INTERNATIONAL FINANCIAL MANAGEMENT
FINAL PAPER SOLVED QUESTIONS WITH
COMPLETE ANSWERS
◉ For an MNC, agency costs are typically:
a. nonexistent.
b. larger than agency costs of a small purely domestic firm.
c. smaller than agency costs of a small purely domestic firm.
d. the same as agency costs of a small purely domestic firm.
Answer: b. larger than agency costs of a small purely domestic firm
◉ Which of the following could reduce agency problems for an
MNC?
a. stock options as managerial compensation
b. hostile takeover threat
c. investor monitoring
d. All of above.
Answer: d. All of the above
,◉ The agency costs of an MNC are likely to be lower if it:
a. scatters its subsidiaries across many foreign countries.
b. increases its volume of international business.
c. uses a centralized management style.
d. scatters its subsidiaries across many foreign countries AND
increases its volume of international business.
Answer: c. uses a centralized management style
◉ The Sarbanes-Oxley Act improved corporate governance of MNCs
because it:
a. made executives more accountable for verifying financial
statements.
b. eliminated stock options as a form of compensation.
c. tied executive compensation to firm performance.
d. placed a limit on the amount of funds that managers can spend
Answer: a. made executives more accountable for verifying financial
statements
◉ Agency costs faced by MNCs may be larger than those faced by
purely domestic firms because:
,a. monitoring of managers located in foreign countries is more
difficult.
b. foreign subsidiary managers raised in different cultures may not
follow uniform goals.
c. MNCs are relatively large.
d. All of these are correct.
e. monitoring of managers located in foreign countries is more
difficult AND foreign subsidiary managers raised in different
cultures may not follow uniform goals.
Answer: d. All of these are correct
◉ Which of the following theories identifies specialization as a
reason for international business?
a. theory of comparative advantage
b. imperfect markets theory
c. product cycle theory
d. None of these are correct
Answer: a. theory of comparative advantage
◉ Which of the following theories identifies the non-transferability
of resources as a reason for international business?
, a. theory of comparative advantage
b. imperfect markets theory
c. product cycle theory
d. None of these are correct
Answer: b. imperfect markets theory
◉ Which of the following theories suggests that firms seek to
penetrate new markets over time?
a. theory of comparative advantage
b. imperfect markets theory
c. product cycle theory
d. None of these are correct.
Answer: c. product cycle theory
◉ An industry based on which of the following would most likely
take advantage of lower costs in some less developed foreign
countries?
a. assembly line production
b. specialized professional services
c. nuclear missile programs
FINAL PAPER SOLVED QUESTIONS WITH
COMPLETE ANSWERS
◉ For an MNC, agency costs are typically:
a. nonexistent.
b. larger than agency costs of a small purely domestic firm.
c. smaller than agency costs of a small purely domestic firm.
d. the same as agency costs of a small purely domestic firm.
Answer: b. larger than agency costs of a small purely domestic firm
◉ Which of the following could reduce agency problems for an
MNC?
a. stock options as managerial compensation
b. hostile takeover threat
c. investor monitoring
d. All of above.
Answer: d. All of the above
,◉ The agency costs of an MNC are likely to be lower if it:
a. scatters its subsidiaries across many foreign countries.
b. increases its volume of international business.
c. uses a centralized management style.
d. scatters its subsidiaries across many foreign countries AND
increases its volume of international business.
Answer: c. uses a centralized management style
◉ The Sarbanes-Oxley Act improved corporate governance of MNCs
because it:
a. made executives more accountable for verifying financial
statements.
b. eliminated stock options as a form of compensation.
c. tied executive compensation to firm performance.
d. placed a limit on the amount of funds that managers can spend
Answer: a. made executives more accountable for verifying financial
statements
◉ Agency costs faced by MNCs may be larger than those faced by
purely domestic firms because:
,a. monitoring of managers located in foreign countries is more
difficult.
b. foreign subsidiary managers raised in different cultures may not
follow uniform goals.
c. MNCs are relatively large.
d. All of these are correct.
e. monitoring of managers located in foreign countries is more
difficult AND foreign subsidiary managers raised in different
cultures may not follow uniform goals.
Answer: d. All of these are correct
◉ Which of the following theories identifies specialization as a
reason for international business?
a. theory of comparative advantage
b. imperfect markets theory
c. product cycle theory
d. None of these are correct
Answer: a. theory of comparative advantage
◉ Which of the following theories identifies the non-transferability
of resources as a reason for international business?
, a. theory of comparative advantage
b. imperfect markets theory
c. product cycle theory
d. None of these are correct
Answer: b. imperfect markets theory
◉ Which of the following theories suggests that firms seek to
penetrate new markets over time?
a. theory of comparative advantage
b. imperfect markets theory
c. product cycle theory
d. None of these are correct.
Answer: c. product cycle theory
◉ An industry based on which of the following would most likely
take advantage of lower costs in some less developed foreign
countries?
a. assembly line production
b. specialized professional services
c. nuclear missile programs
