KirtdC.dButler,dMultinationaldFinance,d3rdd edition
Test Bank d
True/false questions d
Multiple choice questions
d d d
Problems
to accompany
d
Multinational Finance d
by Kirt C. Butler
d d d
Third Edition d
, lOMoARcPSD| 1935369
KirtdC.dButler,dMultinationaldFinance,d3rdd edition
PART I Overview and Background
d d d d
Chapter 1 An Introduction to Multinational Finance
d d d d d d
True/False
1. MNCsdhavedinvestmentdordfinancialdoperationsdindmoredthandonedcountry.d
ANS:dTrue.
2. Becausedofdglobalizationdindthedworld’sdmarkets,dadmultinationaldfinancialdmanagerdisdmoredli
kelydthandaddomesticdfinancialdmanagerdtodspecializedindfinancedtodthedexclusiondofdotherdfiel
dsdofdbusiness.
ANS:dFalse.dThedmultinationaldfinancialdmanagerdmustdbedwelldverseddindeachdofdthedbusine
ssddisciplinesdindwhichdthedMNCdisdinvolved.
3. Theddomesticdfinancialdmanagerdmustdbedknowledgeabledindseveraldareasdwithindfinance,d
whereasdthedmultinationaldfinancialdmanagerdusuallydspecializesdindadsingledarea,dsuchdasdc
orporatedfinance,dinvestments,dordfinancialdmarkets.
ANS:dFalse.dThedmultinationaldfinancialdmanagerdisdlikelydtodrequiredknowledgedofdseveraldf
ieldsdwithindfinance.
4. Thedinvestmentdopportunitydsetdisdthedsetdofdinvestmentsdavailabledtodthedcorporation;dthatdis,dtheds
etdfromdwhichdthedcompanydmustdselect.
ANS:dTrue.
5. Typesdofdmarketdefficiencyduseddtoddescribedthedperformancedofdfinancialdmarketsdareda
llocational,doperational,danddtransactionaldefficiency.
ANS:dFalse.dThreedtypesdofdmarketdefficiencydaredallocational,doperational,dand
informational.
6. Andinformationallydefficientdmarketdisdonedwithdabundantdinformation.
ANS:dFalse.dItdisdadmarketdindwhichdpricesdfullydreflectdavailabledinformation.
7. Allocationaldefficiencydrefersdtodhowdefficientlydadmarketdchannelsdcapitaldtowardditsdmostdp
roductiveduses.
ANS:dTrue.
8. Allocationaldefficiencydrefersdtodwhetherdadmarketdallocatesdcapitaldtodthosedinvestmentsdd
eemeddmostdworthydbydadhostdgovernment.
ANS:dFalse.dAllocationaldefficiencydrefersdtodhowdefficientlydadmarketdchannelsdcapitaldtow
ardditsdmostdproductivedusesdindandeconomic,dratherdthandadpolitical,dsense.
9. Operationaldefficiencydrefersdtodhowdlargedandinfluencedtransactionsdcostsdanddotherdmarketdf
rictionsdhavedondthedoperationdofdadmarket.
ANS:dTrue.
10. ThedMNCdfacesdgreaterdconstraintsdthandtheddomesticdcorporationdindthedtimingdofditsdi
nvestments.
ANS:dFalse.dMultinationalsdtypicallydhavedmoredflexibilitydindtiming,dlocation,danddoperatio
n.
11. Riskdexistsdwheneverdactualdoutcomesdcanddifferdfromdexpecteddoutcomes.d
ANS:dTrue.
2
Distributingdprohibitedd|dDownloadeddbydAnniedTand(
)
, lOMoARcPSD| 1935369
12. Assetsdanddliabilitiesdaredexposeddtodcurrencydriskdwhendtheirdvaluesdcandchangedwithdu
nexpecteddchangesdindcurrencydvalues.
ANS:dTrue.
13. “Currencydrisk”dandd“currencydriskdexposure”dreferdtodthedsamedthingd-
dthedpossibilitydthatd
currencydvaluesdwillddifferdfromdtheirdexpectations.
ANS:dFalse.dAdfirmdisdexposeddtodcurrencydriskdwhenditsdassetsdordliabilitiesdcandchangedindvaluedw
ithdunexpecteddchangesdindcurrencydvalues.
14. Politicaldriskdisdthedriskdthatdthedbusinessdenvironmentdindadhostdcountrydwilldchangedu
nexpectedlydduedtodpoliticaldevents.
ANS:dTrue.
15. Thedtermsd“stakeholders”dandd“shareholders”daredsynonymous.
ANS:dFalse.dStakeholdersdincludedalldthosedwithdadstakedindthedfirm.dAdbroadddefinitiondofdstake
holdersdincludesdthedfirm’sdcreditors,dcustomers,dsuppliers,danddemployees.
16. Exportingdthroughdadforeigndsalesdagentdrequiresdlittledresourcedcommitmentdanddhelpsdtodi
nsulatedthedexporterdfromdthedcostsdanddrisksdofdforeigndmarketdentry.
ANS:dTrue.
17. Foreignddirectdinvestmentdisdwhendadmultinationaldcorporationdbuildsdproductivedcapacitydinda
dforeigndcountry.
ANS:dTrue.
18. Thedeasiestdmodedofdentrydintodforeigndmarketsdisdforeignddirectdinvestment.d
ANS:dFalse.dFDIdisdonedofdthedmostddifficultdentrydmodes.
19. Contract-
baseddmodesdofdentrydintodforeigndmarketsdincludedforeigndsalesdagentsdanddforeigndsalesdbranc
hes.
ANS:dFalse.dInternationaldlicensingdanddfranchising,dreciprocaldmarketdagreements,danddmanag
ementdcontractsdaredcontract-baseddentrydmodes.
20. Foreignddirectdinvestmentdrequiresdadrelativelydlargedresourcedcommitmentdfromdthedparentdfirm.d
ANS:dTrue.
21. Thedsalesdanddmarketingdbenefitsdofdforeignddirectdinvestmentdaredusuallydlessdthandthosedofde
xportdentrydintodforeigndmarkets.
ANS:dFalse.dWithdestablisheddoperationsdindthedforeigndcountry,dmultinationaldcorporationsdared
abledtodpromotedtheirdproductsdanddservicesdmoredeffectively.
22. Licensingdprovidesdquickdanddrelativelydlow-
riskdentrydintodforeigndmarketsdasdlongdasdthedparentdcandprotectditsdintellectualdpropertydrigh
ts.
ANS:dTrue.
3
Distributingdprohibitedd|dDownloadeddbydAnniedTand(
)
, lOMoARcPSD| 1935369
KirtdC.dButler,dMultinationaldFinance,d3rdd edition
23. Thedmaindreasondfordinvestment-
baseddforeigndmarketdentrydisdtodminimizedculturaldrisk.dANS:dFalse.dThedmaindreasonsdar
edthedpotentialdfordhigherdsalesdanddlowerdcosts.
24. Accordingdtodproductdcycledtheory,dnewdproductsdaredtypicallydtesteddindforeigndmarketsdanddt
hendaredintroduceddintodthedhomedmarket.
ANS:dFalse.dNewdproductsdaredusuallydintroduceddindthedhomedmarket.
25. Corporationsdoftendtrydtodextenddtheirdproductdlifedcyclesdbydenteringdforeigndmarkets.d
ANS:dTrue.
MultipledChoice
1. Entrydmodesdintodinternationaldmarketsdincludedeachdofda)dthroughdd)dexcept .
a. exporting
b. franchising
c. investment
d. licensing
e. eachdofdthedabovedisdandentrydmoded
ANS:dE
2. Fordmanufacturingdfirmsdwithdpatents,dthedmostdimportantddifferencedbetweendthedvariousdf
oreigndmarketdentrydmodesdfordmanufacturingdfirmsdisdindwhetherdordnotdthedparentdfirmdm
aintainsdcontroldof .
a. distribution
b. marketing
c. packaging
d. production
e. purchasingd
ANS:dD
3. Resourcedcommitmentdisdhighestdfordwhichdforeigndmarketdentrydmode?
a. exportingdthroughdforeigndsalesdagents
b. exportingdthroughdforeigndsalesdbranches
c. foreignddirectdinvestment
d. foreigndjointdventure
e. licensingd
ANS:dC
4. Thedfastestdwaydtodgaindaccessdtodadforeigndmarketdisdby .
a. exportingdthroughdforeigndsalesdagents
b. exportingdthroughdforeigndsalesdbranches
c. foreigndacquisition
d. foreignddirectdinvestment
e. foreigndjointdventured
ANS:dA
5. Thedforeigndmarketdentrydmodedwithdthedlowestdsalesdpotentialdis .
a. exportingdthroughdforeigndsalesdagents
b. exportingdthroughdforeigndsalesdbranches
c. foreignddirectdinvestments
4
Distributingdprohibitedd|dDownloadeddbydAnniedTand(
)
Test Bank d
True/false questions d
Multiple choice questions
d d d
Problems
to accompany
d
Multinational Finance d
by Kirt C. Butler
d d d
Third Edition d
, lOMoARcPSD| 1935369
KirtdC.dButler,dMultinationaldFinance,d3rdd edition
PART I Overview and Background
d d d d
Chapter 1 An Introduction to Multinational Finance
d d d d d d
True/False
1. MNCsdhavedinvestmentdordfinancialdoperationsdindmoredthandonedcountry.d
ANS:dTrue.
2. Becausedofdglobalizationdindthedworld’sdmarkets,dadmultinationaldfinancialdmanagerdisdmoredli
kelydthandaddomesticdfinancialdmanagerdtodspecializedindfinancedtodthedexclusiondofdotherdfiel
dsdofdbusiness.
ANS:dFalse.dThedmultinationaldfinancialdmanagerdmustdbedwelldverseddindeachdofdthedbusine
ssddisciplinesdindwhichdthedMNCdisdinvolved.
3. Theddomesticdfinancialdmanagerdmustdbedknowledgeabledindseveraldareasdwithindfinance,d
whereasdthedmultinationaldfinancialdmanagerdusuallydspecializesdindadsingledarea,dsuchdasdc
orporatedfinance,dinvestments,dordfinancialdmarkets.
ANS:dFalse.dThedmultinationaldfinancialdmanagerdisdlikelydtodrequiredknowledgedofdseveraldf
ieldsdwithindfinance.
4. Thedinvestmentdopportunitydsetdisdthedsetdofdinvestmentsdavailabledtodthedcorporation;dthatdis,dtheds
etdfromdwhichdthedcompanydmustdselect.
ANS:dTrue.
5. Typesdofdmarketdefficiencyduseddtoddescribedthedperformancedofdfinancialdmarketsdareda
llocational,doperational,danddtransactionaldefficiency.
ANS:dFalse.dThreedtypesdofdmarketdefficiencydaredallocational,doperational,dand
informational.
6. Andinformationallydefficientdmarketdisdonedwithdabundantdinformation.
ANS:dFalse.dItdisdadmarketdindwhichdpricesdfullydreflectdavailabledinformation.
7. Allocationaldefficiencydrefersdtodhowdefficientlydadmarketdchannelsdcapitaldtowardditsdmostdp
roductiveduses.
ANS:dTrue.
8. Allocationaldefficiencydrefersdtodwhetherdadmarketdallocatesdcapitaldtodthosedinvestmentsdd
eemeddmostdworthydbydadhostdgovernment.
ANS:dFalse.dAllocationaldefficiencydrefersdtodhowdefficientlydadmarketdchannelsdcapitaldtow
ardditsdmostdproductivedusesdindandeconomic,dratherdthandadpolitical,dsense.
9. Operationaldefficiencydrefersdtodhowdlargedandinfluencedtransactionsdcostsdanddotherdmarketdf
rictionsdhavedondthedoperationdofdadmarket.
ANS:dTrue.
10. ThedMNCdfacesdgreaterdconstraintsdthandtheddomesticdcorporationdindthedtimingdofditsdi
nvestments.
ANS:dFalse.dMultinationalsdtypicallydhavedmoredflexibilitydindtiming,dlocation,danddoperatio
n.
11. Riskdexistsdwheneverdactualdoutcomesdcanddifferdfromdexpecteddoutcomes.d
ANS:dTrue.
2
Distributingdprohibitedd|dDownloadeddbydAnniedTand(
)
, lOMoARcPSD| 1935369
12. Assetsdanddliabilitiesdaredexposeddtodcurrencydriskdwhendtheirdvaluesdcandchangedwithdu
nexpecteddchangesdindcurrencydvalues.
ANS:dTrue.
13. “Currencydrisk”dandd“currencydriskdexposure”dreferdtodthedsamedthingd-
dthedpossibilitydthatd
currencydvaluesdwillddifferdfromdtheirdexpectations.
ANS:dFalse.dAdfirmdisdexposeddtodcurrencydriskdwhenditsdassetsdordliabilitiesdcandchangedindvaluedw
ithdunexpecteddchangesdindcurrencydvalues.
14. Politicaldriskdisdthedriskdthatdthedbusinessdenvironmentdindadhostdcountrydwilldchangedu
nexpectedlydduedtodpoliticaldevents.
ANS:dTrue.
15. Thedtermsd“stakeholders”dandd“shareholders”daredsynonymous.
ANS:dFalse.dStakeholdersdincludedalldthosedwithdadstakedindthedfirm.dAdbroadddefinitiondofdstake
holdersdincludesdthedfirm’sdcreditors,dcustomers,dsuppliers,danddemployees.
16. Exportingdthroughdadforeigndsalesdagentdrequiresdlittledresourcedcommitmentdanddhelpsdtodi
nsulatedthedexporterdfromdthedcostsdanddrisksdofdforeigndmarketdentry.
ANS:dTrue.
17. Foreignddirectdinvestmentdisdwhendadmultinationaldcorporationdbuildsdproductivedcapacitydinda
dforeigndcountry.
ANS:dTrue.
18. Thedeasiestdmodedofdentrydintodforeigndmarketsdisdforeignddirectdinvestment.d
ANS:dFalse.dFDIdisdonedofdthedmostddifficultdentrydmodes.
19. Contract-
baseddmodesdofdentrydintodforeigndmarketsdincludedforeigndsalesdagentsdanddforeigndsalesdbranc
hes.
ANS:dFalse.dInternationaldlicensingdanddfranchising,dreciprocaldmarketdagreements,danddmanag
ementdcontractsdaredcontract-baseddentrydmodes.
20. Foreignddirectdinvestmentdrequiresdadrelativelydlargedresourcedcommitmentdfromdthedparentdfirm.d
ANS:dTrue.
21. Thedsalesdanddmarketingdbenefitsdofdforeignddirectdinvestmentdaredusuallydlessdthandthosedofde
xportdentrydintodforeigndmarkets.
ANS:dFalse.dWithdestablisheddoperationsdindthedforeigndcountry,dmultinationaldcorporationsdared
abledtodpromotedtheirdproductsdanddservicesdmoredeffectively.
22. Licensingdprovidesdquickdanddrelativelydlow-
riskdentrydintodforeigndmarketsdasdlongdasdthedparentdcandprotectditsdintellectualdpropertydrigh
ts.
ANS:dTrue.
3
Distributingdprohibitedd|dDownloadeddbydAnniedTand(
)
, lOMoARcPSD| 1935369
KirtdC.dButler,dMultinationaldFinance,d3rdd edition
23. Thedmaindreasondfordinvestment-
baseddforeigndmarketdentrydisdtodminimizedculturaldrisk.dANS:dFalse.dThedmaindreasonsdar
edthedpotentialdfordhigherdsalesdanddlowerdcosts.
24. Accordingdtodproductdcycledtheory,dnewdproductsdaredtypicallydtesteddindforeigndmarketsdanddt
hendaredintroduceddintodthedhomedmarket.
ANS:dFalse.dNewdproductsdaredusuallydintroduceddindthedhomedmarket.
25. Corporationsdoftendtrydtodextenddtheirdproductdlifedcyclesdbydenteringdforeigndmarkets.d
ANS:dTrue.
MultipledChoice
1. Entrydmodesdintodinternationaldmarketsdincludedeachdofda)dthroughdd)dexcept .
a. exporting
b. franchising
c. investment
d. licensing
e. eachdofdthedabovedisdandentrydmoded
ANS:dE
2. Fordmanufacturingdfirmsdwithdpatents,dthedmostdimportantddifferencedbetweendthedvariousdf
oreigndmarketdentrydmodesdfordmanufacturingdfirmsdisdindwhetherdordnotdthedparentdfirmdm
aintainsdcontroldof .
a. distribution
b. marketing
c. packaging
d. production
e. purchasingd
ANS:dD
3. Resourcedcommitmentdisdhighestdfordwhichdforeigndmarketdentrydmode?
a. exportingdthroughdforeigndsalesdagents
b. exportingdthroughdforeigndsalesdbranches
c. foreignddirectdinvestment
d. foreigndjointdventure
e. licensingd
ANS:dC
4. Thedfastestdwaydtodgaindaccessdtodadforeigndmarketdisdby .
a. exportingdthroughdforeigndsalesdagents
b. exportingdthroughdforeigndsalesdbranches
c. foreigndacquisition
d. foreignddirectdinvestment
e. foreigndjointdventured
ANS:dA
5. Thedforeigndmarketdentrydmodedwithdthedlowestdsalesdpotentialdis .
a. exportingdthroughdforeigndsalesdagents
b. exportingdthroughdforeigndsalesdbranches
c. foreignddirectdinvestments
4
Distributingdprohibitedd|dDownloadeddbydAnniedTand(
)
