Test Bank for
International Financial
Management, 14th
Edition, Jeff Madura,
ISBN-10: 0357130545,
ISBN-13: 9780357130544
, 1. The commonly accepted goal of an MNC is to:
a. maximize short-term earnings.
b. maximize shareholder wealth.
c. minimize risk.
d. maximize short-term earnings AND minimize risk.
e. maximize international sales.
ANSWER: b
2. With regard to corporate goals, an MNC is mostly concerned with maximizing ____, and a purely domestic firm is
mostly concerned with maximizing ____.
a. shareholder wealth; short-term earnings
b. shareholder wealth; shareholder wealth
c. short-term earnings; sales volume
d. short-term earnings; shareholder wealth
ANSWER: b
3. For an MNC, agency costs are typically:
a. nonexistent.
b. larger than agency costs of a small purely domestic firm.
c. smaller than agency costs of a small purely domestic firm.
d. the same as agency costs of a small purely domestic firm.
ANSWER: b
4. Which of the following could reduce agency problems for an MNC?
a. stock options as managerial compensation
b. hostile takeover threat
c. investor monitoring
d. All of these are forms of corporate control that could reduce agency problems for an MNC.
ANSWER: d
5. The valuation of an MNC should rise when an event causes the expected cash flows from foreign subsidiaries to ____
and when the foreign currencies denominating these cash flows are expected
to ____.
a. decrease; appreciate
b. increase; appreciate
c. decrease; depreciate
d. increase; depreciate
ANSWER: b
6. Which of the following theories identifies specialization as a reason for international business?
a. theory of comparative advantage
b. imperfect markets theory
c. product cycle theory
d. None of these are correct.
ANSWER: a
7. Which of the following theories identifies the nontransferability of resources as a reason for international business?
a. theory of comparative advantage
International Financial
Management, 14th
Edition, Jeff Madura,
ISBN-10: 0357130545,
ISBN-13: 9780357130544
, 1. The commonly accepted goal of an MNC is to:
a. maximize short-term earnings.
b. maximize shareholder wealth.
c. minimize risk.
d. maximize short-term earnings AND minimize risk.
e. maximize international sales.
ANSWER: b
2. With regard to corporate goals, an MNC is mostly concerned with maximizing ____, and a purely domestic firm is
mostly concerned with maximizing ____.
a. shareholder wealth; short-term earnings
b. shareholder wealth; shareholder wealth
c. short-term earnings; sales volume
d. short-term earnings; shareholder wealth
ANSWER: b
3. For an MNC, agency costs are typically:
a. nonexistent.
b. larger than agency costs of a small purely domestic firm.
c. smaller than agency costs of a small purely domestic firm.
d. the same as agency costs of a small purely domestic firm.
ANSWER: b
4. Which of the following could reduce agency problems for an MNC?
a. stock options as managerial compensation
b. hostile takeover threat
c. investor monitoring
d. All of these are forms of corporate control that could reduce agency problems for an MNC.
ANSWER: d
5. The valuation of an MNC should rise when an event causes the expected cash flows from foreign subsidiaries to ____
and when the foreign currencies denominating these cash flows are expected
to ____.
a. decrease; appreciate
b. increase; appreciate
c. decrease; depreciate
d. increase; depreciate
ANSWER: b
6. Which of the following theories identifies specialization as a reason for international business?
a. theory of comparative advantage
b. imperfect markets theory
c. product cycle theory
d. None of these are correct.
ANSWER: a
7. Which of the following theories identifies the nontransferability of resources as a reason for international business?
a. theory of comparative advantage
