MULTINATIONAL BUSINESS FINANCE
ACTUAL PAPER 2026 QUESTIONS WITH
ANSWERS GRADED A+
⩥ What is the effect of a decentralized management style on agency
costs? Answer: It increases agency costs by giving more control to
subsidiary managers.
⩥ What does the Theory of Competitive Advantage suggest? Answer:
Specialization increases production efficiency.
⩥ What does the Imperfect Markets Theory imply about international
business? Answer: Factors of production are somewhat immobile,
incentivizing firms to seek foreign opportunities.
⩥ What does the Product Cycle Theory state? Answer: As a firm
matures, it recognizes opportunities outside its domestic market.
⩥ What are comparative advantages? Answer: Advantages that allow
firms to penetrate foreign markets.
⩥ What happens if markets were closed to international business?
Answer: There would be no international business.
, ⩥ What is the impact of perfect markets on international trade? Answer:
It eliminates the comparative cost advantage rationale for international
trade.
⩥ What is the first step for a firm according to the Product Cycle
Theory? Answer: To establish its operation in the home market.
⩥ Why might a firm export its product to foreign consumers? Answer:
Because the product is perceived as superior to local alternatives.
⩥ What is a key factor in the management of MNCs? Answer: Clear
communication of goals from the parent company to subsidiaries.
⩥ How does SOX improve corporate governance of MNCs? Answer: By
establishing a centralized database and ensuring consistent reporting
among subsidiaries.
⩥ What is the significance of monitoring managers in MNCs? Answer:
It helps ensure that managers maximize shareholder wealth.
⩥ What challenges do MNCs face in managing agency problems?
Answer: Difficulties in monitoring distant subsidiaries and cultural
differences among managers.
ACTUAL PAPER 2026 QUESTIONS WITH
ANSWERS GRADED A+
⩥ What is the effect of a decentralized management style on agency
costs? Answer: It increases agency costs by giving more control to
subsidiary managers.
⩥ What does the Theory of Competitive Advantage suggest? Answer:
Specialization increases production efficiency.
⩥ What does the Imperfect Markets Theory imply about international
business? Answer: Factors of production are somewhat immobile,
incentivizing firms to seek foreign opportunities.
⩥ What does the Product Cycle Theory state? Answer: As a firm
matures, it recognizes opportunities outside its domestic market.
⩥ What are comparative advantages? Answer: Advantages that allow
firms to penetrate foreign markets.
⩥ What happens if markets were closed to international business?
Answer: There would be no international business.
, ⩥ What is the impact of perfect markets on international trade? Answer:
It eliminates the comparative cost advantage rationale for international
trade.
⩥ What is the first step for a firm according to the Product Cycle
Theory? Answer: To establish its operation in the home market.
⩥ Why might a firm export its product to foreign consumers? Answer:
Because the product is perceived as superior to local alternatives.
⩥ What is a key factor in the management of MNCs? Answer: Clear
communication of goals from the parent company to subsidiaries.
⩥ How does SOX improve corporate governance of MNCs? Answer: By
establishing a centralized database and ensuring consistent reporting
among subsidiaries.
⩥ What is the significance of monitoring managers in MNCs? Answer:
It helps ensure that managers maximize shareholder wealth.
⩥ What challenges do MNCs face in managing agency problems?
Answer: Difficulties in monitoring distant subsidiaries and cultural
differences among managers.
