Question 1

Which of the following is accurate for having an open account selling?
A) Involves shipping goods first and billing the importer later
B) Involves billing first and then shipping the goods
C) Involves shipping and billing at the same time
D) None of the above

Accepted Answer

Open account selling involves shipping goods first and then billing the importer later, which is a common practice in international trade that benefits the importer by providing them goods before payment is made.

Question 2

In Latin America, firms kept a portion of excess cash in gold dollar related government bonds to help hedge operation exposure during a/an______________.
A) depression
B) inflationary period
C) recession
D) constant growth

Accepted Answer

During an inflationary period, the value of a country's currency decreases while the price of goods and services increases. To protect against these effects, firms in Latin America may keep a portion of excess cash in gold or dollar-related government bonds as a hedge against the devaluation of their local currency. This helps to maintain the purchasing power of their cash reserves.

Question 3

An example of _____________ is depicted through, a US firm focusing on exports to Canada to acquire its debt in Canadian dollar markets and use the Canadian dollar cash inflows from export sales to service loan payments on Canadian dollar.
A) matching
B) netting
C) price escalation
D) leading

Accepted Answer

The example given depicts matching, which refers to aligning the currency of a company's assets and liabilities in order to reduce foreign exchange risk. In this case, the US firm is matching its Canadian dollar debt with the Canadian dollar cash inflows from its exports to Canada.

Question 4

Export financing is important because many export projects require
A) private sources of funding.
B) governmental sources of funding.
C) forfeit houses.
D) a large amount of start-up costs.

Accepted Answer

Export projects often require significant initial investments for production, marketing, and distribution, making large start-up costs a common necessity.

Question 5

Today, interbank email systems have been extensively applied in lieu of ___________________ between cross-border banks
A) cash in advance
B) cash on delivery
C) airmail payment orders
D) open account terms

Accepted Answer

Interbank email systems have replaced the outdated method of airmail payment orders, which were used to transfer funds between cross-border banks. Airmail payment orders were slow and unreliable, and the use of interbank email systems has improved the speed and efficiency of cross-border transactions. Cash in advance, cash on delivery, and open account terms are all payment methods used within domestic transactions, and are not relevant to cross-border banking.

Question 6

The majority of international trade uses __________ as the payment method.
A) cash in advance
B) letters of credit
C) documentary collection
D) open account terms

Accepted Answer

The majority of international trade uses letters of credit as the payment method, which provides a secure form of payment for both the buyer and the seller. The other payment methods, cash in advance, documentary collection, and open account terms, are less common in international trade compared to letters of credit.

Question 7

Widely-used payment methods in international trade include
A) working capital.
B) corporate guarantees.
C) closed account terms.
D) cash in advance.

Accepted Answer

Cash in advance is the most secure payment method for the exporter in international trade, as it ensures that they receive payment before shipping the goods. Other methods such as working capital, corporate guarantees, and closed account terms are riskier for the exporter as they require them to extend credit to the importer, increasing the possibility of non-payment or delayed payment.

Question 8

A firm's ability to raise its foreign currency selling price sufficiently to preserve its home currency profit margin in the case of foreign currency depreciation is considered to be
A) production/outsourcing flexibility.
B) pricing flexibility.
C) endaka.
D) localization structure.

Accepted Answer

Pricing flexibility refers to the ability of a firm to adjust its prices in response to changes in market conditions such as foreign currency depreciation. This allows the firm to maintain its profit margin even if its costs in the foreign currency increase. The other options are not relevant to this concept.

Question 9

_____________ measures the change in the present value of the firm resulting from any change in the future operating cash flows of the firm caused by an unexpected change in exchange rates and macroeconomic factors.
A) Economic exposure
B) Translation exposure
C) Light exposure
D) Foreign exchange exposure

Accepted Answer

Economic exposure measures the impact of unexpected changes in exchange rates and macroeconomic factors on the present value of the firm's future operating cash flows. Translation exposure is the impact of changes in exchange rates on the financial statements of the firm, and light exposure and foreign exchange exposure are not relevant terms in this context.

Question 10

MNEs encounter what types of foreign exchange exposure?
A) transaction exposure
B) economic (or operating) exposure
C) translation (or accounting) exposure
D) all of the above

Accepted Answer

MNEs can encounter all three types of foreign exchange exposure: transaction exposure, economic (or operating) exposure, and translation (or accounting) exposure.

Question 11

Which is used to partially or fully transfer foreign exchange risk to the importer?
A) mixed currency invoicing
B) price escalation clause
C) leads
D) lags

Accepted Answer

The price escalation clause is used to transfer foreign exchange risk to the importer. This clause allows the exporter to adjust the contract price to reflect changes in exchange rates between the time the contract is signed and the time the payment is received. By doing so, the exporter can partially or fully transfer the foreign exchange risk to the importer.

Question 12

In cash management, when considering efficient funding routes, a company must take into account
A) interest rates.
B) profitability of local operations.
C) tax rates.
D) all of the above

Accepted Answer

When considering efficient funding routes for cash management, a company must take into account all of the above factors including interest rates, profitability of local operations, and tax rates. Interest rates can affect the cost of borrowing and the return on investments, while profitability of local operations can impact the availability of internal funding sources. Tax rates can affect the after-tax cost of borrowing and the tax implications of investment decisions. All of these factors must be considered in order to determine the most efficient funding routes for the company's cash management needs.

Question 13

In global coordination, financial EDI systems help companies relay information
A) slower.
B) the same.
C) faster.
D) not at all.

Accepted Answer

Financial EDI systems allow for near-instantaneous transmission of financial information and transactions, enabling companies to coordinate their financial processes more quickly and efficiently.

Question 14

A revolving letter of credit
A) automatically renews.
B) is always transferable.
C) is the obligation of only the issuing bank.
D) is always cumulative.

Accepted Answer

A revolving letter of credit automatically renews, meaning that the issuing bank will continue to provide financing for the specified amount and time period until the credit is cancelled or expires. This allows the buyer to make multiple transactions using the same credit without having to arrange for a new credit each time.

Question 15

A document discrepancy is
A) payment made only under compliance with the letter of credit's conditions.
B) a pre-deposit in an issuing bank.
C) an oversight on checking the documents that are required in the letter of credit.
D) a financial contract.

Accepted Answer

A document discrepancy refers to a situation where the documents presented by the seller or exporter do not comply with the requirements specified in the letter of credit. It may be due to an oversight or error in checking the documents required, leading to a delay in payment or rejection of the documents. Options A, B and D do not accurately describe a document discrepancy.

Question 16

The bankers acceptance is a two-armed instrument with one branch in financing and the other in ________________________.
A) sales
B) investment
C) corporate guarantees
D) promissory notes

Accepted Answer

The first arm of the bankers acceptance is the financing aspect, which provides short-term credit to the borrower. The second arm is the investment aspect, which involves investors buying the bankers acceptance and holding it to maturity for the return on investment. Therefore, option B, investment, is the correct choice to complete the sentence.

Question 17

_____________ involve the exchange of interest or foreign currency exposures or a combination of both by two or more borrowers.
A) Transformations
B) Trades
C) Foreign trade flows
D) Swaps

Accepted Answer

Swaps involve the exchange of interest or currency exposures, or both, between two or more parties, typically borrowers.

Question 18

When managing foreign receivables in what stage does the exporting company decide what currency the transaction should be in?
A) pre-transaction
B) transaction
C) post-transaction
D) mid-transaction

Accepted Answer

The answer of When managing foreign receivables in what stage...

Question 19

An example of_______________, is Westinghouse Electric having its subsidiaries in Spain increase production of generators in response to a weakening euro
A) production arrangement
B) intra-company re-invoicing
C) input outsourcing
D) matching

Accepted Answer

Production arrangement is when a company has its subsidiaries in other countries increase production in response to changes in the exchange rate.

Question 20

An example of a/an ____________is if a subsidiary in Brazil needs Brazilian reals while a Brazilian company's subsidiary in the U.S. needs dollars. The Brazilian firm can lend reals to the U.S. owned subsidiary in Brazil while it borrows an equivalent amount of dollars from the U.S. parent in the U.S.
A) unparallel loan
B) overdraft
C) parallel loan
D) risky loan

Accepted Answer

This scenario describes a parallel loan, where two subsidiaries of different parent companies swap currencies to meet their respective funding needs. This allows them to avoid currency conversion fees and potentially obtain more favorable interest rates. The other options listed (unparallel loan, overdraft, risky loan) do not accurately describe this type of transaction.

Quiz 14: Financial Management for Global Operations

Which of the following is accurate for having an open account selling?

In Latin America, firms kept a portion of excess cash in gold dollar related government bonds to help hedge operation exposure during a/an______________.

An example of _____________ is depicted through, a US firm focusing on exports to Canada to acquire its debt in Canadian dollar markets and use the Canadian dollar cash inflows from export sales to service loan payments on Canadian dollar.

Export financing is important because many export projects require

Today, interbank email systems have been extensively applied in lieu of ___________________ between cross-border banks

The majority of international trade uses __________ as the payment method.

Widely-used payment methods in international trade include

A firm's ability to raise its foreign currency selling price sufficiently to preserve its home currency profit margin in the case of foreign currency depreciation is considered to be

_____________ measures the change in the present value of the firm resulting from any change in the future operating cash flows of the firm caused by an unexpected change in exchange rates and macroeconomic factors.

MNEs encounter what types of foreign exchange exposure?

Which is used to partially or fully transfer foreign exchange risk to the importer?

In cash management, when considering efficient funding routes, a company must take into account

In global coordination, financial EDI systems help companies relay information

A revolving letter of credit

A document discrepancy is

The bankers acceptance is a two-armed instrument with one branch in financing and the other in ________________________.

_____________ involve the exchange of interest or foreign currency exposures or a combination of both by two or more borrowers.

When managing foreign receivables in what stage does the exporting company decide what currency the transaction should be in?

An example of_______________, is Westinghouse Electric having its subsidiaries in Spain increase production of generators in response to a weakening euro