IBUS 401 TEST 1 Study Guide Update
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) non of the above - imperfect markets theory
TRUE/FALSE: Licensing is the process by which a firm provides its technology (copyrights, patents,
trademarks, or trade names) in exchange for fees or some other specified benefits. - True
TRUE/FALSE: The Sarbanes-Oxley Act (SOX) was enacted in 2002 required MNCs and other firms to implement
an internal reporting process that could be easily monitored by executives and the board of directors. - TRUE
TRUE/FALSE: A centralized management style, where major decisions about a foreign subsidiary are made by
the parent company, results in an increase in agency costs. - FALSE
The primary component of the current account is the:
(a) balance of trade
(b) balance of money market flows
(c) balance of capital market flows
(d) unilateral transfers - balance of trade
Which of the following is mentioned in the text as a possible means by which the government may attempt to
improve its balance of trade position (increase its exports or reduce its imports)
(a) it could attempt to reduce its home currency's value
(b) the government could require firms to engage in outsourcing
(c) the gov't could require that its local firms pursue outsourcing
, (d) all of the above are mentioned - it could attempt to reduce its home currency's value
T/F: A balance of trade deficit indicates an excess of imports over exports - True
T/F: A weakening of the U.S. dollar with respect to the British pound would likely reduce U.S. exports to the
U.K. and increase U.S. imports from the U.K. - False
Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bid-ask percentage spread is: -
about 4.26%
______ is not a factor that affects the bid/ask spread.
(a) order costs
(b) inventory costs
(c) volume
(d) all of the above factors affect the bid/ask spread - all of the above factors affect the bid/ask spread
What are the factors that affect the bid-ask spread? - 1. order costs
2. inventory costs
3. competition
4. volume
5. currency risk
If a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it will need C$200,000 in 90 days to
make payment on imports from Canada, it could:
(a) obtain a 90-day forward purchase contract on Canadian dollars
(b) obtain a 90-day forward sale contract on Canadian dollars
(c) purchase Canadian dollars 90 days from now at the spot rate
(d) sell Canadian dollars 90 days from now at the spot rate - obtain a 90-day forward purchase contract on
Canadian dollars
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) non of the above - imperfect markets theory
TRUE/FALSE: Licensing is the process by which a firm provides its technology (copyrights, patents,
trademarks, or trade names) in exchange for fees or some other specified benefits. - True
TRUE/FALSE: The Sarbanes-Oxley Act (SOX) was enacted in 2002 required MNCs and other firms to implement
an internal reporting process that could be easily monitored by executives and the board of directors. - TRUE
TRUE/FALSE: A centralized management style, where major decisions about a foreign subsidiary are made by
the parent company, results in an increase in agency costs. - FALSE
The primary component of the current account is the:
(a) balance of trade
(b) balance of money market flows
(c) balance of capital market flows
(d) unilateral transfers - balance of trade
Which of the following is mentioned in the text as a possible means by which the government may attempt to
improve its balance of trade position (increase its exports or reduce its imports)
(a) it could attempt to reduce its home currency's value
(b) the government could require firms to engage in outsourcing
(c) the gov't could require that its local firms pursue outsourcing
, (d) all of the above are mentioned - it could attempt to reduce its home currency's value
T/F: A balance of trade deficit indicates an excess of imports over exports - True
T/F: A weakening of the U.S. dollar with respect to the British pound would likely reduce U.S. exports to the
U.K. and increase U.S. imports from the U.K. - False
Assume that a bank's bid rate on Swiss francs is $.45 and its ask rate is $.47. Its bid-ask percentage spread is: -
about 4.26%
______ is not a factor that affects the bid/ask spread.
(a) order costs
(b) inventory costs
(c) volume
(d) all of the above factors affect the bid/ask spread - all of the above factors affect the bid/ask spread
What are the factors that affect the bid-ask spread? - 1. order costs
2. inventory costs
3. competition
4. volume
5. currency risk
If a U.S. firm desires to avoid the risk from exchange rate fluctuations, and it will need C$200,000 in 90 days to
make payment on imports from Canada, it could:
(a) obtain a 90-day forward purchase contract on Canadian dollars
(b) obtain a 90-day forward sale contract on Canadian dollars
(c) purchase Canadian dollars 90 days from now at the spot rate
(d) sell Canadian dollars 90 days from now at the spot rate - obtain a 90-day forward purchase contract on
Canadian dollars
