TEST BANK
INTERNATIONAL FINANCIAL MANAGEMENT,
BY CHEOL EUN, BRUCE G. RESNICK
10th Edition
,International Financial Management, 10e (Eun)
Chapter 1 Globalization and the Multinational Firm
1) What Major Dimension Sets Apart International Finance From Domestic Finance?
A) Foreign Exchange And Political Risks
B) Market Imperfections
C) Expanded Opportunity Set
D) All Of The Options
Answer: D
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
2) An Example Of A Political Risk Is
A) Expropriation Of Assets.
B) Adverse Change In Tax Rules.
C) The Opposition Party Being Elected.
D) Both The Expropriation Of Assets And Adverse Changes In Tax Rules Are Correct.
Answer: D
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
3) Production Of Goods And Services Has Become Globalized To A Large Extent As A Result Of
A) Natural Resources Being Depleted In One Country After Another.
B) Skilled Labor Being Highly Mobile.
C) Multinational Corporations' Efforts To Source Inputs And Locate Production Anywhere
Where Costs Are Lower And Profits Higher.
D) Common Tastes Worldwide For The Same Goods And Services.
Answer: C
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
4) Recently, Financial Markets Have Become Highly Integrated. This Development
A) Allows Investors To Diversify Their Portfolios Internationally.
B) Allows Minority Investors To Buy And Sell Stocks.
C) Has Increased The Cost Of Capital For Firms.
D) None Of The Options
Answer: A
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
,5) Japan Has Experienced Large Trade Surpluses. Japanese Investors Have Responded To This By
A) Liquidating Their Positions In Stocks To Buy Dollar-Denominated Bonds.
B) Investing Heavily In U.S. And Other Foreign Financial Markets.
C) Lobbying The U.S. Government To Depreciate Its Currency.
D) Lobbying The Japanese Government To Allow The Yen To Appreciate.
Answer: B
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
6) Suppose Your Firm Invests $100,000 In A Project In Italy. At The Time The Exchange Rate Is
$1.25 = €1.00. One Year Later The Exchange Rate Is The Same, But The Italian Government
Has Expropriated Your Firm's Assets Paying Only €80,000 In Compensation. This Is An
Example Of
A) Exchange Rate Risk.
B) Political Risk.
C) Market Imperfections.
D) None Of The Options, Since $100,000 = €80,000 × $1.25/€1.00.
Answer: B
Topic: What's Special About "International" Finance?
7) Suppose You Start With $100 And Buy Stock For £50 When The Exchange Rate Is £1 = $2.
One Year Later, The Stock Rises To £60. You Are Happy With Your 20 Percent Return On The
Stock, But When You Sell The Stock And Exchange Your £60 For Dollars, You Only Get $45
Since The Pound Has Fallen To £1 = $0.75. This Loss Of Value Is An Example Of
A) Exchange Rate Risk.
B) Political Risk.
C) Market Imperfections.
D) Weakness In The Dollar.
Answer: A
Topic: What's Special About "International" Finance?
,8) Suppose That Great Britain Is A Major Export Market For Your Firm, A U.S.-Based MNC.
If The British Pound Depreciates Against The U.S. Dollar,
A) Your Firm Will Be Able To Charge More In Dollar Terms While Keeping Pound Prices Stable.
B) Your Firm May Be Priced Out Of The U.K. Market, To The Extent That Your Dollar
Costs Stay Constant And Your Pound Prices Will Rise.
C) To Protect U.K. Market Share, Your Firm May Have To Cut The Dollar Price Of Your Goods
To Keep The Pound Price The Same.
D) Your Firm May Be Priced Out Of The U.K. Market, To The Extent That Your Dollar Costs
Stay Constant And Your Pound Prices Will Rise, And To Protect U.K. Market Share, Your
Firm May Have To Cut The Dollar Price Of Your Goods To Keep The Pound Price The Same.
Answer: D
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
9) Suppose Mexico Is A Major Export Market For Your U.S.-Based Company And The Mexican
Peso Appreciates Drastically Against The U.S. Dollar. This Means
A) Your Company's Products Can Be Priced Out Of The Mexican Market, As The Peso
Price Of American Imports Will Rise Following The Peso's Fall.
B) Your Firm Will Be Able To Charge More In Dollar Terms While Keeping Peso Prices Stable.
C) Your Domestic Competitors Will Enjoy A Period Of Facing Lessened Price
Competition From Mexican Imports.
D) Your Firm Will Be Able To Charge More In Dollar Terms While Keeping Peso Prices
Stable And Your Domestic Competitors Will Enjoy A Period Of Facing Lessened Price
Competition From Mexican Imports.
Answer: D
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
10) Suppose Mexico Is A Major Export Market For Your U.S.-Based Company And The
Mexican Peso Depreciates Drastically Against The U.S. Dollar, As It Did In December 1994.
This Means That
A) Your Company's Products Can Be Priced Out Of The Mexican Market, As The Peso
Price Of American Imports Will Rise Following The Peso's Fall.
B) Your Firm Will Be Able To Charge More In Dollar Terms While Keeping Peso Prices Stable.
C) Your Domestic Competitors Will Enjoy A Period Of Facing Little Price Competition From
Mexican Imports.
D) None Of The Options
Answer: A
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
,11) Suppose That You Are A U.S. Producer Of A Commodity Good Competing With Foreign
Producers. Your Inputs Of Production Are Priced In Dollars And You Sell Your Output In
Dollars. If The U.S. Currency Depreciates Against The Currencies Of Our Trading Partners,
A) Your Competitive Position Is Likely Improved.
B) Your Competitive Position Is Likely Worsened.
C) Your Competitive Position Is Unchanged.
D) None Of The Options
Answer: A
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
12) Undoubtedly, We Are Now Living In A World Where All The Major Economic
Functions— Consumption, Production, And Investment—
A) Are Still Inherently Local.
B) Are Still Regional In Nature.
C) Are Slowly Becoming Globalized.
D) Are Highly Globalized.
Answer: D
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
13) Most Governments At Least Try To Make It Difficult For People To Cross Their Borders
Illegally. This Barrier To The Free Movement Of Labor Is An Example Of
A) Information Asymmetry.
B) Excessive Transactions Costs.
C) Racial Discrimination.
D) A Market Imperfection.
Answer: D
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
14) Although The World Economy Is Much More Integrated Today Than Was The Case 10 Or
20 Years Ago, A Variety Of Barriers Still Hamper Free Movements Of People, Goods, Services,
And Capital Across National Boundaries. These Barriers Include
A) Legal Restrictions.
B) Excessive Transportation Costs.
C) Information Asymmetry.
D) All Of The Options
Answer: D
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
15) The Japanese Automobile Company Honda Decided To Establish Production Facilities In
Ohio, Mainly To
A) Circumvent Trade Barriers.
,B) Reduce Transportation Costs.
C) Reduce Transactions Costs.
D) All Of The Options
Answer: A
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
16) When Individual Investors Become Aware Of Overseas Investment Opportunities And
Are Willing To Diversify Their Portfolios Internationally,
A) They Trade One Market Imperfection, Information Asymmetry, For Another, Exchange Rate
Risk.
B) They Benefit From An Expanded Opportunity Set.
C) They Should Not Bother To Read Or To Understand The Prospectus, Since It's Probably
Written In A Foreign Language.
D) They Should Invest Only In Dollars Or Euros.
Answer: B
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
17) The Nestlé Corporation, A Well-Known Swiss MNC, Used To Issue Two Different
Classes Of Common Stock, Bearer Shares And Registered Shares, And Foreigners Were
Allowed To Hold Only
A) Registered Shares.
B) Bearer Shares.
C) Voting Shares.
D) Convertible Shares.
Answer: B
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
18) Deregulated Financial Markets And Heightened Competition In Financial Services
Provided An Environment For Financial Innovations That Resulted In The Introduction Of
Various Instruments. Examples Of These Innovative Instruments Include
A) Currency Futures And Options, Foreign Stock Index Futures And Options.
B) Multicurrency Bonds.
C) International Mutual Funds, Country Funds, Exchange Traded Funds.
D) All Of The Options
Answer: D
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
19) Nestlé, A Well-Known Swiss Corporation,
A) Has Been A Paragon Of Virtue In Its Opposition To All Forms Of Political Risk.
B) At One Time Placed Restrictions On Foreign Ownership Of Its Stock. When It
Relaxed These Restrictions, The Total Market Value Of The Firm Fell.
C) At One Time Placed Restrictions On Foreign Ownership Of Its Stock. When It
Relaxed These Restrictions, There Was A Major Transfer Of Wealth From Foreign
,Shareholders To Domestic
,Shareholders.
D) None Of The Options
Answer: C
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
20) The Goal Of Shareholder Wealth Maximization
A) Is Not Appropriate For Non-U.S. Business Firms.
B) Means That All Business Decisions And Investments That A Firm Makes Are Done For The
Purpose Of Making The Owners Of The Firm Better Off Financially.
C) Is A Sub-Objective The Firm Should Attempt To Achieve After The Objective Of
Customer Satisfaction Is Met.
D) Is In Conflict With The Privatization Process Taking Place In Third-World Countries.
Answer: B
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
21) As Capital Markets Are Becoming More Integrated, The Goal Of Shareholder
Wealth Maximization
A) Has Been Altered To Include Other Goals As Well.
B) Has Lost Out To Other Goals, Even In The U.S.
C) Has Been Given Increasing Importance By Managers In Europe.
D) Has Been Shown To Be A Deterrent To Raising Funds Abroad.
Answer: C
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
22) Corporate Scandals At Firms Such As Enron, Worldcom And The Italian Firm Parmalat
A) Show That Managers Might Be Tempted To Pursue Their Own Private Interests At The
Expense Of Shareholders.
B) Show That Italian Shareholders Are Better At Monitoring Managerial Behavior Than
U.S. Shareholders.
C) Show That White-Collar Criminals Hardly Ever Get Punished.
D) Show That Socialism Is A Better Way To Go Than Capitalism.
Answer: A
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
23) While The Corporate Governance Problem Is Not Confined To The United States,
A) It Can Actually Be A Much More Serious Problem In Other Parts Of The World, Where
The Legal Protection Of Shareholders Is Weak Or Nonexistent.
B) It Has Reached Its High Point In The United States.
C) The U.S. Legal System, With Lawsuits Used Only As A Last Resort, Ensured That Any
Conflicts Of Interest Would Soon Be A Thing Of The Past.
D) None Of The Options
,Answer: A
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
24) The Owners Of A Business Are The
A) Taxpayers.
B) Workers.
C) Suppliers.
D) Shareholders.
Answer: D
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
25) The Massive Privatization That Is Currently Taking Place In Developing And Formerly
Socialist Countries
A) Will Eventually Enhance The Standard Of Living To These Countries' Citizens.
B) Depends On Private Investment.
C) Increases The Opportunity Set Facing These Countries' Citizens.
D) All Of The Options
Answer: D
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
26) A Firm With Concentrated Ownership
A) May Give Rise To Conflicts Of Interest Between Dominant Shareholders And Small
Outside Shareholders.
B) May Enjoy More Accounting Transparency Than Firms With Diffuse Ownership Structures.
C) Is A Partnership, Never A Corporation.
D) None Of The Options
Answer: A
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
, 27) The Ultimate Guardians Of Shareholder Interest In A Corporation Are The
A) Rank And File Workers.
B) Senior Management.
C) Boards Of Directors.
D) All Of The Options
Answer: C
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
28) In Countries Like France And Germany,
A) Managers Have Often Made Business Decisions With Regard To Maximizing Market Share
To The Exclusion Of Other Goals.
B) Managers Have Often Viewed Shareholders As One Of The "Stakeholders" Of The
Firm, Others Being Employees, Customers, Suppliers, Banks And So Forth.
C) Managers Have Often Regarded The Prosperity And Growth Of Their Combines, Or
Families Of Related Firms, As Their Most Critical Goal.
D) Managers Have Traditionally Embraced The Maximization Of Shareholder Wealth As
The Only Worthy Goal.
Answer: B
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
29) When Corporate Governance Breaks Down
A) Shareholders Are Unlikely To Receive Fair Returns On Their Investments.
B) Managers May Be Tempted To Enrich Themselves At Shareholder Expense.
C) The Board Of Directors Is Not Doing Its Job.
D) All Of The Options
Answer: D
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
30) Privatization Refers To The Process Of
A) Having Government Operate Businesses For The Betterment Of The Public Sector.
B) Government Allowing The Operation Of Privately Owned Business.
C) Prohibiting Government Operated Enterprises.
D) A Country Divesting Itself Of The Ownership And Operation Of A Business Venture By
Turning It Over To The Free Market System.
Answer: D
Topic: Globalization Of The World Economy
Accessibility: Keyboard Navigation
INTERNATIONAL FINANCIAL MANAGEMENT,
BY CHEOL EUN, BRUCE G. RESNICK
10th Edition
,International Financial Management, 10e (Eun)
Chapter 1 Globalization and the Multinational Firm
1) What Major Dimension Sets Apart International Finance From Domestic Finance?
A) Foreign Exchange And Political Risks
B) Market Imperfections
C) Expanded Opportunity Set
D) All Of The Options
Answer: D
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
2) An Example Of A Political Risk Is
A) Expropriation Of Assets.
B) Adverse Change In Tax Rules.
C) The Opposition Party Being Elected.
D) Both The Expropriation Of Assets And Adverse Changes In Tax Rules Are Correct.
Answer: D
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
3) Production Of Goods And Services Has Become Globalized To A Large Extent As A Result Of
A) Natural Resources Being Depleted In One Country After Another.
B) Skilled Labor Being Highly Mobile.
C) Multinational Corporations' Efforts To Source Inputs And Locate Production Anywhere
Where Costs Are Lower And Profits Higher.
D) Common Tastes Worldwide For The Same Goods And Services.
Answer: C
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
4) Recently, Financial Markets Have Become Highly Integrated. This Development
A) Allows Investors To Diversify Their Portfolios Internationally.
B) Allows Minority Investors To Buy And Sell Stocks.
C) Has Increased The Cost Of Capital For Firms.
D) None Of The Options
Answer: A
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
,5) Japan Has Experienced Large Trade Surpluses. Japanese Investors Have Responded To This By
A) Liquidating Their Positions In Stocks To Buy Dollar-Denominated Bonds.
B) Investing Heavily In U.S. And Other Foreign Financial Markets.
C) Lobbying The U.S. Government To Depreciate Its Currency.
D) Lobbying The Japanese Government To Allow The Yen To Appreciate.
Answer: B
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
6) Suppose Your Firm Invests $100,000 In A Project In Italy. At The Time The Exchange Rate Is
$1.25 = €1.00. One Year Later The Exchange Rate Is The Same, But The Italian Government
Has Expropriated Your Firm's Assets Paying Only €80,000 In Compensation. This Is An
Example Of
A) Exchange Rate Risk.
B) Political Risk.
C) Market Imperfections.
D) None Of The Options, Since $100,000 = €80,000 × $1.25/€1.00.
Answer: B
Topic: What's Special About "International" Finance?
7) Suppose You Start With $100 And Buy Stock For £50 When The Exchange Rate Is £1 = $2.
One Year Later, The Stock Rises To £60. You Are Happy With Your 20 Percent Return On The
Stock, But When You Sell The Stock And Exchange Your £60 For Dollars, You Only Get $45
Since The Pound Has Fallen To £1 = $0.75. This Loss Of Value Is An Example Of
A) Exchange Rate Risk.
B) Political Risk.
C) Market Imperfections.
D) Weakness In The Dollar.
Answer: A
Topic: What's Special About "International" Finance?
,8) Suppose That Great Britain Is A Major Export Market For Your Firm, A U.S.-Based MNC.
If The British Pound Depreciates Against The U.S. Dollar,
A) Your Firm Will Be Able To Charge More In Dollar Terms While Keeping Pound Prices Stable.
B) Your Firm May Be Priced Out Of The U.K. Market, To The Extent That Your Dollar
Costs Stay Constant And Your Pound Prices Will Rise.
C) To Protect U.K. Market Share, Your Firm May Have To Cut The Dollar Price Of Your Goods
To Keep The Pound Price The Same.
D) Your Firm May Be Priced Out Of The U.K. Market, To The Extent That Your Dollar Costs
Stay Constant And Your Pound Prices Will Rise, And To Protect U.K. Market Share, Your
Firm May Have To Cut The Dollar Price Of Your Goods To Keep The Pound Price The Same.
Answer: D
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
9) Suppose Mexico Is A Major Export Market For Your U.S.-Based Company And The Mexican
Peso Appreciates Drastically Against The U.S. Dollar. This Means
A) Your Company's Products Can Be Priced Out Of The Mexican Market, As The Peso
Price Of American Imports Will Rise Following The Peso's Fall.
B) Your Firm Will Be Able To Charge More In Dollar Terms While Keeping Peso Prices Stable.
C) Your Domestic Competitors Will Enjoy A Period Of Facing Lessened Price
Competition From Mexican Imports.
D) Your Firm Will Be Able To Charge More In Dollar Terms While Keeping Peso Prices
Stable And Your Domestic Competitors Will Enjoy A Period Of Facing Lessened Price
Competition From Mexican Imports.
Answer: D
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
10) Suppose Mexico Is A Major Export Market For Your U.S.-Based Company And The
Mexican Peso Depreciates Drastically Against The U.S. Dollar, As It Did In December 1994.
This Means That
A) Your Company's Products Can Be Priced Out Of The Mexican Market, As The Peso
Price Of American Imports Will Rise Following The Peso's Fall.
B) Your Firm Will Be Able To Charge More In Dollar Terms While Keeping Peso Prices Stable.
C) Your Domestic Competitors Will Enjoy A Period Of Facing Little Price Competition From
Mexican Imports.
D) None Of The Options
Answer: A
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
,11) Suppose That You Are A U.S. Producer Of A Commodity Good Competing With Foreign
Producers. Your Inputs Of Production Are Priced In Dollars And You Sell Your Output In
Dollars. If The U.S. Currency Depreciates Against The Currencies Of Our Trading Partners,
A) Your Competitive Position Is Likely Improved.
B) Your Competitive Position Is Likely Worsened.
C) Your Competitive Position Is Unchanged.
D) None Of The Options
Answer: A
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
12) Undoubtedly, We Are Now Living In A World Where All The Major Economic
Functions— Consumption, Production, And Investment—
A) Are Still Inherently Local.
B) Are Still Regional In Nature.
C) Are Slowly Becoming Globalized.
D) Are Highly Globalized.
Answer: D
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
13) Most Governments At Least Try To Make It Difficult For People To Cross Their Borders
Illegally. This Barrier To The Free Movement Of Labor Is An Example Of
A) Information Asymmetry.
B) Excessive Transactions Costs.
C) Racial Discrimination.
D) A Market Imperfection.
Answer: D
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
14) Although The World Economy Is Much More Integrated Today Than Was The Case 10 Or
20 Years Ago, A Variety Of Barriers Still Hamper Free Movements Of People, Goods, Services,
And Capital Across National Boundaries. These Barriers Include
A) Legal Restrictions.
B) Excessive Transportation Costs.
C) Information Asymmetry.
D) All Of The Options
Answer: D
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
15) The Japanese Automobile Company Honda Decided To Establish Production Facilities In
Ohio, Mainly To
A) Circumvent Trade Barriers.
,B) Reduce Transportation Costs.
C) Reduce Transactions Costs.
D) All Of The Options
Answer: A
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
16) When Individual Investors Become Aware Of Overseas Investment Opportunities And
Are Willing To Diversify Their Portfolios Internationally,
A) They Trade One Market Imperfection, Information Asymmetry, For Another, Exchange Rate
Risk.
B) They Benefit From An Expanded Opportunity Set.
C) They Should Not Bother To Read Or To Understand The Prospectus, Since It's Probably
Written In A Foreign Language.
D) They Should Invest Only In Dollars Or Euros.
Answer: B
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
17) The Nestlé Corporation, A Well-Known Swiss MNC, Used To Issue Two Different
Classes Of Common Stock, Bearer Shares And Registered Shares, And Foreigners Were
Allowed To Hold Only
A) Registered Shares.
B) Bearer Shares.
C) Voting Shares.
D) Convertible Shares.
Answer: B
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
18) Deregulated Financial Markets And Heightened Competition In Financial Services
Provided An Environment For Financial Innovations That Resulted In The Introduction Of
Various Instruments. Examples Of These Innovative Instruments Include
A) Currency Futures And Options, Foreign Stock Index Futures And Options.
B) Multicurrency Bonds.
C) International Mutual Funds, Country Funds, Exchange Traded Funds.
D) All Of The Options
Answer: D
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
19) Nestlé, A Well-Known Swiss Corporation,
A) Has Been A Paragon Of Virtue In Its Opposition To All Forms Of Political Risk.
B) At One Time Placed Restrictions On Foreign Ownership Of Its Stock. When It
Relaxed These Restrictions, The Total Market Value Of The Firm Fell.
C) At One Time Placed Restrictions On Foreign Ownership Of Its Stock. When It
Relaxed These Restrictions, There Was A Major Transfer Of Wealth From Foreign
,Shareholders To Domestic
,Shareholders.
D) None Of The Options
Answer: C
Topic: What's Special About "International" Finance?
Accessibility: Keyboard Navigation
20) The Goal Of Shareholder Wealth Maximization
A) Is Not Appropriate For Non-U.S. Business Firms.
B) Means That All Business Decisions And Investments That A Firm Makes Are Done For The
Purpose Of Making The Owners Of The Firm Better Off Financially.
C) Is A Sub-Objective The Firm Should Attempt To Achieve After The Objective Of
Customer Satisfaction Is Met.
D) Is In Conflict With The Privatization Process Taking Place In Third-World Countries.
Answer: B
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
21) As Capital Markets Are Becoming More Integrated, The Goal Of Shareholder
Wealth Maximization
A) Has Been Altered To Include Other Goals As Well.
B) Has Lost Out To Other Goals, Even In The U.S.
C) Has Been Given Increasing Importance By Managers In Europe.
D) Has Been Shown To Be A Deterrent To Raising Funds Abroad.
Answer: C
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
22) Corporate Scandals At Firms Such As Enron, Worldcom And The Italian Firm Parmalat
A) Show That Managers Might Be Tempted To Pursue Their Own Private Interests At The
Expense Of Shareholders.
B) Show That Italian Shareholders Are Better At Monitoring Managerial Behavior Than
U.S. Shareholders.
C) Show That White-Collar Criminals Hardly Ever Get Punished.
D) Show That Socialism Is A Better Way To Go Than Capitalism.
Answer: A
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
23) While The Corporate Governance Problem Is Not Confined To The United States,
A) It Can Actually Be A Much More Serious Problem In Other Parts Of The World, Where
The Legal Protection Of Shareholders Is Weak Or Nonexistent.
B) It Has Reached Its High Point In The United States.
C) The U.S. Legal System, With Lawsuits Used Only As A Last Resort, Ensured That Any
Conflicts Of Interest Would Soon Be A Thing Of The Past.
D) None Of The Options
,Answer: A
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
24) The Owners Of A Business Are The
A) Taxpayers.
B) Workers.
C) Suppliers.
D) Shareholders.
Answer: D
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
25) The Massive Privatization That Is Currently Taking Place In Developing And Formerly
Socialist Countries
A) Will Eventually Enhance The Standard Of Living To These Countries' Citizens.
B) Depends On Private Investment.
C) Increases The Opportunity Set Facing These Countries' Citizens.
D) All Of The Options
Answer: D
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
26) A Firm With Concentrated Ownership
A) May Give Rise To Conflicts Of Interest Between Dominant Shareholders And Small
Outside Shareholders.
B) May Enjoy More Accounting Transparency Than Firms With Diffuse Ownership Structures.
C) Is A Partnership, Never A Corporation.
D) None Of The Options
Answer: A
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
, 27) The Ultimate Guardians Of Shareholder Interest In A Corporation Are The
A) Rank And File Workers.
B) Senior Management.
C) Boards Of Directors.
D) All Of The Options
Answer: C
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
28) In Countries Like France And Germany,
A) Managers Have Often Made Business Decisions With Regard To Maximizing Market Share
To The Exclusion Of Other Goals.
B) Managers Have Often Viewed Shareholders As One Of The "Stakeholders" Of The
Firm, Others Being Employees, Customers, Suppliers, Banks And So Forth.
C) Managers Have Often Regarded The Prosperity And Growth Of Their Combines, Or
Families Of Related Firms, As Their Most Critical Goal.
D) Managers Have Traditionally Embraced The Maximization Of Shareholder Wealth As
The Only Worthy Goal.
Answer: B
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
29) When Corporate Governance Breaks Down
A) Shareholders Are Unlikely To Receive Fair Returns On Their Investments.
B) Managers May Be Tempted To Enrich Themselves At Shareholder Expense.
C) The Board Of Directors Is Not Doing Its Job.
D) All Of The Options
Answer: D
Topic: Goals For International Financial Management
Accessibility: Keyboard Navigation
30) Privatization Refers To The Process Of
A) Having Government Operate Businesses For The Betterment Of The Public Sector.
B) Government Allowing The Operation Of Privately Owned Business.
C) Prohibiting Government Operated Enterprises.
D) A Country Divesting Itself Of The Ownership And Operation Of A Business Venture By
Turning It Over To The Free Market System.
Answer: D
Topic: Globalization Of The World Economy
Accessibility: Keyboard Navigation
