KirtkC.kButler,kMultinationalkFinance,k3rdk edition
Test Bank k
True/false questions k
Multiple choice questions Pr
k k k
oblems
to accompany
k
Multinational Finance k
by Kirt C. Butler
k k k
Third Edition k
, lOMoARcPSD| 1935369
KirtkC.kButler,kMultinationalkFinance,k3rdk edition
PART I Overview and Background
k k k k
Chapter 1 An Introduction to Multinational Finance
k k k k k k
True/False
1. MNCskhavekinvestmentkorkfinancialkoperationskinkmorekthankonekcountry.k
ANS:kTrue.
2. Becausekofkglobalizationkinkthekworld’skmarkets,kakmultinationalkfinancialkmanagerkiskmorekl
ikelykthankakdomestickfinancialkmanagerktokspecializekinkfinancektokthekexclusionkofkotherkfie
ldskofkbusiness.
ANS:kFalse.kThekmultinationalkfinancialkmanagerkmustkbekwellkversedkinkeachkofkthekbusines
skdisciplineskinkwhichkthekMNCkiskinvolved.
3. Thekdomestickfinancialkmanagerkmustkbekknowledgeablekinkseveralkareaskwithinkfinance,k
whereaskthekmultinationalkfinancialkmanagerkusuallykspecializeskinkaksinglekarea,ksuchkaskc
orporatekfinance,kinvestments,korkfinancialkmarkets.
ANS:kFalse.kThekmultinationalkfinancialkmanagerkisklikelyktokrequirekknowledgekofkseveralkf
ieldskwithinkfinance.
4. Thekinvestmentkopportunityksetkisktheksetkofkinvestmentskavailablektokthekcorporation;kthatkis,ktheks
etkfromkwhichkthekcompanykmustkselect.
ANS:kTrue.
5. Typeskofkmarketkefficiencykusedktokdescribekthekperformancekofkfinancialkmarketskareka
llocational,koperational,kandktransactionalkefficiency.
ANS:kFalse.kThreektypeskofkmarketkefficiencykarekallocational,koperational,kand
informational.
6. Ankinformationallykefficientkmarketkiskonekwithkabundantkinformation.
ANS:kFalse.kItkiskakmarketkinkwhichkpriceskfullykreflectkavailablekinformation.
7. Allocationalkefficiencykrefersktokhowkefficientlykakmarketkchannelskcapitalktowardkitskmostk
productivekuses.
ANS:kTrue.
8. Allocationalkefficiencykrefersktokwhetherkakmarketkallocateskcapitalktokthosekinvestmentsk
deemedkmostkworthykbykakhostkgovernment.
ANS:kFalse.kAllocationalkefficiencykrefersktokhowkefficientlykakmarketkchannelskcapitalktowar
dkitskmostkproductivekuseskinkankeconomic,kratherkthankakpolitical,ksense.
9. Operationalkefficiencykrefersktokhowklargekankinfluencektransactionskcostskandkotherkmarketkf
rictionskhavekonkthekoperationkofkakmarket.
ANS:kTrue.
10. ThekMNCkfaceskgreaterkconstraintskthankthekdomestickcorporationkinkthektimingkofkitski
nvestments.
ANS:kFalse.kMultinationalsktypicallykhavekmorekflexibilitykinktiming,klocation,kandkoperation
.
11. Riskkexistskwheneverkactualkoutcomeskcankdifferkfromkexpectedkoutcomes.k
ANS:kTrue.
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Distributingkprohibitedk|kDownloadedkbykAnniekTank()
, lOMoARcPSD| 1935369
12. Assetskandkliabilitieskarekexposedktokcurrencykriskkwhenktheirkvalueskcankchangekwithku
nexpectedkchangeskinkcurrencykvalues.
ANS:kTrue.
13. “Currencykrisk”kandk“currencykriskkexposure”kreferktoktheksamekthingk-
kthekpossibilitykthatkcurrencykvalueskwillkdifferkfrom ktheirkexpectations.
ANS:kFalse.kAkfirmkiskexposedktokcurrencykriskkwhenkitskassetskorkliabilitieskcankchangekinkvaluekw
ithkunexpectedkchangeskinkcurrencykvalues.
14. Politicalkriskkiskthekriskkthatkthekbusinesskenvironmentkinkakhostkcountrykwillkchangeku
nexpectedlykduektokpoliticalkevents.
ANS:kTrue.
15. Thektermsk“stakeholders”kandk“shareholders”kareksynonymous.
ANS:kFalse.kStakeholderskincludekallkthosekwithkakstakekinkthekfirm.kAkbroadkdefinitionkofkstakeholdersk
includeskthekfirm’skcreditors,kcustomers,ksuppliers,kandkemployees.
16. Exportingkthroughkakforeignksaleskagentkrequiresklittlekresourcekcommitmentkandkhelpsktoki
nsulatekthekexporterkfromkthekcostskandkriskskofkforeignkmarketkentry.
ANS:kTrue.
17. Foreignkdirectkinvestmentkiskwhenkakmultinationalkcorporationkbuildskproductivekcapacitykink
akforeignkcountry.
ANS:kTrue.
18. Thekeasiestkmodekofkentrykintokforeignkmarketskiskforeignkdirectkinvestment.k
ANS:kFalse.kFDIkiskonekofkthekmostkdifficultkentrykmodes.
19. Contract-
basedkmodeskofkentrykintokforeignkmarketskincludekforeignksaleskagentskandkforeignksaleskbran
ches.
ANS:kFalse.kInternationalklicensingkandkfranchising,kreciprocalkmarketkagreements,kandkman
agementkcontractskarekcontract-basedkentrykmodes.
20. Foreignkdirectkinvestmentkrequireskakrelativelyklargekresourcekcommitmentkfromkthekparentkfirm.k
ANS:kTrue.
21. Theksaleskandkmarketingkbenefitskofkforeignkdirectkinvestmentkarekusuallyklesskthankthosekofke
xportkentrykintokforeignkmarkets.
ANS:kFalse.kWithkestablishedkoperationskinkthekforeignkcountry,kmultinationalkcorporationska
rekablektokpromotektheirkproductskandkserviceskmorekeffectively.
22. Licensingkprovideskquickkandkrelativelyklow-
riskkentrykintokforeignkmarketskasklongkaskthekparentkcankprotectkitskintellectualkpropertykrig
hts.
ANS:kTrue.
3
Distributingkprohibitedk|kDownloadedkbykAnniekTank()
, lOMoARcPSD| 1935369
KirtkC.kButler,kMultinationalkFinance,k3rdk edition
23. Thekmainkreasonkforkinvestment-
basedkforeignkmarketkentrykisktokminimizekculturalkrisk.kANS:kFalse.kThekmainkreasonskar
ekthekpotentialkforkhigherksaleskandklowerkcosts.
24. Accordingktokproductkcyclektheory,knewkproductskarektypicallyktestedkinkforeignkmarketskandkt
henkarekintroducedkintokthekhomekmarket.
ANS:kFalse.kNewkproductskarekusuallykintroducedkinkthekhomekmarket.
25. Corporationskoftenktryktokextendktheirkproductklifekcycleskbykenteringkforeignkmarkets.k
ANS:kTrue.
MultiplekChoice
1. Entrykmodeskintokinternationalkmarketskincludekeachkofka)kthroughkd)kexceptk .
a. exporting
b. franchising
c. investment
d. licensing
e. eachkofkthekabovekiskankentrykmodek
ANS:kE
2. Forkmanufacturingkfirmskwithkpatents,kthekmostkimportantkdifferencekbetweenkthekvariouskf
oreignkmarketkentrykmodeskforkmanufacturingkfirmskiskinkwhetherkorknotkthekparentkfirmkm
aintainskcontrolkofk .
a. distribution
b. marketing
c. packaging
d. production
e. purchasing
kANS:kD
3. Resourcekcommitmentkiskhighestkforkwhichkforeignkmarketkentrykmode?
a. exportingkthroughkforeignksaleskagents
b. exportingkthroughkforeignksaleskbranches
c. foreignkdirectkinvestment
d. foreignkjointkventure
e. licensing
kANS:kC
4. Thekfastestkwayktokgainkaccessktokakforeignkmarketkiskbyk .
a. exportingkthroughkforeignksaleskagents
b. exportingkthroughkforeignksaleskbranches
c. foreignkacquisition
d. foreignkdirectkinvestment
e. foreignkjointkventure
kANS:kA
5. Thekforeignkmarketkentrykmodekwithktheklowestksaleskpotentialkisk .
a. exportingkthroughkforeignksaleskagents
b. exportingkthroughkforeignksaleskbranches
c. foreignkdirectkinvestments
4
Distributingkprohibitedk|kDownloadedkbykAnniekTank()
Test Bank k
True/false questions k
Multiple choice questions Pr
k k k
oblems
to accompany
k
Multinational Finance k
by Kirt C. Butler
k k k
Third Edition k
, lOMoARcPSD| 1935369
KirtkC.kButler,kMultinationalkFinance,k3rdk edition
PART I Overview and Background
k k k k
Chapter 1 An Introduction to Multinational Finance
k k k k k k
True/False
1. MNCskhavekinvestmentkorkfinancialkoperationskinkmorekthankonekcountry.k
ANS:kTrue.
2. Becausekofkglobalizationkinkthekworld’skmarkets,kakmultinationalkfinancialkmanagerkiskmorekl
ikelykthankakdomestickfinancialkmanagerktokspecializekinkfinancektokthekexclusionkofkotherkfie
ldskofkbusiness.
ANS:kFalse.kThekmultinationalkfinancialkmanagerkmustkbekwellkversedkinkeachkofkthekbusines
skdisciplineskinkwhichkthekMNCkiskinvolved.
3. Thekdomestickfinancialkmanagerkmustkbekknowledgeablekinkseveralkareaskwithinkfinance,k
whereaskthekmultinationalkfinancialkmanagerkusuallykspecializeskinkaksinglekarea,ksuchkaskc
orporatekfinance,kinvestments,korkfinancialkmarkets.
ANS:kFalse.kThekmultinationalkfinancialkmanagerkisklikelyktokrequirekknowledgekofkseveralkf
ieldskwithinkfinance.
4. Thekinvestmentkopportunityksetkisktheksetkofkinvestmentskavailablektokthekcorporation;kthatkis,ktheks
etkfromkwhichkthekcompanykmustkselect.
ANS:kTrue.
5. Typeskofkmarketkefficiencykusedktokdescribekthekperformancekofkfinancialkmarketskareka
llocational,koperational,kandktransactionalkefficiency.
ANS:kFalse.kThreektypeskofkmarketkefficiencykarekallocational,koperational,kand
informational.
6. Ankinformationallykefficientkmarketkiskonekwithkabundantkinformation.
ANS:kFalse.kItkiskakmarketkinkwhichkpriceskfullykreflectkavailablekinformation.
7. Allocationalkefficiencykrefersktokhowkefficientlykakmarketkchannelskcapitalktowardkitskmostk
productivekuses.
ANS:kTrue.
8. Allocationalkefficiencykrefersktokwhetherkakmarketkallocateskcapitalktokthosekinvestmentsk
deemedkmostkworthykbykakhostkgovernment.
ANS:kFalse.kAllocationalkefficiencykrefersktokhowkefficientlykakmarketkchannelskcapitalktowar
dkitskmostkproductivekuseskinkankeconomic,kratherkthankakpolitical,ksense.
9. Operationalkefficiencykrefersktokhowklargekankinfluencektransactionskcostskandkotherkmarketkf
rictionskhavekonkthekoperationkofkakmarket.
ANS:kTrue.
10. ThekMNCkfaceskgreaterkconstraintskthankthekdomestickcorporationkinkthektimingkofkitski
nvestments.
ANS:kFalse.kMultinationalsktypicallykhavekmorekflexibilitykinktiming,klocation,kandkoperation
.
11. Riskkexistskwheneverkactualkoutcomeskcankdifferkfromkexpectedkoutcomes.k
ANS:kTrue.
2
Distributingkprohibitedk|kDownloadedkbykAnniekTank()
, lOMoARcPSD| 1935369
12. Assetskandkliabilitieskarekexposedktokcurrencykriskkwhenktheirkvalueskcankchangekwithku
nexpectedkchangeskinkcurrencykvalues.
ANS:kTrue.
13. “Currencykrisk”kandk“currencykriskkexposure”kreferktoktheksamekthingk-
kthekpossibilitykthatkcurrencykvalueskwillkdifferkfrom ktheirkexpectations.
ANS:kFalse.kAkfirmkiskexposedktokcurrencykriskkwhenkitskassetskorkliabilitieskcankchangekinkvaluekw
ithkunexpectedkchangeskinkcurrencykvalues.
14. Politicalkriskkiskthekriskkthatkthekbusinesskenvironmentkinkakhostkcountrykwillkchangeku
nexpectedlykduektokpoliticalkevents.
ANS:kTrue.
15. Thektermsk“stakeholders”kandk“shareholders”kareksynonymous.
ANS:kFalse.kStakeholderskincludekallkthosekwithkakstakekinkthekfirm.kAkbroadkdefinitionkofkstakeholdersk
includeskthekfirm’skcreditors,kcustomers,ksuppliers,kandkemployees.
16. Exportingkthroughkakforeignksaleskagentkrequiresklittlekresourcekcommitmentkandkhelpsktoki
nsulatekthekexporterkfromkthekcostskandkriskskofkforeignkmarketkentry.
ANS:kTrue.
17. Foreignkdirectkinvestmentkiskwhenkakmultinationalkcorporationkbuildskproductivekcapacitykink
akforeignkcountry.
ANS:kTrue.
18. Thekeasiestkmodekofkentrykintokforeignkmarketskiskforeignkdirectkinvestment.k
ANS:kFalse.kFDIkiskonekofkthekmostkdifficultkentrykmodes.
19. Contract-
basedkmodeskofkentrykintokforeignkmarketskincludekforeignksaleskagentskandkforeignksaleskbran
ches.
ANS:kFalse.kInternationalklicensingkandkfranchising,kreciprocalkmarketkagreements,kandkman
agementkcontractskarekcontract-basedkentrykmodes.
20. Foreignkdirectkinvestmentkrequireskakrelativelyklargekresourcekcommitmentkfromkthekparentkfirm.k
ANS:kTrue.
21. Theksaleskandkmarketingkbenefitskofkforeignkdirectkinvestmentkarekusuallyklesskthankthosekofke
xportkentrykintokforeignkmarkets.
ANS:kFalse.kWithkestablishedkoperationskinkthekforeignkcountry,kmultinationalkcorporationska
rekablektokpromotektheirkproductskandkserviceskmorekeffectively.
22. Licensingkprovideskquickkandkrelativelyklow-
riskkentrykintokforeignkmarketskasklongkaskthekparentkcankprotectkitskintellectualkpropertykrig
hts.
ANS:kTrue.
3
Distributingkprohibitedk|kDownloadedkbykAnniekTank()
, lOMoARcPSD| 1935369
KirtkC.kButler,kMultinationalkFinance,k3rdk edition
23. Thekmainkreasonkforkinvestment-
basedkforeignkmarketkentrykisktokminimizekculturalkrisk.kANS:kFalse.kThekmainkreasonskar
ekthekpotentialkforkhigherksaleskandklowerkcosts.
24. Accordingktokproductkcyclektheory,knewkproductskarektypicallyktestedkinkforeignkmarketskandkt
henkarekintroducedkintokthekhomekmarket.
ANS:kFalse.kNewkproductskarekusuallykintroducedkinkthekhomekmarket.
25. Corporationskoftenktryktokextendktheirkproductklifekcycleskbykenteringkforeignkmarkets.k
ANS:kTrue.
MultiplekChoice
1. Entrykmodeskintokinternationalkmarketskincludekeachkofka)kthroughkd)kexceptk .
a. exporting
b. franchising
c. investment
d. licensing
e. eachkofkthekabovekiskankentrykmodek
ANS:kE
2. Forkmanufacturingkfirmskwithkpatents,kthekmostkimportantkdifferencekbetweenkthekvariouskf
oreignkmarketkentrykmodeskforkmanufacturingkfirmskiskinkwhetherkorknotkthekparentkfirmkm
aintainskcontrolkofk .
a. distribution
b. marketing
c. packaging
d. production
e. purchasing
kANS:kD
3. Resourcekcommitmentkiskhighestkforkwhichkforeignkmarketkentrykmode?
a. exportingkthroughkforeignksaleskagents
b. exportingkthroughkforeignksaleskbranches
c. foreignkdirectkinvestment
d. foreignkjointkventure
e. licensing
kANS:kC
4. Thekfastestkwayktokgainkaccessktokakforeignkmarketkiskbyk .
a. exportingkthroughkforeignksaleskagents
b. exportingkthroughkforeignksaleskbranches
c. foreignkacquisition
d. foreignkdirectkinvestment
e. foreignkjointkventure
kANS:kA
5. Thekforeignkmarketkentrykmodekwithktheklowestksaleskpotentialkisk .
a. exportingkthroughkforeignksaleskagents
b. exportingkthroughkforeignksaleskbranches
c. foreignkdirectkinvestments
4
Distributingkprohibitedk|kDownloadedkbykAnniekTank()
