Archives: Quiz

1) Tax law variations around the world affect an MNE’s capital budgeting, financing, and method of setting transfer prices. 2) By operating internationally, a company may take advantage of business-cycle differences among countries and thereby reduce its financial risks Answer: […]

1) Each country in NAFTA sets its own tariffs to the rest of the world. 2) Stockholders are typically more interested in corporate social responsibility than in earning profits. Answer: FALSE 3) A multidomestic strategy makes the most sense for […]

1) The term protectionism, when applied to international trade, refers to governmental restrictions and incentives to affect trade flows. 2) In a matrix structure, product, functional, or geographic groups compete for resources. Answer: TRUE 3) Companies that have integrated their […]

1) JIT is the process of sourcing raw materials and parts just as they are needed in the manufacturing process. 2) An advantage of collaborative agreements is the ability to spread faster geographically. Answer: TRUE 3) Mobile Technology is a […]

1) Horizontal differentiation is concerned with how the managers of a firm decide to divide the company into discrete subunits. 2) Executives from the home office typically demand richer compensation packages and impose higher relocation costs than third-country nationals do. […]

1) A criticism of globalization is that as economic growth increases, too many nonrenewable resources are used 2) In a licensing arrangement, it is rare for companies to agree to a front-end payment to cover technology transfer costs. Answer: FALSE […]

1) There is a strong relationship between skewed income distributions and the split between those who live in urban settings versus those who live in rural areas. 2) A differentiation strategy works well in situations where there are many ways […]

1) One advantage of importing is that an importer can diversify its operating risks by developing alternative suppliers. 2) A Eurocurrency is any currency that is banked outside its country of origin. Answer: TRUE 3) Governments sometimes prohibit foreign acquisitions […]

1) An effective code of conduct reports results to external stakeholders. 2) Vertical integration occurs when the company owns the entire supplier network or at least a significant part of it. Answer: TRUE 3) Countries typically establish export restrictions to […]

1) The growth of small-scale production technology will most likely enable small countries to produce products efficiently for their own consumption. 2) The bid is the price at which the trader is willing to sell foreign currency. Answer: FALSE 3) […]

1) A tariff is the price of a currency. 2) Rationalization is the process of specializing in manufacturing according to product or process. Answer: TRUE 3) The Washington Consensus promotes democracy, freedom, the rule of man, and human rights. Answer: […]

1) The Single European Act set steps to accomplish monetary union in the European Union, including the creation of the euro. 2) The use of JIT does not depend on the quality of incoming parts or the time of their […]

1) The range of economic systems in the world today, when represented on a spectrum, has one end anchored by the idea of capitalism, the other with that of socialism. 2) According to EIU research, 37% of the world’s populations […]

1) A company can best benefit from a first-mover advantage by moving into a small country, before entering a much larger country. 2) The balance of trade is a record of a country’s international transactions that take place among companies, […]

1) Electronic data interchange (EDI) is an online collaboration model that brings manufacturers, distributors, value-added retailers, and customers together to execute trading transactions. 2) Many products’ location of production will shift internationally as the products go through their life cycle. […]

1) Import substitution is a program promoting local production of products that would otherwise be imported. 2) Trading activity has increased in recent years due to the growing importance of foreign exchange as an alternative asset and the expanded emphasis […]

1) Indirect exporters sell goods to a foreign intermediary, who then sells the product in the domestic market to the final consumer. 2) An MNE would most likely benefit from converting local currency into its home-country currency when exchange rates […]

1) According to experts, stakeholder participation in decision making is effective only in countries with an educated population. 2) In an FX swap, one currency is swapped for another on one date and then swapped back on a future date. […]

1) An exception to the PLC theory in terms of production location is often a product with very rapid change in innovation. 2) Most U.S. companies have moved from a total quality management (TQM) approach to an acceptable quality level […]

1) Uneven income distribution is largely a problem confined to poorer nations. 2) A condition that is conducive to low transfer prices from the parent company to the subsidiary and high transfer prices from the subsidiary to the parent company […]

1) In a multiple exchange-rate system, the government determines which kinds of transactions are to be conducted at which exchange rate. 2) Major types of indirect intermediaries include export trading companies, distributors, and freight forwarding companies. Answer: FALSE 3) The […]

1) Geographical barriers typically affect distribution channels within countries, but they rarely affect distribution channels between countries 2) Companies find it challenging to judge a potential expatriate’s adaptability to foreign places, people, and processes. Answer: TRUE 3) Expatriates are locals […]

1) The ethnocentric and polycentric staffing policies, unlike the geocentric staffing policy, rely on extensive use of expatriate managers. 2) A polycentric staffing policy is well matched with a transnational strategy. Answer: FALSE 3) The IMF’s primary role is to […]

1) When using a budget for foreign operations, it is important for the parent company to select an exchange rate to set the budget and use that same rate to evaluate performance. 2) An important business objective for pursuing ethical […]

1) A licensing agreement is a contract for the granting of rights on tangible property. 2) A current account deficit suggests that a country is importing more than it is exporting and building up foreign debt. Answer: TRUE 3) An […]

1) A culture in which people prefer to handle tasks sequentially is a polychronic culture. 2) Germanic and Japanese companies tend to be more optimistic than U.S. and U.K. companies. Answer: FALSE 3) The most important rationales for NAFTA are […]

1) A geocentric staffing policy is one in which all key management positions throughout the company’s global operations are filled by host-country nationals. 2) A company that prices its products at a desired margin over cost is using a cost-plus […]

1) GATT’s contribution to trade liberalization made possible the expansion of world trade in the second half of the twentieth century. 2) A currency sells at a forward premium when the forward rate is greater than the spot rate. Answer: […]

1) The Malcolm Baldrige National Quality Award is an example of a general standard that is presented annually to companies that demonstrate quality strategies and achievements. 2) A civil law system anchors itself in the wisdom of daily experience or, […]

1) Dispersed value chains make sense when costs vary across countries. 2) When a company sells technologically advanced products to global customers, it is more likely to handle distribution itself. Answer: TRUE 3) The fact that a company is the […]

1) Collaborative agreements allow companies to specialize more in those activities that best fit their competencies. 2) The more partners in a joint venture, the more complex the management of the arrangement will be. Answer: TRUE 3) The most common […]

1) A firm’s vertical differentiation determines where in its organization structure managers have decided to concentrate decision-making authority. 2) A company that exports products at a price lower than its domestic market price is using a skimming policy abroad. Answer: […]

1) The target capital structure is the desired optimal mix of debt and equity financing that most firms attempt to achieve and maintain. 2) The conversion feature, which can be part of either a bond or preferred stock, permits a […]

1) When considering a firm’s financial decision alternative, financial managers should accept only those actions that are expected to increase the firm’s profitability. 2) The required return on an asset is an increasing function of its nondiversifiable risk. Answer: TRUE […]

1) The existence of specific regulations and controls on dollar deposits in the United States, including interest rate ceiling imposed by the government, has contributed to the growth of the Euromarket. 2) Restrictive covenants are contractual clauses in long-term debt […]

1) The free cash flow valuation model is based on the same principle as dividend valuation models; that is, the value of a share of stock is the present value of future cash flows. 2) The conversion value is the […]

1) Most managers are risk-averse, since for a given increase in risk they require an increase in return. 2) Marketable securities are short-term, interest-earning, money market instruments that can easily be converted into cash. Answer: TRUE 3) Purchasers of a […]

1) The spot exchange rate is the rate of exchange between two currencies at some specified future date. 2) A single key ratio of a firm provides all the information required to judge the overall performance of the firm. Answer: […]

1) Since operating leases result in the receipt of services from an asset without increasing the assets or liabilities on a firm’s balance sheet, leasing may result in misleading financial ratios. 2) If a new asset is being considered as […]

1) Since the issuer of zero (or low) coupon bonds can annually deduct the current year’s interest accrual without having to actually pay the interest until the bond matures (or is called), its cash flow each year is increased by […]

1) Operating leverage is present when a firm has fixed operating costs. 2) The cost of capital is a dynamic concept and it is affected by economic and firm-specific factors such as business risk and financial risk. Answer: TRUE 3) […]

1) The motive to pay stock dividend to retain cash to satisfy past-due bills, may result in a decline in market value. 2) The effective rate of interest is the contractual rate of interest charged by a lender or promised […]

1) If the risk-free rate decreases due to a shift in government policy, the required return goes up. 2) Tangshan Mining issued $10,000 of commercial paper for $9,925 for 60 days. Based on this information, the effective annual rate of […]

1) Economic exposure is the risk resulting from the effects of changes in foreign exchange rates on a firm’s value. 2) The constant growth model is an approach to dividend valuation that assumes a constant future dividend. Answer: FALSE 3) […]

1) The cost of equity increases with increasing financial leverage in order to compensate the stockholders for the higher degree of financial risk. 2) A controller administers a firm’s credit policy by analyzing or managing the evaluation of credit applications, […]

1) A prospectus is another term for a firm’s annual report showing the firm’s prospects for the coming year. 2) Increased collection expenditures should reduce the investment in accounts receivable and bad debt expenses, increasing profits. Answer: TRUE 3) Historical […]

1) A strike price is a price at which the holder of a call option can buy a specified amount of stock at any time prior to the option’s expiration date. 2) Financial markets are intermediaries that channel the savings […]

1) Since lenders are generally reluctant to grant loans to a firm to pay dividends, the firm’s ability to pay cash dividends is generally constrained by the amount of excess cash available. 2) In capital budgeting, risk refers to a […]

1) Holding all other factors constant, a firm that is subject to a greater level of business risk should employ more total leverage than an otherwise equivalent firm that is subject to a lesser level of business risk. 2) The […]

1) Cash budgets and pro forma statements are useful not only for internal financial planning but also are routinely required by the Internal Revenue Service (IRS). 2) If a firm is subject to capital rationing, it is able to accept […]