71) ________ refers to the foreign direct investment in factories, equipment, and land that cannot
be pulled out of the market quickly.
A) Hot money
B) Patient money
C) Fiat money
D) Key money
72) Money earned from the sale of goods and services is known as ________.
A) revenue
B) dividend
C) depreciation
D) book value
73) The ________ of a company is the mix of equity, debt, and internally generated funds that it
uses to finance its activities.
A) enterprise value
B) stock value
C) capital structure
D) corporate structure
74) ________ appeals to companies because it lowers the amount of taxes the companies must
pay.
A) Debt
B) Equity
C) Stock value
D) Enterprise value
75) The board plans to examine Wilson’s ability to produce enough bags to satisfy their
customers’ demands. This evaluation is known as ________.
A) capacity planning
B) process planning
C) lean production
D) product structure modeling
76) If Wilson Industries selects a new area for its production units, the company will be
implementing ________.
A) capacity planning
B) process planning
C) facilities location planning
D) product structure modeling
77) The board will also examine new production techniques the company could use to create its
product. This examination is a part of ________.
A) capacity planning
B) process planning
C) facilities location planning
D) centralized production
78) If the board discusses the spatial arrangement of production processes within Wilson’s
production facilities, they will be engaging in ________.
A) capacity planning
B) facilities location planning
C) process planning
D) facilities layout planning
Scenario: Hafstrom Motors
Based in Kentucky, Hafstrom Motors has always used spare parts made in America for its
automobiles. However, sales and profits have slumped over the past three years. A senior
manager at the company comes up with new strategies for improving the firm’s production
activities.
79) The senior manager recommends that Hafstrom obtain auto parts from a country where
production activities would generate more value than it would generate elsewhere. He wants to
take advantage of ________.
A) just-in-time manufacturing
B) facilities layout planning
C) process planning
D) location economies
80) The top management of the company contends that Hafstrom would benefit most from
manufacturing its own parts, rather than sourcing it from elsewhere, even if they are made at
another location overseas. Which of the following is being recommended in this approach?
A) just-in-time manufacturing
B) location economies
C) vertical integration
D) outsourcing
81) The senior manager argues that Hafstrom could reduce its costs significantly by purchasing
parts from companies located overseas rather than producing its own parts. Which of the
following is the senior manager advocating?
A) outsourcing
B) a greenfield investment
C) lean production
D) vertical integration
Scenario: Audio Component Outsourcing
Echo Corporation manufactures high-quality audio components, such as speakers, amplifiers,
and receivers, for home entertainment systems. Echo has been losing market share in recent
years due to the competitive pricing of other audio component manufacturers that engage in
outsourcing. Echo managers are attempting to convince Nathan Douglas, the firm’s founder and
CEO, that outsourcing would enable the firm to be more competitive without sacrificing quality.
82) Which of the following most likely supports the argument of Echo managers to outsource
some of the firm’s manufacturing activities?
A) Echo managers could reduce the wages of U.S. based employees and sub-contractors.
B) Echo could save money by reducing the costs incurred in manufacturing the component parts.
C) Echo managers could implement a marketing campaign for foreign markets that is identical to
the outsourced firm’s marketing campaign.
D) Echo could merge with one of its U.S.-based competitors to gain a larger market share.
83) Which of the following should most likely be considered in making the decision to outsource
some of Echo’s manufacturing activities?
A) Do purchasing components present the lowest cost option for Echo?
B) Would Echo engineers be willing to relocate to a foreign nation?
C) Is Echo prepared to cover moving expenses for its managerial talent?
D) Can Echo find employees for a customer service center in the U.S.?
84) Which of the following is most likely a potential benefit for Echo if it outsources some of its
manufacturing activities?
A) heightened communications awareness
B) increased activity in e-commerce sales
C) strong intellectual property protection
D) eliminating the exposure of assets to political risk
85) Economic forecasts reveal that the U.S. dollar is expected to decline relative to the Euro.
Which of the following is the most advantageous method of obtaining funding for Verandas
under these conditions?
A) borrowing from U.S. banks
B) issuing equity in Germany
C) issuing equity in the U.S.
D) borrowing from Dutch banks
86) The Verandas U.S. subsidiary was turned down when it tried to borrow from a U.S. bank.
The bank manager suggested that the parent firm deposit money with the U.S. bank’s Dutch
branch, and then the U.S. bank’s home office would lend the money to the U.S. subsidiary. This
type of arrangement is known as a(n) ________.
A) mortgage loan
B) title loan
C) back-to-back loan
D) syndicated loan
87) If Verandas International chooses to pursue equity financing, but wants to avoid the time and
money required to comply with stock exchange regulations, the company would most likely
issue ________.
A) American Depository Receipts
B) bills of lading
C) equity shares
D) irrevocable letters of credit
88) Explain the process of facilities location planning. What issues must companies consider
while selecting the location for their production facilities?
89) What role does flexibility play in the make-or-buy decision?
90) How is process planning affected by a company’s business-level strategy? How can
outsourcing lower risk for firms?
91) Describe the production managers’ decision regarding whether to centralize or decentralize
production facilities, and explain the benefits of vertical integration.
92) Describe the issues involved in the decision of how a company acquires raw materials and
fixed assets.
93) Discuss the standardization versus adaptation decision for managers when considering
production facilities, and describe considerations for managers when acquiring fixed assets.
94) Discuss why companies strive toward quality improvement and the two methods of doing so.
95) Why might companies decide to reinvest, scale back, or divest local operations?
96) What are the options available to companies seeking financial resources?
97) What are the advantages of American Depository Receipts (ADRs)?
98) How can companies use internal funding to finance ongoing international business activities?
99) Explain the concept of capital structure as it applies to a company with international
operations.