS:l l 1
2. Withlregardltolcorporatelgoals,lanlMNClislmostlylconcernedlwithlmaximizingl
,landlalpurelyldomesticlfirmlislmostlylconcernedlwithlmaximizingl .
a. shareholderlwealth;lshort-termlearnings
b. shareholderlwealth;lshareholderlwealth
c. short-termlearnings;lsaleslvolume
d. short-termlearnings;lshareholderlwealth
ANS:l B PTS:l l 1
3. ForlthelMNC,lagencylcostslareltypically:
a. non-existent.
b. largerlthanlagencylcostsloflalsmalllpurelyldomesticlfirm.
c. smallerlthanlagencylcostsloflalsmalllpurelyldomesticlfirm.
d. thelsamelaslagencylcostsloflalsmalllpurelyldomesticlfirm.
ANS:l B PTS:l l 1
4. WhichloflthelfollowinglcouldlreducelagencylproblemslforlanlMNC?
a. stockloptionslaslmanageriallcompensation.
b. hostileltakeoverlthreat.
c. investorlmonitoring.
d. allloflthelabovelarelformsloflcorporatelcontrollthatlcouldlreducelagencylproblemslforlan
MNC.
ANS:l D PTS:l l 1
5. ThelvaluationloflanlMNClshouldlriselwhenlanleventlcauseslthelexpectedlcashlflowslfromlforeignltol
andlwhenlforeignlcurrenciesldenominatingltheselcashlflowslar
elexpectedltol .
a. decrease;lappreciate
b. increase;lappreciate
c. decrease;ldepreciate
d. increase;ldepreciate
ANS:l B PTS:l l 1
, 6. Whichloflthelfollowingltheorieslidentifieslspecializationlaslalreasonlforlinternationallbusiness?
a. theoryloflcomparativeladvantage.
b. imperfectlmarketsltheory.
c. productlcycleltheory.
d. noneloflthelabove
ANS:l A PTS:l l 1
7. Whichloflthelfollowingltheorieslidentifieslthelnon-transferabilityloflresourceslaslalreasonlforlinternationallbusiness?
a. theoryloflcomparativeladvantage.
b. imperfectlmarketsltheory.
c. productlcycleltheory.
d. noneloflthelabove
ANS:l B PTS:l l 1
8. Whichloflthelfollowingltheorieslsuggestslthatlfirmslseekltolpenetratelnewlmarketsloverltime?
a. theoryloflcomparativeladvantage.
b. imperfectlmarketsltheory.
c. productlcycleltheory.
d. noneloflthelabove
ANS:l C PTS:l l 1
9. Whichloflthelfollowinglindustrieslwouldlmostllikelyltakeladvantagelofllowerlcostslinlsomellessldevelopedlforeignlcountries?
a. assemblyllinelproduction.
b. specializedlprofessionallservices.
c. nuclearlmissilelplanning.
d. planninglforlmorelsophisticatedlcomputerltechnology.
ANS:l A PTS:l l 1
10. Dueltolthelriskslinvolvedlinlinternationallbusiness,lfirmslshould:
a. onlylconsiderlinternationallbusinesslinlmajorlcountries.
b. maintainlinternationallbusinessltolnolmorelthanl20%lofltotallbusiness.
c. maintainlinternationallbusinessltolnolmorelthanl35%lofltotallbusiness.
d. noneloflthelabove
ANS:l D PTS:l l 1
11. Alproductlcyclelislthelprocesslbylwhichlalfirmlprovideslalspecializedlsaleslorlservicelstrategy,lsupportlassistance,landlpos
siblylanlinitiallinvestmentlinlthelfranchiselinlexchangelforlperiodiclfees.
a. True
b. False
ANS:l F PTS:l l 1
, 12. Licensinglislthelprocesslbylwhichlalfirmlprovideslitsltechnologyl(copyrights,lpatents,ltrademarks,lorltradelnames)linlex
changelforlfeeslorlsomelotherlspecifiedlbenefits.
a. True
b. False
ANS:l T PTS:l l 1
13. ThelagencylcostsloflanlMNClarellikelyltolbellowerliflit:
a. scatterslitslsubsidiarieslacrosslmanylforeignlcountries.
b. increaseslitslvolumeloflinternationallbusiness.
c. useslalcentralizedlmanagementlstyle.
d. AlandlB.
ANS:l C PTS:l l 1
14. AnlMNClmaylbelmorelexposedltolagencylproblemsliflmostloflitslshareslarelheldlby:
a. alfewlmutuallfunds
b. alwidelyldispersedlsetloflindividuallinvestors
c. alfewlpensionlfunds
d. allloflthelabovelwouldlpreventlagencylproblems
ANS:l B PTS:l l 1
15. ThelSarbanes-OxleylActlimproveslcorporatelgovernanceloflMNCslbecauselit:
a. makeslexecutiveslmorelaccountablelforlverifyinglfinanciallstatements
b. eliminateslstockloptionslaslalformloflcompensation
c. tieslexecutivelcompensationltolfirmlperformance
d. placeslallimitlonlthelamountloflfundslthatlmanagerslcanlspend
ANS:l A PTS:l l 1
16. MNCslcanlimproveltheirlinternallcontrollprocesslbylallloflthelfollowing,lexcept:
a. establishinglalcentralizedldatalbaseloflinformation
b. ensuringlthatlallldatalarelreportedlconsistentlylamonglsubsidiaries
c. ensuringlthatlthelMNClalwayslborrowslfromlcountrieslwherelinterestlrateslarellowest
d. usinglalsystemlthatlcheckslinternalldatalforlunusualldiscrepancies
ANS:l C PTS:l l 1
17. Franchisinglislthelprocesslbylwhichlnationallgovernmentslselllstatelownedloperationsltolcorporationslandlotherlinvestors.
a. True
b. False
ANS:l F PTS:l l 1
18. ThelparentloflMNClcanlimplementlcompensationlplanslthatldirectlylrewardlthelsubsidiarylmanagerslforlenhancinglthelvalueloflt
helMNC.
a. True
b. False
ANS:l T PTS:l l 1
19. Iflalpublicly-tradedlMNC'slmanagerslmakelpoorldecisionslthatlreducelitslvalue,litlmaylencouragelotherlfirmsltolacquirelit.
