The chapters in this document are displayed in reversed order, with the last chapter appearing first.
This change ensures all chapters are included in the test bank. Chap 1 to 18 ✅
Financial Management: Core Concepts, 5e (Brooks)
Chapter 18 International Financial Management
18.1 Managing Multinational Operations
1) Businesses that operate in more than one country are commonly referred to as ________.
A) multiamerican firms
B) multinational firms
C) ultranational firms
D) worldwide firms
Answer: B
Diff: 1
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
2) The difficulties of managing international business operations stem from three special issues.
Which of the choices below is NOT one of these?
A) Political risk
B) Differences in business practices
C) Social fads
D) Cultural differences
Answer: C
Diff: 2
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
3) ________ arise(s) from differences in customs, social norms, attitudes, assumptions, and
expectations of the local society in a host country.
A) Cultural risk
B) Political risk
C) Social fads
D) Similarities in business beliefs
Answer: A
Diff: 1
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
1
Copyright © 2025
,4) Specific issues related to cultural differences can arise in the management of a multinational
enterprise. All of the following are related to cultural differences EXCEPT ________.
A) a requirement to have local management
B) issues with promotion of women into management positions
C) issues with observation of religious holidays
D) nationalization of the assets of a company by the foreign government
Answer: D
Explanation: This is a political risk, not a cultural risk.
Diff: 1
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
Hmwrk Questions: * Taken from "Prepping for Exams" questions at the end of the chapter.
5) In regard to the cultural risks related to ownership structure, which of the statements below is
FALSE?
A) Cultural norms work their way into laws and regulations so that the interests of the host
country will take precedence over the interest of the foreign country, the original home of the
business.
B) In order to start a business operation in a foreign country, it may be necessary to utilize a joint
venture business form.
C) Today, there are practically no industries protected against foreign ownership in host
countries.
D) The ownership structure of a business can be restricted once the business ventures overseas
and faces the additional constraint of meeting ownership requirements of more than one
government.
Answer: C
Explanation: Some industries remain HEAVILY protected against foreign ownership in host
countries.
Diff: 2
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
6) In regard to the cultural risks related to human resources management, which of the statements
below is TRUE?
A) In some countries, women are restricted from management positions.
B) The hiring of local citizens instead of bringing in foreign expatriates is often a necessary part
of doing business abroad.
C) Foreign expatriates would find it difficult living and working in a community where they are
seen as taking away wages and livelihood from local citizens.
D) All of these statements are true.
Answer: D
Diff: 2
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
2
Copyright © 2025
,7) In regard to the cultural risks related to nepotism and corrupt practices, which of the
statements below is TRUE?
A) The Foreign Corrupt Practices Act, passed during the administration of President Carter,
makes it illegal for U. S. citizens to pay bribes to foreign officials or leaders in order to facilitate
business operations.
B) If a firm does not have a competitive advantage so that it can overcome the bribery situation
and still make a profit, it may be best to look somewhere else to extend business operations.
C) Companies can be forced by a local government official to hire specific individuals and place
them in positions of control.
D) All of these statements are true.
Answer: D
Diff: 2
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
8) In regard to the cultural risks related to intellectual property rights, which of the statements
below is FALSE?
A) Property rights, in general, refer to the right of an individual to use his or her talents and
properties (assets) for company gain.
B) Intellectual property rights refer to the product or service that is created by the talents of an
individual.
C) The exclusive use of a specific technological advantage may be lost because local
governments do not respect or honor copyright or patent laws.
D) Intellectual property rights are established through patents and copyrights in order to protect
the goods and services of the original developer and the revenues pertaining to them.
Answer: A
Explanation: Property rights, in general, refer to the right of an individual to use his or her
talents and properties (assets) for PERSONAL gain.
Diff: 2
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
9) A major aspect of operating a business in a host country is the business risk that must be
assumed. Which of the following is NOT a business risk?
A) A severe drought
B) The risk of the firm being nationalized by the host country.
C) A rise in interest rates
D) A shift in exchange rates
Answer: B
Explanation: Nationalization of assets is a political risk.
Diff: 2
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
3
Copyright © 2025
, 10) As we go from home operations to international operations, we can potentially receive a
________, but we can also see our ________ increase.
A) diversification benefit; systematic risk
B) diversification disadvantage; total risk
C) diversification disadvantage; systematic risk
D) diversification benefit; total risk
Answer: D
Diff: 3
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
Hmwrk Questions: * Taken from "Prepping for Exams" questions at the end of the chapter.
11) ________ involves the changes in a foreign government that can have far-reaching effects on
a multinational company.
A) Social risk
B) Political risk
C) Business risk
D) Government risk
Answer: B
Diff: 1
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
12) Which of the statements below is FALSE?
A) Political risk involves changes in a foreign government. At one extreme is the case in which a
local government "takes over" the assets of the company and nationalizes it.
B) Political risk involves changes in a foreign government. An extreme example is the case in
which a government encourages foreign investment and gives breaks to companies willing to
move operations locally.
C) There are three basic defensive mechanisms that can guard against the extreme case of
nationalized assets. These include keeping critical operations private, financing operations and
assets with local money, and receiving primary inputs outside the local economy.
D) One way that a multinational firm can minimize the potential of nationalization of assets by a
foreign government is to share key elements of operations with the government.
Answer: D
Explanation: One way that a multinational firm can minimize the potential of nationalization of
assets by a foreign government is to maintain key elements of operations within the firm.
Diff: 2
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
4
Copyright © 2025
This change ensures all chapters are included in the test bank. Chap 1 to 18 ✅
Financial Management: Core Concepts, 5e (Brooks)
Chapter 18 International Financial Management
18.1 Managing Multinational Operations
1) Businesses that operate in more than one country are commonly referred to as ________.
A) multiamerican firms
B) multinational firms
C) ultranational firms
D) worldwide firms
Answer: B
Diff: 1
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
2) The difficulties of managing international business operations stem from three special issues.
Which of the choices below is NOT one of these?
A) Political risk
B) Differences in business practices
C) Social fads
D) Cultural differences
Answer: C
Diff: 2
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
3) ________ arise(s) from differences in customs, social norms, attitudes, assumptions, and
expectations of the local society in a host country.
A) Cultural risk
B) Political risk
C) Social fads
D) Similarities in business beliefs
Answer: A
Diff: 1
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
1
Copyright © 2025
,4) Specific issues related to cultural differences can arise in the management of a multinational
enterprise. All of the following are related to cultural differences EXCEPT ________.
A) a requirement to have local management
B) issues with promotion of women into management positions
C) issues with observation of religious holidays
D) nationalization of the assets of a company by the foreign government
Answer: D
Explanation: This is a political risk, not a cultural risk.
Diff: 1
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
Hmwrk Questions: * Taken from "Prepping for Exams" questions at the end of the chapter.
5) In regard to the cultural risks related to ownership structure, which of the statements below is
FALSE?
A) Cultural norms work their way into laws and regulations so that the interests of the host
country will take precedence over the interest of the foreign country, the original home of the
business.
B) In order to start a business operation in a foreign country, it may be necessary to utilize a joint
venture business form.
C) Today, there are practically no industries protected against foreign ownership in host
countries.
D) The ownership structure of a business can be restricted once the business ventures overseas
and faces the additional constraint of meeting ownership requirements of more than one
government.
Answer: C
Explanation: Some industries remain HEAVILY protected against foreign ownership in host
countries.
Diff: 2
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
6) In regard to the cultural risks related to human resources management, which of the statements
below is TRUE?
A) In some countries, women are restricted from management positions.
B) The hiring of local citizens instead of bringing in foreign expatriates is often a necessary part
of doing business abroad.
C) Foreign expatriates would find it difficult living and working in a community where they are
seen as taking away wages and livelihood from local citizens.
D) All of these statements are true.
Answer: D
Diff: 2
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
2
Copyright © 2025
,7) In regard to the cultural risks related to nepotism and corrupt practices, which of the
statements below is TRUE?
A) The Foreign Corrupt Practices Act, passed during the administration of President Carter,
makes it illegal for U. S. citizens to pay bribes to foreign officials or leaders in order to facilitate
business operations.
B) If a firm does not have a competitive advantage so that it can overcome the bribery situation
and still make a profit, it may be best to look somewhere else to extend business operations.
C) Companies can be forced by a local government official to hire specific individuals and place
them in positions of control.
D) All of these statements are true.
Answer: D
Diff: 2
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
8) In regard to the cultural risks related to intellectual property rights, which of the statements
below is FALSE?
A) Property rights, in general, refer to the right of an individual to use his or her talents and
properties (assets) for company gain.
B) Intellectual property rights refer to the product or service that is created by the talents of an
individual.
C) The exclusive use of a specific technological advantage may be lost because local
governments do not respect or honor copyright or patent laws.
D) Intellectual property rights are established through patents and copyrights in order to protect
the goods and services of the original developer and the revenues pertaining to them.
Answer: A
Explanation: Property rights, in general, refer to the right of an individual to use his or her
talents and properties (assets) for PERSONAL gain.
Diff: 2
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
9) A major aspect of operating a business in a host country is the business risk that must be
assumed. Which of the following is NOT a business risk?
A) A severe drought
B) The risk of the firm being nationalized by the host country.
C) A rise in interest rates
D) A shift in exchange rates
Answer: B
Explanation: Nationalization of assets is a political risk.
Diff: 2
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
3
Copyright © 2025
, 10) As we go from home operations to international operations, we can potentially receive a
________, but we can also see our ________ increase.
A) diversification benefit; systematic risk
B) diversification disadvantage; total risk
C) diversification disadvantage; systematic risk
D) diversification benefit; total risk
Answer: D
Diff: 3
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
Hmwrk Questions: * Taken from "Prepping for Exams" questions at the end of the chapter.
11) ________ involves the changes in a foreign government that can have far-reaching effects on
a multinational company.
A) Social risk
B) Political risk
C) Business risk
D) Government risk
Answer: B
Diff: 1
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
12) Which of the statements below is FALSE?
A) Political risk involves changes in a foreign government. At one extreme is the case in which a
local government "takes over" the assets of the company and nationalizes it.
B) Political risk involves changes in a foreign government. An extreme example is the case in
which a government encourages foreign investment and gives breaks to companies willing to
move operations locally.
C) There are three basic defensive mechanisms that can guard against the extreme case of
nationalized assets. These include keeping critical operations private, financing operations and
assets with local money, and receiving primary inputs outside the local economy.
D) One way that a multinational firm can minimize the potential of nationalization of assets by a
foreign government is to share key elements of operations with the government.
Answer: D
Explanation: One way that a multinational firm can minimize the potential of nationalization of
assets by a foreign government is to maintain key elements of operations within the firm.
Diff: 2
Topic: 18.1 Managing Multinational Operations
AACSB: Analytical Thinking
LO: 18.1 Understand cultural, business, and political differences in business practices.
4
Copyright © 2025
