8/2/2019 20080526233411994
1/235
Fundamentals of Multinational Finance , 3e (Moffett)Chapter1
8/2/2019 20080526233411994
2/235
Globalizationand theMultinational
Enterpri
se
1.1
8/2/2019 20080526233411994
3/235
MultipleChoic
eand True/FalseQuestions
8/2/2019 20080526233411994
4/235
1)
8/2/2019 20080526233411994
5/235
8/2/2019 20080526233411994
6/235
an open market placeB)
8/2/2019 20080526233411994
7/235
high quality strategic managementC)
8/2/2019 20080526233411994
8/235
access to capitalD)
8/2/2019 20080526233411994
9/235
all of the aboveAnswer:
8/2/2019 20080526233411994
10/235
ATopic:
8/2/2019 20080526233411994
11/235
Firm ValueSkill:
8/2/2019 20080526233411994
12/235
Conceptual
2)
8/2/2019 20080526233411994
13/235
A well-establis
hed, large firm U.S.-based MNE will probably not be able to overcome which of thefollowing obstacles to maximizing firm value?
A)
8/2/2019 20080526233411994
14/235
an open market placeB)
8/2/2019 20080526233411994
15/235
high quality strategic managementC)
8/2/2019 20080526233411994
16/235
access to capitalD)
8/2/2019 20080526233411994
17/235
none of the aboveAnswer:
8/2/2019 20080526233411994
18/235
DTopic:
8/2/2019 20080526233411994
19/235
Firm ValueSkill:
8/2/2019 20080526233411994
20/235
Recognition
3)
8/2/2019 20080526233411994
21/235
8/2/2019 20080526233411994
22/235
TRUETopic:
8/2/2019 20080526233411994
23/235
Firm ValueSkill:
8/2/2019 20080526233411994
24/235
Conceptual
4)
8/2/2019 20080526233411994
25/235
A well-establis
hed, large China-based MNE will probably be most adversely affected by which of thefollowing elements of firm value?
A)
8/2/2019 20080526233411994
26/235
an open marketplaceB)
8/2/2019 20080526233411994
27/235
high-quality strategic managementC)
8/2/2019 20080526233411994
28/235
access to capitalD)
8/2/2019 20080526233411994
29/235
access to qualified labor poolAnswer:
8/2/2019 20080526233411994
30/235
ATopic:
8/2/2019 20080526233411994
31/235
Firm ValueSkill:
8/2/2019 20080526233411994
32/235
Conceptual
5)
8/2/2019 20080526233411994
33/235
A well-establis
hed, large, Brazil-based MNE will probably be most adversely affected by which of the following elements of firm value?
A)
8/2/2019 20080526233411994
34/235
an open marketplaceB)
8/2/2019 20080526233411994
35/235
high-quality strategic managementC)
8/2/2019 20080526233411994
36/235
access to capitalD)
8/2/2019 20080526233411994
37/235
access to qualified labor poolAnswer:
8/2/2019 20080526233411994
38/235
CTopic:
8/2/2019 20080526233411994
39/235
Firm ValueSkill:
8/2/2019 20080526233411994
40/235
Conceptual
6)
8/2/2019 20080526233411994
41/235
Thetheory
that suggests specialization by country can increase worldwide production is ________.
A)
8/2/2019 20080526233411994
42/235
the theory of comparative advantageB)
8/2/2019 20080526233411994
43/235
the theory of foreign direct investmentC)
8/2/2019 20080526233411994
44/235
the international Fisher effectD)
8/2/2019 20080526233411994
45/235
the theory of working capital managementAnswer:
8/2/2019 20080526233411994
46/235
ATopic:
8/2/2019 20080526233411994
47/235
Comparative Advantage
Skill:
8/2/2019 20080526233411994
48/235
Recognition
7)
8/2/2019 20080526233411994
49/235
Which of the following would NOT be a way to implement comparative advantage?A)
8/2/2019 20080526233411994
50/235
IBM exports computers to Egypt.B)
8/2/2019 20080526233411994
51/235
Computerhardware is
designed in the United States but manufactured and assembled in Korea.
C)
8/2/2019 20080526233411994
52/235
Water of thegreatest
purity is obtained from wells in Oregon, bottled, and exported worldwide.
D)
8/2/2019 20080526233411994
53/235
All of the above are examples of ways to implement comparative advantage.Answer:
8/2/2019 20080526233411994
54/235
DTopic:
8/2/2019 20080526233411994
55/235
Comparative Advantage
Skill:
8/2/2019 20080526233411994
56/235
Conceptual
8)
8/2/2019 20080526233411994
57/235
Which of the following would NOT be considered a feature of comparative advantage?A)
8/2/2019 20080526233411994
58/235
Exporters in Country A sell goods or services to unrelated importers in Country B.B)
8/2/2019 20080526233411994
59/235
Firms inCountry Aspecialize in
making products that can be produced relatively efficiently, given County A'sendowment of factors of production. Firms in Country B do likewise thusmaximizing the combined output of Countries A and B.
C)
8/2/2019 20080526233411994
60/235
Trade existsbetween
Counties A and B because of specialized factors of production that cannot bemoved among countries.
D)
8/2/2019 20080526233411994
61/235
8/2/2019 20080526233411994
62/235
DTopic:
8/2/2019 20080526233411994
63/235
Comparative Advantage
Skill:
8/2/2019 20080526233411994
64/235
Recognition
9)
8/2/2019 20080526233411994
65/235
Of thefollowin
g, which would NOT be considered a way that government interferes withcomparative advantage?
A)
8/2/2019 20080526233411994
66/235
tariffsB)
8/2/2019 20080526233411994
67/235
managerial skillsC)
8/2/2019 20080526233411994
68/235
quotasD)
8/2/2019 20080526233411994
69/235
other non- tariff restrictionsAnswer:
8/2/2019 20080526233411994
70/235
BTopic:
8/2/2019 20080526233411994
71/235
Comparative Advantage
Skill:
8/2/2019 20080526233411994
72/235
Recognition
10)
8/2/2019 20080526233411994
73/235
Comparative
advantage shifts over time as less developed countries become more developed andrealize their latent opportunities.Answer:
8/2/2019 20080526233411994
74/235
TRUETopic:
8/2/2019 20080526233411994
75/235
Comparative Advantage
Skill:
8/2/2019 20080526233411994
76/235
Recognition
8/2/2019 20080526233411994
77/235
11)
8/2/2019 20080526233411994
78/235
Comparative
advantage was once the cornerstone of international trade theory, but today it isarchaic, simplistic, and irrelevant for explaining investment choices made by MNEs.Answer:
8/2/2019 20080526233411994
79/235
FALSETopic:
8/2/2019 20080526233411994
80/235
8/2/2019 20080526233411994
81/235
Recognition
12)
8/2/2019 20080526233411994
82/235
Indetermining
why a firm becomes multinational there are many reasons. One reason is that thefirm is a market seeker. Which of the following is NOT a reason why market seekingfirms produce in foreign countries?
A)
8/2/2019 20080526233411994
83/235
8/2/2019 20080526233411994
84/235
8/2/2019 20080526233411994
85/235
political safely and small likelihood of government expropriation of assetsD)
8/2/2019 20080526233411994
86/235
All of the above are market-seeking activities.Answer:
8/2/2019 20080526233411994
87/235
CTopic:
8/2/2019 20080526233411994
88/235
Comparative Advantage
Skill:
8/2/2019 20080526233411994
89/235
Recognition
13)
8/2/2019 20080526233411994
90/235
________ investments are
designed to promote and enhance the growth and profitability of the firm. ________ investments are designed to deny those same opportunities to the firm'scompetitors.
A)
8/2/2019 20080526233411994
91/235
Conservative ; aggressiveB)
8/2/2019 20080526233411994
92/235
Defensive; proactiveC)
8/2/2019 20080526233411994
93/235
Proactive; defensiveD)
8/2/2019 20080526233411994
94/235
Aggressive; proactiveAnswer:
8/2/2019 20080526233411994
95/235
CTopic:
8/2/2019 20080526233411994
96/235
Comparative Advantage
Skill:
8/2/2019 20080526233411994
97/235
Recognition
14)
8/2/2019 20080526233411994
98/235
Whichof the
following is NOT considered to be a type of competitive advantage that may beenjoyed by an MNE?
A)
8/2/2019 20080526233411994
99/235
managerial and marketing expertiseB)
8/2/2019 20080526233411994
100/235
superior technology due to investment in research and developmentC)
8/2/2019 20080526233411994
101/235
increased agency costsD)
8/2/2019 20080526233411994
102/235
differentiate d productsAnswer:
8/2/2019 20080526233411994
103/235
CTopic:
8/2/2019 20080526233411994
104/235
Comparative Advantage
Skill:
8/2/2019 20080526233411994
105/235
Recognition
15)
8/2/2019 20080526233411994
106/235
Whichof the
following is NOT considered to be a type of competitive advantage that may beenjoyed by an MNE?
A)
8/2/2019 20080526233411994
107/235
competitiven ess in their home marketsB)
8/2/2019 20080526233411994
108/235
foreign exchange risksC)
8/2/2019 20080526233411994
109/235
economies of scaleD)
8/2/2019 20080526233411994
110/235
economies of scopeAnswer:
8/2/2019 20080526233411994
111/235
BTopic:
8/2/2019 20080526233411994
112/235
Comparative Advantage
Skill:
8/2/2019 20080526233411994
113/235
Recognition
8/2/2019 20080526233411994
114/235
16)
8/2/2019 20080526233411994
115/235
Thephase
of the globalization process characterized by imports from foreign suppliers andexports to foreign buyers is called the
A)
8/2/2019 20080526233411994
116/235
domestic phase.B)
8/2/2019 20080526233411994
117/235
multinational phase.C)
8/2/2019 20080526233411994
118/235
international trade phase.D)
8/2/2019 20080526233411994
119/235
import- export banking phase.Answer:
8/2/2019 20080526233411994
120/235
CTopic:
8/2/2019 20080526233411994
121/235
TheGlobalizationProcessFundamentals
Skill:
8/2/2019 20080526233411994
122/235
Recognition
17)
8/2/2019 20080526233411994
123/235
Theauthors
describe the multinational phase of globalization for a firm as one characterized bythe
A)
8/2/2019 20080526233411994
124/235
ownership of assets and enterprises in foreign countries.B)
8/2/2019 20080526233411994
125/235
potential forinternational
competitors or suppliers even though all accounts are with domestic firms andare denominated in dollars.
C)
8/2/2019 20080526233411994
126/235
imports from foreign suppliers and exports to foreign buyers.D)
8/2/2019 20080526233411994
127/235
requirement that all employees be multilingual.Answer:
8/2/2019 20080526233411994
128/235
ATopic:
8/2/2019 20080526233411994
129/235
TheGlobalizationProcessFundamentals
Skill:
8/2/2019 20080526233411994
130/235
Recognition
18)
8/2/2019 20080526233411994
131/235
Of thefollowin
g, which was NOT mentioned by the authors as an increase in the demands of financial management services due to increased globalization by the firm?
A)
8/2/2019 20080526233411994
132/235
evaluation of the credit quality of foreign buyers and sellersB)
8/2/2019 20080526233411994
133/235
foreign consumer method of payment preferencesC)
8/2/2019 20080526233411994
134/235
credit risk managementD)
8/2/2019 20080526233411994
135/235
evaluation of foreign exchange riskAnswer:
8/2/2019 20080526233411994
136/235
BTopic:
8/2/2019 20080526233411994
137/235
TheGlobalizationProcess,FinancialManagement
Skill:
8/2/2019 20080526233411994
138/235
Recognition
19)
8/2/2019 20080526233411994
139/235
Theauthors
describe the multinational phase of globalization for a firm as one characterized bythe
A)
8/2/2019 20080526233411994
140/235
ownership of assets and enterprises in foreign countries.B)
8/2/2019 20080526233411994
141/235
potential forinternational
competitors or suppliers even though all accounts are with domestic firms andare denominated in dollars.
C)
8/2/2019 20080526233411994
142/235
imports from foreign suppliers and exports to foreign buyers.D)
8/2/2019 20080526233411994
143/235
requirement that all employees be multilingual.Answer:
8/2/2019 20080526233411994
144/235
ATopic:
8/2/2019 20080526233411994
145/235
TheGlobalizationProcessFundamentals
Skill:
8/2/2019 20080526233411994
146/235
Recognition
20)
8/2/2019 20080526233411994
147/235
Of thefollowin
g, which was NOT mentioned by the authors as an increase in the demands of financial management services due to increased globalization by the firm?
A)
8/2/2019 20080526233411994
148/235
evaluation of the credit quality of foreign buyers and sellersB)
8/2/2019 20080526233411994
149/235
8/2/2019 20080526233411994
150/235
credit risk managementD)
8/2/2019 20080526233411994
151/235
evaluation of foreign exchange riskAnswer:
8/2/2019 20080526233411994
152/235
BTopic:
8/2/2019 20080526233411994
153/235
TheGlobalizationProcess,FinancialManagement
Skill:
8/2/2019 20080526233411994
154/235
Recognition
21)
8/2/2019 20080526233411994
155/235
Typically, a firm
in its domestic stage of globalization has all financial transactions in its domesticcurrency.Answer:
8/2/2019 20080526233411994
156/235
TRUETopic:
8/2/2019 20080526233411994
157/235
TheGlobalizationProcessFundamentals
Skill:
8/2/2019 20080526233411994
158/235
Conceptual
22)
8/2/2019 20080526233411994
159/235
A firm in the International Trade Phase of GlobalizationA)
8/2/2019 20080526233411994
160/235
makes allforeign
payments in foreign currency units and all foreign receipts in domestic currencyunits.
B)
8/2/2019 20080526233411994
161/235
receives allforeign
receipts in foreign currency units and makes all foreign payments in domesticcurrency units.
C)
8/2/2019 20080526233411994
162/235
bears direct foreign exchange risk.D)
8/2/2019 20080526233411994
163/235
none of the above.Answer:
8/2/2019 20080526233411994
164/235
CTopic:
8/2/2019 20080526233411994
165/235
TheGlobalizationProcessFundamentals
Skill:
8/2/2019 20080526233411994
166/235
Conceptual
23)
8/2/2019 20080526233411994
167/235
The exposure to foreign exchange risk known as Translation Exposure may be defined asA)
8/2/2019 20080526233411994
168/235
changes inreported
owners' equity in consolidated financial statements caused by a change inexchange rates.
B)
8/2/2019 20080526233411994
169/235
the impact of settling
outstanding obligations entered into before change in exchange rates but to besettled after change in exchange rates.
C)
8/2/2019 20080526233411994
170/235
the changein expected
future cash flows arising from an unexpected change in exchange rates.
D)
8/2/2019 20080526233411994
171/235
all of the above.Answer:
8/2/2019 20080526233411994
172/235
ATopic:
8/2/2019 20080526233411994
173/235
TheGlobalizationProcessFundamentals
Skill:
8/2/2019 20080526233411994
174/235
Conceptual
24)
8/2/2019 20080526233411994
175/235
Thetwin
agency problems limiting financial globalization are caused by these two groupsacting in their own self-interests rather than the interests of the firm.
A)
8/2/2019 20080526233411994
176/235
8/2/2019 20080526233411994
177/235
corporate insiders and attorneysC)
8/2/2019 20080526233411994
178/235
corporate insiders and rulers of sovereign statesD)
8/2/2019 20080526233411994
179/235
attorneys and unsavory customs officialsAnswer:
8/2/2019 20080526233411994
180/235
CTopic:
8/2/2019 20080526233411994
181/235
Firm ValueSkill:
8/2/2019 20080526233411994
182/235
Recognition
8/2/2019 20080526233411994
183/235
TABLE 1.1Use the information in the table to answer following question(s).
25)
8/2/2019 20080526233411994
184/235
Refer to Table
1.1. A production unit in Austria has a/an ________ over a production unit in Russia in ________.
A)
8/2/2019 20080526233411994
185/235
absolute disadvantage; digital camerasB)
8/2/2019 20080526233411994
186/235
absolute disadvantage; snowboardsC)
8/2/2019 20080526233411994
187/235
absolute advantage; both cameras and snowboardsD)
8/2/2019 20080526233411994
188/235
none of the aboveAnswer:
8/2/2019 20080526233411994
189/235
CTopic:
8/2/2019 20080526233411994
190/235
Absolute Advantage
Skill:
8/2/2019 20080526233411994
191/235
8/2/2019 20080526233411994
192/235
Refer to Table
1.1. Austria has a larger relative advantage over Russia in the production of ________ at a ratio of ________.
A)
8/2/2019 20080526233411994
193/235
snowboards; 5 to 4B)
8/2/2019 20080526233411994
194/235
cameras; 8 to 3C)
8/2/2019 20080526233411994
195/235
snowboards; 8 to 3D)
8/2/2019 20080526233411994
196/235
cameras; 3 to 8Answer:
8/2/2019 20080526233411994
197/235
BTopic:
8/2/2019 20080526233411994
198/235
Absolute Advantage
Skill:
8/2/2019 20080526233411994
199/235
Conceptual
27)
8/2/2019 20080526233411994
200/235
Refer to Table1.1.
Assume no trade between Russia and Austria. If each country put 50% of theirproduction units into each product, the total number of snowboards and digitalcameras produced by the two countries combined are ________ and ________.
A)
8/2/2019 20080526233411994
201/235
15,000 snowboards; 3,000 digital camerasB)
8/2/2019 20080526233411994
202/235
6,000 snowboards; 4,000 digital camerasC)
8/2/2019 20080526233411994
203/235
2,750 digital cameras; 6,750 snowboardsD)
8/2/2019 20080526233411994
204/235
15,000 digital cameras; 1,000 snowboardsAnswer:
8/2/2019 20080526233411994
205/235
CTopic:
8/2/2019 20080526233411994
206/235
Absolute Advantage
Skill:
8/2/2019 20080526233411994
207/235
Analytical
28)
8/2/2019 20080526233411994
208/235
Refer to Table
1.1. If trade takes place at Brazil's domestic price, ________ snowboards will berequired to obtain 1 digital camera.
A)
8/2/2019 20080526233411994
209/235
4B)
8/2/2019 20080526233411994
210/235
2 and 2/3C)
8/2/2019 20080526233411994
211/235
1.25D)
8/2/2019 20080526233411994
212/235
8/2/2019 20080526233411994
213/235
ATopic:
8/2/2019 20080526233411994
214/235
Absolute Advantage
Skill:
8/2/2019 20080526233411994
215/235
Analytical
8/2/2019 20080526233411994
216/235
29)
8/2/2019 20080526233411994
217/235
Refer to Table1.1. If each
country specializes in their production with Austria producing only digital camerasand Russia producing only snowboards, at a trading rate of three snowboards perdigital camera, how many cameras and snowboards will be available to be consumedin Austria if they trade 3,000 cameras to Russia?
A)
8/2/2019 20080526233411994
218/235
9,000 snowboards and 5,000 digital camerasB)
8/2/2019 20080526233411994
219/235
3,000 snowboards and 3,000 digital camerasC)
8/2/2019 20080526233411994
220/235
3,000 snowboards and 9,000 digital camerasD)
8/2/2019 20080526233411994
221/235
8/2/2019 20080526233411994
222/235
ATopic:
8/2/2019 20080526233411994
223/235
Absolute Advantage
Skill:
8/2/2019 20080526233411994
224/235
Analytical
30)
8/2/2019 20080526233411994
225/235
Refer to Table1.1. If each
country specializes in their production with Austria producing only digital camerasand Russia producing only snowboards, at a trading rate of three snowboards perdigital camera, how many cameras and snowboards will be available to be consumedin Russia if they trade 9,000 snowboards to Austria?
A)
8/2/2019 20080526233411994
226/235
9,000 snowboards and 5,000 digital camerasB)
8/2/2019 20080526233411994
227/235
3,000 snowboards and 3,000 digital camerasC)
8/2/2019 20080526233411994
228/235
3,000 snowboards and 9,000 digital camerasD)
8/2/2019 20080526233411994
229/235
There is not enough information to answer this question.Answer:
8/2/2019 20080526233411994
230/235
CTopic:
8/2/2019 20080526233411994
231/235
Absolute Advantage
Skill:
8/2/2019 20080526233411994
232/235
Analytical
1.2
8/2/2019 20080526233411994
233/235
Ess1)
8/2/2019 20080526233411994
234/235
List andexplain
three strategic motives why firms become multinationals and give an example of each.Answer:
8/2/2019 20080526233411994
235/235
The authorsprovide 5strategic motivesfor firms tobecomemultinationals:
market seekers,raw materialsseekers,productionefficiencyseekers,