CHAPTER 1
Introduction
EASY (factual)
1.1 Historically, the primary motive for U.S. multinationals to produce abroad
has been to
a. lower costs
b. respond more quickly to the marketplace
c. avoid trade barriers
d. gain tax benefits
ANSWER: b: p.8, evolution of multinational
1.2 The primary objective of the multinational corporation is to
a. maximize shareholder wealth
b. maximize world production
c. minimize debt
d. minimize the cost of doing business globally
ANSWER: a: p.21, Multinational Financial Management: Theory and Practice
1.3 ____________ is defined as the purchase of assets or commodities on one market
for immediate resale on another in order to profit form a price discrepancy.
a. internationalization
b. arbitrage
c. financing
d. total risk
,ANSWER: b: p.8, evolution of multinational
1.4 The value of good financial management is ___________ in the global markets
because of the much greater probability of market imperfections and
multiple tax rates.
a. minimized
b. neutralized
c. enhanced
d. arbitraged away
ANSWER: c: p.26, role of the financial executive
1.5 When a firm operates globally it offers advantages such as
a. greater political power at home
b. less taxes on its profits
c. greater negotiating power with foreign minority groups
d. greater negotiating power with labor unions
ANSWER: d: p. 3, rise of the multinational
The prime transmitter of global competitive forces is the
a. public utility firm
b. financial management experience of the U.S. markets
c. the multinational corporation
d. the Federal Reserve System of the U.S.
ANSWER: c: p.3, rise of the multinational
,1.7 ___________ were the earliest multinationals.
a. raw-material seekers
b. market seekers
c. cost minimizers
d. oil companies
e. the Federal Reserve System of the U.S.
ANSWER: a: p.10, raw material seekers
1.8 The ___________ are the archetype of the modern multinational firm that goes
overseas to produce and sell in foreign markets.
a. cost minimizers
b. market seekers
c. raw-material seekers
d. whaling companies
ANSWER: b: p.10, market seekers
1.9 ___________ are a recent category of multinationals that seek out and invest in
lower cost production sites overseas.
a. Cost minimizers
b. Market seekers
c. Raw-material seekers
d. High tech firms
ANSWER: a: p.11 cost minimizers
, 1.10 Which one of the following is a consequence of increased global competition?
a. the creation of new steel plants in the old industrial countries
b. the end of free-trade agreements between governments of the world
c. increased comfort level of trade unions with the consequences
d. increased anxiety among workers in the old industrial countries
ANSWER: d: p. 18, Consequences of Global Competition
1.11 The defenders of multinationals believe that __________ are the appropriate
reward for efficiently providing the global economy with products and
services.
a. profits
b. subsidies
c. tax holidays
d. low-interest, government-subsidized loans
ANSWER: a: p.22 Criticisms of the Multinational Corporation
1.12 International ________ can reduce the volatility of an investment portfolio
because national financial markets tend to move independently of each
other.
a. arbitrage
b. centralization of the MNC’s cash
c. diversification
d. investment
ANSWER: c: p. 26, The Importance of Total Risk
Introduction
EASY (factual)
1.1 Historically, the primary motive for U.S. multinationals to produce abroad
has been to
a. lower costs
b. respond more quickly to the marketplace
c. avoid trade barriers
d. gain tax benefits
ANSWER: b: p.8, evolution of multinational
1.2 The primary objective of the multinational corporation is to
a. maximize shareholder wealth
b. maximize world production
c. minimize debt
d. minimize the cost of doing business globally
ANSWER: a: p.21, Multinational Financial Management: Theory and Practice
1.3 ____________ is defined as the purchase of assets or commodities on one market
for immediate resale on another in order to profit form a price discrepancy.
a. internationalization
b. arbitrage
c. financing
d. total risk
,ANSWER: b: p.8, evolution of multinational
1.4 The value of good financial management is ___________ in the global markets
because of the much greater probability of market imperfections and
multiple tax rates.
a. minimized
b. neutralized
c. enhanced
d. arbitraged away
ANSWER: c: p.26, role of the financial executive
1.5 When a firm operates globally it offers advantages such as
a. greater political power at home
b. less taxes on its profits
c. greater negotiating power with foreign minority groups
d. greater negotiating power with labor unions
ANSWER: d: p. 3, rise of the multinational
The prime transmitter of global competitive forces is the
a. public utility firm
b. financial management experience of the U.S. markets
c. the multinational corporation
d. the Federal Reserve System of the U.S.
ANSWER: c: p.3, rise of the multinational
,1.7 ___________ were the earliest multinationals.
a. raw-material seekers
b. market seekers
c. cost minimizers
d. oil companies
e. the Federal Reserve System of the U.S.
ANSWER: a: p.10, raw material seekers
1.8 The ___________ are the archetype of the modern multinational firm that goes
overseas to produce and sell in foreign markets.
a. cost minimizers
b. market seekers
c. raw-material seekers
d. whaling companies
ANSWER: b: p.10, market seekers
1.9 ___________ are a recent category of multinationals that seek out and invest in
lower cost production sites overseas.
a. Cost minimizers
b. Market seekers
c. Raw-material seekers
d. High tech firms
ANSWER: a: p.11 cost minimizers
, 1.10 Which one of the following is a consequence of increased global competition?
a. the creation of new steel plants in the old industrial countries
b. the end of free-trade agreements between governments of the world
c. increased comfort level of trade unions with the consequences
d. increased anxiety among workers in the old industrial countries
ANSWER: d: p. 18, Consequences of Global Competition
1.11 The defenders of multinationals believe that __________ are the appropriate
reward for efficiently providing the global economy with products and
services.
a. profits
b. subsidies
c. tax holidays
d. low-interest, government-subsidized loans
ANSWER: a: p.22 Criticisms of the Multinational Corporation
1.12 International ________ can reduce the volatility of an investment portfolio
because national financial markets tend to move independently of each
other.
a. arbitrage
b. centralization of the MNC’s cash
c. diversification
d. investment
ANSWER: c: p. 26, The Importance of Total Risk
