Question 1

In countries such as the United States and Britain, firms typically raised capital by

Accepted Answer

In countries where there were well-developed capital markets, such as the United States and Britain, firms typically raised capital by issuing stock or bonds to investors.

Question 2

A fronting loan is a loan between a parent and its subsidiary channeled through a financial intermediary.

Accepted Answer

A fronting loan is a loan between a parent and its subsidiary channeled through a financial intermediary, usually a large international bank.

Question 3

Three sets of related decisions are involved in financial management in an international business. Which of these involves making decisions about how to fund the chosen activities?

Accepted Answer

Financial management in an international business includes three sets of related decisions: (1) investment decisions: decisions about what activities to finance, (2) financing decisions: decisions about how to finance those activities, and (3) money management decisions: decisions about how to manage the firm's financial resources most efficiently.

Question 4

________ are the most important source of external capital for business enterprises in the United States.

Accepted Answer

In countries where there are well-developed capital markets, such as the United States and Britain, firms typically raise capital by issuing stock or bonds to investors.

Question 5

A tax treaty between two countries is formed to fix the exchange rates between the two countries.

Accepted Answer

A tax treaty between two countries is an agreement specifying what items of income will be taxed by the authorities of the country where the income is earned.

Question 6

Payment of dividends is an uncommon method of transferring funds from foreign subsidiaries to the parent company.

Accepted Answer

Payment of dividends is the most common method by which firms transfer funds from foreign subsidiaries to the parent company.

Question 7

Historically, financial reports prepared by firms in Germany

Accepted Answer

In Germany and Switzerland, the banks emerged as the main providers of capital to enterprises. Bank officers often sat on the boards of these companies and were privy to detailed information about their operations and financial position. As a consequence, there were fewer demands for detailed accounting disclosures, and public accounts tended to reveal less information.

Question 8

Financial management in an international business includes three sets of related decisions. Which of these involves making decisions about how to manage the firm's financial resources most efficiently?

Accepted Answer

Financial management in an international business includes three sets of related decisions: (1) investment decisions: decisions about what activities to finance, (2) financing decisions: decisions about how to finance those activities, and (3) money management decisions: decisions about how to manage the firm's financial resources most efficiently.

Question 9

A fee is compensation for professional services or expertise supplied to a foreign subsidiary by the parent company or another subsidiary.

Accepted Answer

A fee is compensation for professional services or expertise supplied to a foreign subsidiary by the parent company or another subsidiary.

Question 10

What is an accounting problem that only international businesses face?

Accepted Answer

International businesses face a number of accounting problems that do not confront purely domestic businesses. The lack of consistency in the accounting standards of different countries is one such problem.

Question 11

A German firm raising capital by selling stock through the London Stock Exchange is an example of

Accepted Answer

Transnational financing occurs when a firm based in one country enters another country's capital market to raise capital from the sale of stocks or bonds.

Question 12

Accounting standards are

Accepted Answer

Accounting standards are rules for preparing financial statements. They define what is useful accounting information.

Question 13

Financial management in an international business includes three sets of related decisions. Which of these involves making decisions about what activities to finance?

Accepted Answer

Financial management in an international business includes three sets of related decisions: (1) investment decisions: decisions about what activities to finance, (2) financing decisions: decisions about how to finance those activities, and (3) money management decisions: decisions about how to manage the firm's financial resources most efficiently.

Question 14

A tax haven is a country that gives income tax exemptions to firms that export all or part of its products.

Accepted Answer

A tax haven is a country with an exceptionally low, or even no, income tax. International businesses avoid or defer income taxes by establishing a wholly owned, nonoperating subsidiary in the tax haven.

Question 15

Firms cannot use transfer prices to move funds from a subsidiary to the parent company when financial transfers in the form of dividends are blocked by host-country government policies.

Accepted Answer

A firm can use transfer prices to move funds from a subsidiary to the parent company (or a tax haven) when financial transfers in the form of dividends are restricted or blocked by host-country government policies.

Question 16

The principles of multilateral netting and bilateral netting are different.

Accepted Answer

Multilateral netting is an extension of bilateral netting. Bilateral netting involves adjustments between two firms whereas multilateral netting involves adjustments between multiple subsidiaries.

Question 17

Which of the following was formed in March 2001 to replace the International Accounting Standards Committee (IASC)?

Accepted Answer

The International Accounting Standards Board (IASB) has emerged as a major proponent of standardization. The IASB was formed in March 2001 to replace the International Accounting Standards Committee (IASC), which had been established in 1973. The IASB has 15 members who are responsible for the formulation of new international financial reporting standards. To issue a new standard, 75 percent of the 15 members of the board must agree.

Question 18

Transnational financing occurs when a firm based in one country enters another country to raise capital

Accepted Answer

Transnational financing occurs when a firm based in one country enters another country's capital market to raise capital from the sale of stocks or bonds.

Question 19

The technical process by which an independent person gathers evidence for determining if financial accounts conform to required accounting standards is known as

Accepted Answer

An audit is the technical process by which an independent person (the auditor) gathers evidence for determining if financial accounts conform to required accounting standards and if they are also reliable.

Question 20

Which of the following is a country in which banks emerged as the main providers of capital to enterprises?

Accepted Answer

In Germany and Switzerland the banks emerged as the main providers of capital to enterprises. Bank officers often sat on the boards of these companies and were privy to detailed information about their operations and financial position. As a consequence, there were fewer demands for detailed accounting disclosures, and public accounts tended to reveal less information.

Quiz 20: Accounting and Finance in the International Business

In countries such as the United States and Britain, firms typically raised capital by

A fronting loan is a loan between a parent and its subsidiary channeled through a financial intermediary.

Three sets of related decisions are involved in financial management in an international business. Which of these involves making decisions about how to fund the chosen activities?

________ are the most important source of external capital for business enterprises in the United States.

A tax treaty between two countries is formed to fix the exchange rates between the two countries.

Payment of dividends is an uncommon method of transferring funds from foreign subsidiaries to the parent company.

Historically, financial reports prepared by firms in Germany

Financial management in an international business includes three sets of related decisions. Which of these involves making decisions about how to manage the firm's financial resources most efficiently?

A fee is compensation for professional services or expertise supplied to a foreign subsidiary by the parent company or another subsidiary.

What is an accounting problem that only international businesses face?

A German firm raising capital by selling stock through the London Stock Exchange is an example of

Accounting standards are

Financial management in an international business includes three sets of related decisions. Which of these involves making decisions about what activities to finance?

A tax haven is a country that gives income tax exemptions to firms that export all or part of its products.

Firms cannot use transfer prices to move funds from a subsidiary to the parent company when financial transfers in the form of dividends are blocked by host-country government policies.

The principles of multilateral netting and bilateral netting are different.

Which of the following was formed in March 2001 to replace the International Accounting Standards Committee (IASC) ?

Transnational financing occurs when a firm based in one country enters another country to raise capital

The technical process by which an independent person gathers evidence for determining if financial accounts conform to required accounting standards is known as

Which of the following is a country in which banks emerged as the main providers of capital to enterprises?