IBUS 401 EXAM 1 UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Question:
1. centralized management
Answer:
allows managers of the parent firm to control foreign subsidiaries and reduce the power of subsidiary
managers
Question:
2. decentralized management
Answer:
gives more control to subsidiary managers who are closer to the subsidiary's operation and environment
Question:
3. agency cost
Answer:
cost of ensuring managers maximize shareholder wealth
Question:
4. agency problem
Answer:
conflict of interest between managers and shareholders (difference in goals)
Question:
5. sarbanes-oxley act
Answer:
2002 A law passed by Congress that ensures a more transparent process for managers to report on the
productivity and financial condition of their firm
Question:
6. Theory of Competitive Advantage
Answer:
specialization increases production efficiency
Question:
7. Imperfect Market Theory
Answer:
factors of production are somewhat immobile, providing incentive to seek out foreign opportunities
Question:
8. Product Cycle Theory
Answer:
as a firm matures, it recognizes opportunities outside its domestic market
, Question:
9. direct foreign investment (DFI)
Answer:
any method of increasing international business that requires a direct investment in foreign operations
Question:
10. international trade, licensing
Answer:
what is usually not included in direct foreign investment?
Question:
11. Balance of Payments
Answer:
summary of transactions between domestic and foreign residents for a specific country over a specified
period of time
Question:
12. Current Account
Answer:
summary of flow of funds due to purchases of goods and services or the provision of income on financial
assets
Question:
13. Capital Account
Answer:
summary of flow of funds resulting from the sale of assets between one specified country and all other
countries over a specified period of time
Question:
14. Financial Account
Answer:
refers to special types of investment, including direct foreign investment and portfolio investment
Question:
15. Removal of the Berlin Wall
Answer:
Led to reductions in trade barriers in Eastern Europe.
Question:
16. Single European Act of 1987
Answer:
Improved access to supplies from firms in other European countries.
Question:
17. North American Free Trade Agreement (NAFTA)
CORRECT ANSWERS
Question:
1. centralized management
Answer:
allows managers of the parent firm to control foreign subsidiaries and reduce the power of subsidiary
managers
Question:
2. decentralized management
Answer:
gives more control to subsidiary managers who are closer to the subsidiary's operation and environment
Question:
3. agency cost
Answer:
cost of ensuring managers maximize shareholder wealth
Question:
4. agency problem
Answer:
conflict of interest between managers and shareholders (difference in goals)
Question:
5. sarbanes-oxley act
Answer:
2002 A law passed by Congress that ensures a more transparent process for managers to report on the
productivity and financial condition of their firm
Question:
6. Theory of Competitive Advantage
Answer:
specialization increases production efficiency
Question:
7. Imperfect Market Theory
Answer:
factors of production are somewhat immobile, providing incentive to seek out foreign opportunities
Question:
8. Product Cycle Theory
Answer:
as a firm matures, it recognizes opportunities outside its domestic market
, Question:
9. direct foreign investment (DFI)
Answer:
any method of increasing international business that requires a direct investment in foreign operations
Question:
10. international trade, licensing
Answer:
what is usually not included in direct foreign investment?
Question:
11. Balance of Payments
Answer:
summary of transactions between domestic and foreign residents for a specific country over a specified
period of time
Question:
12. Current Account
Answer:
summary of flow of funds due to purchases of goods and services or the provision of income on financial
assets
Question:
13. Capital Account
Answer:
summary of flow of funds resulting from the sale of assets between one specified country and all other
countries over a specified period of time
Question:
14. Financial Account
Answer:
refers to special types of investment, including direct foreign investment and portfolio investment
Question:
15. Removal of the Berlin Wall
Answer:
Led to reductions in trade barriers in Eastern Europe.
Question:
16. Single European Act of 1987
Answer:
Improved access to supplies from firms in other European countries.
Question:
17. North American Free Trade Agreement (NAFTA)
