BESTLEC
Test Bank
International Financial Management, 13th Edition
by Jeff Madura
All Chapters| Latest Edition| 2025
C
LE
ST
BE
1
, BESTLEC
Chapter 1—Multinational Financial Management
1. The commonly accepted goal of the MNC is to:
a. maximizes short-term earnings.
b. maximizes shareholder wealth.
c. minimize risk.
d. A and C.
e. maximizes international sales.
Answer: B PTS: 1
2. With regard to corporate goals, an MNC is mostly concerned with maximizing , and a
C
purely domestic firm is mostly concerned with maximizing .
a. shareholder wealth; short-term earnings
LE
b. shareholder wealth; shareholder wealth
c. short-term earnings; sales volume
ST
d. short-term earnings; shareholder wealth
Answer: B PTS: 1
BE
3. For the MNC, agency costs are typically:
a. non-existent.
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 PTS: 1
4. Which of the following could reduce agency problems for an MNC?
a. stock options as managerial compensation.
b. hostile takeover threat.
c. investor monitoring.
2
, BESTLEC
d. all of the above are forms of corporate control that could reduce agency problems for an
MNC.
Answer: D PTS: 1
5. The valuation of an MNC should rise when an event causes the expected cash flows from
foreign to and when foreign currencies denominating these cash flows are expected to
.
a. decrease; appreciate
b. increase; appreciate
c. decrease; depreciate
d. increase; depreciate
C
Answer: B PTS: 1
LE
6. Which of the following theories identifies specialization as a reason for international
business?
ST
a. theory of comparative advantage.
b. imperfect markets theory.
c. product cycle theory.
BE
d. none of the above
Answer: A PTS: 1
7. 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 the above
Answer: B PTS: 1
3
, BESTLEC
8. 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 the above
Answer: C PTS: 1
9. Which of the following industries would most likely take advantage of lower costs in
some less developed foreign countries?
a. assembly line production.
C
b. specialized professional services.
c. nuclear missile planning.
LE
d. planning for more sophisticated computer technology.
Answer: A PTS: 1
ST
10. Due to the risks involved in international business, firms should:
BE
a. only consider international business in major countries.
b. maintain international business to no more than 20% of total business.
c. maintain international business to no more than 35% of total business.
d. none of the above
Answer: D PTS: 1
11. A product cycle is the process by which a firm provides a specialized sales or service
strategy, support assistance, and possibly an initial investment in the franchise in exchange for
periodic fees.
a. True
b. False
4
Test Bank
International Financial Management, 13th Edition
by Jeff Madura
All Chapters| Latest Edition| 2025
C
LE
ST
BE
1
, BESTLEC
Chapter 1—Multinational Financial Management
1. The commonly accepted goal of the MNC is to:
a. maximizes short-term earnings.
b. maximizes shareholder wealth.
c. minimize risk.
d. A and C.
e. maximizes international sales.
Answer: B PTS: 1
2. With regard to corporate goals, an MNC is mostly concerned with maximizing , and a
C
purely domestic firm is mostly concerned with maximizing .
a. shareholder wealth; short-term earnings
LE
b. shareholder wealth; shareholder wealth
c. short-term earnings; sales volume
ST
d. short-term earnings; shareholder wealth
Answer: B PTS: 1
BE
3. For the MNC, agency costs are typically:
a. non-existent.
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 PTS: 1
4. Which of the following could reduce agency problems for an MNC?
a. stock options as managerial compensation.
b. hostile takeover threat.
c. investor monitoring.
2
, BESTLEC
d. all of the above are forms of corporate control that could reduce agency problems for an
MNC.
Answer: D PTS: 1
5. The valuation of an MNC should rise when an event causes the expected cash flows from
foreign to and when foreign currencies denominating these cash flows are expected to
.
a. decrease; appreciate
b. increase; appreciate
c. decrease; depreciate
d. increase; depreciate
C
Answer: B PTS: 1
LE
6. Which of the following theories identifies specialization as a reason for international
business?
ST
a. theory of comparative advantage.
b. imperfect markets theory.
c. product cycle theory.
BE
d. none of the above
Answer: A PTS: 1
7. 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 the above
Answer: B PTS: 1
3
, BESTLEC
8. 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 the above
Answer: C PTS: 1
9. Which of the following industries would most likely take advantage of lower costs in
some less developed foreign countries?
a. assembly line production.
C
b. specialized professional services.
c. nuclear missile planning.
LE
d. planning for more sophisticated computer technology.
Answer: A PTS: 1
ST
10. Due to the risks involved in international business, firms should:
BE
a. only consider international business in major countries.
b. maintain international business to no more than 20% of total business.
c. maintain international business to no more than 35% of total business.
d. none of the above
Answer: D PTS: 1
11. A product cycle is the process by which a firm provides a specialized sales or service
strategy, support assistance, and possibly an initial investment in the franchise in exchange for
periodic fees.
a. True
b. False
4
