When a firm holds assets in many countries,
A)the firm's cash flows are internationally hedged.
B)shareholders of the firm can indirectly benefit from international diversification even if they are not directly holding foreign shares.
C)shareholders of the firm can directly benefit from international diversification even if they are not directly holding foreign shares.
D)none of the options

Question

Quizplus · Accepted Answer

When a firm holds assets in many countries, it is considered internationally diversified, which means that the firm is less exposed to the risks of any one country or market. This diversification can indirectly benefit shareholders who are not directly holding foreign shares, as it reduces the overall risk of the firm's assets. However, shareholders can directly benefit if the firm's international diversification leads to increased profitability and growth. The firm's cash flows are not necessarily internationally hedged, as currency fluctuations can still affect the value of the assets.

When a Firm Holds Assets in Many Countries