FIN 370 Exam 1 Study Guide Questions
and Answers Graded A+
Concept of "Euro" - Correct answer-Domestic currencies of one country on deposit
in a second country
The Eurocurrency markets serve two valuable purposes:
Eurocurrency deposits are an efficient and convenient money market device for
holding excess corporate liquidity
The Eurocurrency market is a major source of short-term bank loans to finance
corporate working capital needs (including export and import financing)
PURPOSE/EURO BANK/EURO CURRENCY/INTEREST SPREADS - Correct
answer-Eurobanks- They are financial institutions that accept deposits and make
loans in foreign currencies.
Eurocurrency- It is currency held on deposit outside its home market, i.e., held in
banks located outside of the country which issues the currency.
Interest Spreads- For any business that lends money, the interest rate spread is what
the company charges on a loan compared to its cost of money. A bank runs on
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,interest rate spreads, paying a certain rate on savings and CD deposits and making
loans at higher rates than it pays to savers
LIBOR - Correct answer-London Interbank Offered Rate is the daily-calculated
interest rate at which banks lend to one another. It is also the benchmark rate for
trillions of US dollar-denominated contracts and loans, such as floating rate
mortgages
Theory of Comparative Advantage - Correct answer-Free Trade
Perfect Competition
No Uncertainty
Costless Info
No gov.
Reasons firms become MNE's - Correct answer-A multinational enterprise (MNE)
has operating branches, subsidiaries, or affiliates located in foreign countries
Today's MNEs are dependent on emerging markets
Market seekers
Raw Material seekers
Production efficiency
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, Knowledge seekers
Political safety
Phases of globalization process - Correct answer-Global Transition I: Domestic
Phase to the International Trade Phase
Global Transition II: The International Trade Phase to the Multinational Phase
The Multinational Enterprise's Consolidated Financial Results
Public versus family-owned companies - Correct answer-Privately held companies
are—no surprise here—privately held. This means that, in most cases, the company
is owned by its founders, management, or a group of private investors. A public
company, on the other hand, is a company that has sold all or a portion of itself to
the public via an initial public offering (IPO), meaning shareholders have a claim
to part of the company's assets and profits.
A. Tax Morality - Correct answer-- In many countries, taxpayers, corporate or
individual, do not voluntarily comply with the tax laws
- The MNE must decide whether to follow a practice of full disclosure to tax
authorities or adopt the philosophy "When in Rome, do as the Romans do"
- Most MNEs follow the full disclosure practice
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and Answers Graded A+
Concept of "Euro" - Correct answer-Domestic currencies of one country on deposit
in a second country
The Eurocurrency markets serve two valuable purposes:
Eurocurrency deposits are an efficient and convenient money market device for
holding excess corporate liquidity
The Eurocurrency market is a major source of short-term bank loans to finance
corporate working capital needs (including export and import financing)
PURPOSE/EURO BANK/EURO CURRENCY/INTEREST SPREADS - Correct
answer-Eurobanks- They are financial institutions that accept deposits and make
loans in foreign currencies.
Eurocurrency- It is currency held on deposit outside its home market, i.e., held in
banks located outside of the country which issues the currency.
Interest Spreads- For any business that lends money, the interest rate spread is what
the company charges on a loan compared to its cost of money. A bank runs on
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,interest rate spreads, paying a certain rate on savings and CD deposits and making
loans at higher rates than it pays to savers
LIBOR - Correct answer-London Interbank Offered Rate is the daily-calculated
interest rate at which banks lend to one another. It is also the benchmark rate for
trillions of US dollar-denominated contracts and loans, such as floating rate
mortgages
Theory of Comparative Advantage - Correct answer-Free Trade
Perfect Competition
No Uncertainty
Costless Info
No gov.
Reasons firms become MNE's - Correct answer-A multinational enterprise (MNE)
has operating branches, subsidiaries, or affiliates located in foreign countries
Today's MNEs are dependent on emerging markets
Market seekers
Raw Material seekers
Production efficiency
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
, Knowledge seekers
Political safety
Phases of globalization process - Correct answer-Global Transition I: Domestic
Phase to the International Trade Phase
Global Transition II: The International Trade Phase to the Multinational Phase
The Multinational Enterprise's Consolidated Financial Results
Public versus family-owned companies - Correct answer-Privately held companies
are—no surprise here—privately held. This means that, in most cases, the company
is owned by its founders, management, or a group of private investors. A public
company, on the other hand, is a company that has sold all or a portion of itself to
the public via an initial public offering (IPO), meaning shareholders have a claim
to part of the company's assets and profits.
A. Tax Morality - Correct answer-- In many countries, taxpayers, corporate or
individual, do not voluntarily comply with the tax laws
- The MNE must decide whether to follow a practice of full disclosure to tax
authorities or adopt the philosophy "When in Rome, do as the Romans do"
- Most MNEs follow the full disclosure practice
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
