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Multinational Finance 3rd Edition
by Kirt C. Butler (Author) All Chapters | Complete Guide
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Kirt C. Butler, Multinational Finance, 3rd Edition
Part I Overview And Background
Chapter 1 An Introduction To Multinational Finance
True/False
1. Mncs Have Investment Or Financial Operations In More Than One
Country. Ans: True.
2. Because Of Globalization In The World’s Markets, A Multinational Financial Manager Is
More Likely Than A Domestic Financial Manager To Specialize In Finance To The
Exclusion Of Other Fields Of Business.
Ans: False. The Multinational Financial Manager Must Be Well Versed In Each Of The
Business Disciplines In Which The Mnc Is Involved.
3. The Domestic Financial Manager Must Be Knowledgeable In Several Areas Within
Finance, Whereas The Multinational Financial Manager Usually Specializes In A
Single Area, Such As Corporate Finance, Investments, Or Financial Markets.
Ans: False. The Multinational Financial Manager Is Likely To Require Knowledge Of
Several Fields Within Finance.
4. The Investment Opportunity Set Is The Set Of Investments Available To The Corporation; That
Is, The Set From Which The Company Must Select.
Ans: True.
5. Types Of Market Efficiency Used To Describe The Performance Of Financial
Markets Are Allocational, Operational, And Transactional Efficiency.
Ans: False. Three Types Of Market Efficiency Are Allocational, Operational, And
Informational.
6. An Informationally Efficient Market Is One With Abundant Information.
Ans: False. It Is A Market In Which Prices Fully Reflect Available Information.
7. Allocational Efficiency Refers To How Efficiently A Market Channels Capital Toward
Its Most Productive Uses.
Ans: True.
8. Allocational Efficiency Refers To Whether A Market Allocates Capital To Those
Investments Deemed Most Worthy By A Host Government.
Ans: False. Allocational Efficiency Refers To How Efficiently A Market Channels Capital
Toward Its Most Productive Uses In An Economic, Rather Than A Political, Sense.
9. Operational Efficiency Refers To How Large An Influence Transactions Costs And Other
Market Frictions Have On The Operation Of A Market.
Ans: True.
10. The Mnc Faces Greater Constraints Than The Domestic Corporation In The Timing
Of Its Investments.
Ans: False. Multinationals Typically Have More Flexibility In Timing, Location, And
Operation.
11. Risk Exists Whenever Actual Outcomes Can Differ From Expected
Outcomes. Ans: True.
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12. Assets And Liabilities Are Exposed To Currency Risk When Their Values Can
Change With Unexpected Changes In Currency Values.
Ans: True.
13. “Currency Risk” And “Currency Risk Exposure” Refer To The Same Thing - The
Possibility That Currency Values Will Differ From Their Expectations.
Ans: False. A Firm Is Exposed To Currency Risk When Its Assets Or Liabilities Can Change In
Value With Unexpected Changes In Currency Values.
14. Political Risk Is The Risk That The Business Environment In A Host Country Will
Change Unexpectedly Due To Political Events.
Ans: True.
15. The Terms “Stakeholders” And “Shareholders” Are Synonymous.
Ans: False. Stakeholders Include All Those With A Stake In The Firm. A Broad Definition Of
Stakeholders Includes The Firm’s Creditors, Customers, Suppliers, And Employees.
16. Exporting Through A Foreign Sales Agent Requires Little Resource Commitment And
Helps To Insulate The Exporter From The Costs And Risks Of Foreign Market Entry.
Ans: True.
17. Foreign Direct Investment Is When A Multinational Corporation Builds Productive
Capacity In A Foreign Country.
Ans: True.
18. The Easiest Mode Of Entry Into Foreign Markets Is Foreign Direct
Investment. Ans: False. Fdi Is One Of The Most Difficult Entry Modes.
19. Contract-Based Modes Of Entry Into Foreign Markets Include Foreign Sales Agents And
Foreign Sales Branches.
Ans: False. International Licensing And Franchising, Reciprocal Market Agreements, And
Management Contracts Are Contract-Based Entry Modes.
20. Foreign Direct Investment Requires A Relatively Large Resource Commitment From The
Parent Firm. Ans: True.
21. The Sales And Marketing Benefits Of Foreign Direct Investment Are Usually Less Than
Those Of Export Entry Into Foreign Markets.
Ans: False. With Established Operations In The Foreign Country, Multinational
Corporations Are Able To Promote Their Products And Services More Effectively.
22. Licensing Provides Quick And Relatively Low-Risk Entry Into Foreign Markets As
Long As The Parent Can Protect Its Intellectual Property Rights.
Ans: True.
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Kirt C. Butler, Multinational Finance, 3rd Edition
23. The Main Reason For Investment-Based Foreign Market Entry Is To Minimize Cultural
Risk. Ans: False. The Main Reasons Are The Potential For Higher Sales And Lower
Costs.
24. According To Product Cycle Theory, New Products Are Typically Tested In Foreign
Markets And Then Are Introduced Into The Home Market.
Ans: False. New Products Are Usually Introduced In The Home Market.
25. Corporations Often Try To Extend Their Product Life Cycles By Entering Foreign
Markets. Ans: True.
Multiple Choice
1. Entry Modes Into International Markets Include Each Of A) Through D) Except .
a. Exporting
b. Franchising
c. Investment
d. Licensing
e. Each Of The Above Is An Entry
Mode Ans: E
2. For Manufacturing Firms With Patents, The Most Important Difference Between The
Various Foreign Market Entry Modes For Manufacturing Firms Is In Whether Or Not
The Parent Firm Maintains Control Of .
a. Distribution
b. Marketing
c. Packaging
d. Production
e. Purchasing
Ans: D
3. Resource Commitment Is Highest For Which Foreign Market Entry Mode?
a. Exporting Through Foreign Sales Agents
b. Exporting Through Foreign Sales Branches
c. Foreign Direct Investment
d. Foreign Joint Venture
e. Licensin
g ans: c
4. the fastest way to gain access to a foreign market is by .
a. exporting through foreign sales agents
b. exporting through foreign sales branches
c. foreign acquisition
d. foreign direct investment
e. foreign joint venture
ans: a
5. the foreign market entry mode with the lowest sales potential is .
a. exporting through foreign sales agents
b. exporting through foreign sales branches
c. foreign direct investments
4
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Multinational Finance 3rd Edition
by Kirt C. Butler (Author) All Chapters | Complete Guide
|PRINTEND PDF |ORIGINAL DIRECT FROM PUBLISHER|100% VERIFIED
ANSWERS| DOWLOAD IMMEDIATELY AFTER THE ORDER
3th edition
Complete Test Bank, All Chapter Are Included
For More Documents Search (Testbankproferssor.Stuvia)
, lOMoARcPSD|1935369
Kirt C. Butler, Multinational Finance, 3rd Edition
Part I Overview And Background
Chapter 1 An Introduction To Multinational Finance
True/False
1. Mncs Have Investment Or Financial Operations In More Than One
Country. Ans: True.
2. Because Of Globalization In The World’s Markets, A Multinational Financial Manager Is
More Likely Than A Domestic Financial Manager To Specialize In Finance To The
Exclusion Of Other Fields Of Business.
Ans: False. The Multinational Financial Manager Must Be Well Versed In Each Of The
Business Disciplines In Which The Mnc Is Involved.
3. The Domestic Financial Manager Must Be Knowledgeable In Several Areas Within
Finance, Whereas The Multinational Financial Manager Usually Specializes In A
Single Area, Such As Corporate Finance, Investments, Or Financial Markets.
Ans: False. The Multinational Financial Manager Is Likely To Require Knowledge Of
Several Fields Within Finance.
4. The Investment Opportunity Set Is The Set Of Investments Available To The Corporation; That
Is, The Set From Which The Company Must Select.
Ans: True.
5. Types Of Market Efficiency Used To Describe The Performance Of Financial
Markets Are Allocational, Operational, And Transactional Efficiency.
Ans: False. Three Types Of Market Efficiency Are Allocational, Operational, And
Informational.
6. An Informationally Efficient Market Is One With Abundant Information.
Ans: False. It Is A Market In Which Prices Fully Reflect Available Information.
7. Allocational Efficiency Refers To How Efficiently A Market Channels Capital Toward
Its Most Productive Uses.
Ans: True.
8. Allocational Efficiency Refers To Whether A Market Allocates Capital To Those
Investments Deemed Most Worthy By A Host Government.
Ans: False. Allocational Efficiency Refers To How Efficiently A Market Channels Capital
Toward Its Most Productive Uses In An Economic, Rather Than A Political, Sense.
9. Operational Efficiency Refers To How Large An Influence Transactions Costs And Other
Market Frictions Have On The Operation Of A Market.
Ans: True.
10. The Mnc Faces Greater Constraints Than The Domestic Corporation In The Timing
Of Its Investments.
Ans: False. Multinationals Typically Have More Flexibility In Timing, Location, And
Operation.
11. Risk Exists Whenever Actual Outcomes Can Differ From Expected
Outcomes. Ans: True.
2
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12. Assets And Liabilities Are Exposed To Currency Risk When Their Values Can
Change With Unexpected Changes In Currency Values.
Ans: True.
13. “Currency Risk” And “Currency Risk Exposure” Refer To The Same Thing - The
Possibility That Currency Values Will Differ From Their Expectations.
Ans: False. A Firm Is Exposed To Currency Risk When Its Assets Or Liabilities Can Change In
Value With Unexpected Changes In Currency Values.
14. Political Risk Is The Risk That The Business Environment In A Host Country Will
Change Unexpectedly Due To Political Events.
Ans: True.
15. The Terms “Stakeholders” And “Shareholders” Are Synonymous.
Ans: False. Stakeholders Include All Those With A Stake In The Firm. A Broad Definition Of
Stakeholders Includes The Firm’s Creditors, Customers, Suppliers, And Employees.
16. Exporting Through A Foreign Sales Agent Requires Little Resource Commitment And
Helps To Insulate The Exporter From The Costs And Risks Of Foreign Market Entry.
Ans: True.
17. Foreign Direct Investment Is When A Multinational Corporation Builds Productive
Capacity In A Foreign Country.
Ans: True.
18. The Easiest Mode Of Entry Into Foreign Markets Is Foreign Direct
Investment. Ans: False. Fdi Is One Of The Most Difficult Entry Modes.
19. Contract-Based Modes Of Entry Into Foreign Markets Include Foreign Sales Agents And
Foreign Sales Branches.
Ans: False. International Licensing And Franchising, Reciprocal Market Agreements, And
Management Contracts Are Contract-Based Entry Modes.
20. Foreign Direct Investment Requires A Relatively Large Resource Commitment From The
Parent Firm. Ans: True.
21. The Sales And Marketing Benefits Of Foreign Direct Investment Are Usually Less Than
Those Of Export Entry Into Foreign Markets.
Ans: False. With Established Operations In The Foreign Country, Multinational
Corporations Are Able To Promote Their Products And Services More Effectively.
22. Licensing Provides Quick And Relatively Low-Risk Entry Into Foreign Markets As
Long As The Parent Can Protect Its Intellectual Property Rights.
Ans: True.
3
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Kirt C. Butler, Multinational Finance, 3rd Edition
23. The Main Reason For Investment-Based Foreign Market Entry Is To Minimize Cultural
Risk. Ans: False. The Main Reasons Are The Potential For Higher Sales And Lower
Costs.
24. According To Product Cycle Theory, New Products Are Typically Tested In Foreign
Markets And Then Are Introduced Into The Home Market.
Ans: False. New Products Are Usually Introduced In The Home Market.
25. Corporations Often Try To Extend Their Product Life Cycles By Entering Foreign
Markets. Ans: True.
Multiple Choice
1. Entry Modes Into International Markets Include Each Of A) Through D) Except .
a. Exporting
b. Franchising
c. Investment
d. Licensing
e. Each Of The Above Is An Entry
Mode Ans: E
2. For Manufacturing Firms With Patents, The Most Important Difference Between The
Various Foreign Market Entry Modes For Manufacturing Firms Is In Whether Or Not
The Parent Firm Maintains Control Of .
a. Distribution
b. Marketing
c. Packaging
d. Production
e. Purchasing
Ans: D
3. Resource Commitment Is Highest For Which Foreign Market Entry Mode?
a. Exporting Through Foreign Sales Agents
b. Exporting Through Foreign Sales Branches
c. Foreign Direct Investment
d. Foreign Joint Venture
e. Licensin
g ans: c
4. the fastest way to gain access to a foreign market is by .
a. exporting through foreign sales agents
b. exporting through foreign sales branches
c. foreign acquisition
d. foreign direct investment
e. foreign joint venture
ans: a
5. the foreign market entry mode with the lowest sales potential is .
a. exporting through foreign sales agents
b. exporting through foreign sales branches
c. foreign direct investments
4
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