Deck 1: Introduction: Multinational Enterprise and Multinational Financial Management

Question 1

___________ are a recent category of multinationals that seek out and invest in lower cost production sites overseas.
A) Cost minimizers

A) Market seekers
B) Raw-material seekers
D) High tech firms

Answer 1

C

Question 2

Which of the following is an example of reverse foreign investment for the U.S.?

A) Honda builds a factory in Ohio
B) Apple builds a plant in Ireland that exports to the United States
C) British Telecom issues new stock in the United States
D) American investors buy shares in Sony

Answer 2

A

Question 3

Into which category of multinational is IBM most likely to fall?

A) raw materials seeker
B) market seeker
C) cost minimizer
D) all of the above

Answer 3

D

Question 4

For the multinational corporation, which one of the following complements to the integration of world wide operations is MOST critical?

A) flexibility
B) adaptability
C) speed
D) economies of scale of distribution

Question 5

The multinational financial system enables companies to

A) avoid currency controls
B) reduce taxes
C) access lower cost financing sources
D) all of the above

Question 6

According to the efficient market hypothesis, which one of the following is NOT correct?

A) markets place a premium on the future
B) today's stock price is the best predictor of tomorrow's stock price
C) stock prices reflect all available information
D) today's stock price incorporates the past history of prices

Question 7

Critics of the multinational corporation would NOT fault its tendency to

A) shift production from one location to another in search of lower costs
B) avoid taxes
C) cause balance of payments difficulties
D) engage in environmental protection measures

Question 8

Which of the following theories identifies specialization as the main reason for international business activity?

A) product life cycle theory of international trade
B) theory of diversification
C) doctrine of comparative advantage
D) theory of globalization

Question 9

According to the capital asset pricing model

A) only the systematic component of risk affects the required return
B) foreign investments whose returns are uncorrelated with the market's return should have a higher required return than comparable domestic investments
C) total risk of the investment is most relevant for small to medium-sized firms
D) diversification is secondary to risk levels of the investment

Question 10

The primary objective of the multinational corporation is to

A) maximize shareholder wealth
B) maximize world production
C) minimize debt
D) minimize the cost of doing business globally

Question 11

Which one of the following provides strong evidence that internationalization continues to grow in the world economy?

A) import restrictions by the Bush Administration on foreign steel
B) efforts suggested by politicians to restrict the sourcing of foreign products by locally headquartered multinationals
C) the growing volume of foreign direct investment by U.S. as well as other multinational companies
D) pressure on governments to embargo unfriendly nations

Question 12

Which of the following is NOT a failing of the theory of comparative advantage?

A) it ignores the role of uncertainty and economies of scale
B) it assumes that factors of production are relatively immobile
C) it assumes that there are no differentiated products
D) it deals with trade only differentiate rather than undifferentiated products

Question 13

___________ were the earliest multinationals.
A) market seekers

A) raw-material seekers
B) cost minimizers
C) oil companies.

Question 14

Historically, the primary motive for U.S. multinationals to produce abroad has been to

A) lower costs
B) respond more quickly to the marketplace
C) avoid trade barriers
D) gain tax benefits

Question 15

The internationalization process most likely tends to

A) proceed in a preprogrammed series of steps
B) begin by licensing foreign producers
C) inevitably involve foreign production
D) begin by exporting

Question 16

According to Shapiro, if you were the CEO of a multinational corporation, which of the following would be MOST important to you in hiring a manager? One that

A) Avoids risk at any price
B) Manages effectively the political environment of the subsidiary country
C) Anticipates every future disturbance related to the supply chain
D) Makes decisions that anticipates problems and provides solutions that enhances the firm's prospects for growth

Question 17

The ___________ are the archetype of the modern multinational firm that goes overseas to produce and sell in foreign markets.

A) cost minimizers
B) market seekers
C) raw-material seekers
D) whaling companies

Question 18

Multinational firms would most likely be

A) riskier than purely domestic firms because of the exposures of operating abroad
B) less risky than purely domestic firms because of international diversification
C) less risky than domestic firms if the added risks of operating overseas are more than offset by the ability to operate in nations whose economic cycles are not perfectly in phase
D) invested in developed countries only and avoid developing economies