Question 1

The five strategic motives driving the decision to invest abroad and become an MNE (market seekers,raw material seekers,production efficiency seekers,knowledge seekers,and political safety seekers)are mutually exclusive.

Accepted Answer

The five strategic motives are not mutually exclusive and a company may have multiple motives for investing abroad. For example, a company may be seeking market opportunities while also looking to secure access to raw materials and tap into local knowledge.

Question 2

A number of financial instruments that are used in domestic financial management have been modified for use in international financial management.Examples are foreign currency options and futures,interest rate and currency swaps,and letters of credit.

Accepted Answer

This statement is true. Many financial instruments used in domestic financial management have been adapted for international use, such as foreign currency options and futures, swaps, and letters of credit.

Question 3

Defensive measures are designed to enhance growth and profitability of the firm itself.

Accepted Answer

Defensive measures are designed to protect the firm from potential threats and risks, not necessarily to enhance growth and profitability. Offensive measures are more focused on growth and profitability.

Question 4

Domestic firms tend to make GREATER use of financial derivatives than MNEs because they can bear the greater risk presented by these financial instruments.

Accepted Answer

This statement is false. MNEs actually make greater use of financial derivatives than domestic firms due to their extensive global operations and exposure to foreign currency risks. MNEs often use financial derivatives to hedge against currency fluctuations and mitigate risk.

Question 5

The twin agency problems limiting financial globalization are caused by these two groups acting in their own self-interests rather than the interests of the firm.
A) rulers of sovereign states and unsavory customs officials
B) corporate insiders and attorneys
C) corporate insiders and rulers of sovereign states
D) attorneys and unsavory customs officials

Accepted Answer

The twin agency problems limiting financial globalization are caused by corporate insiders, who may prioritize their personal interests over the interests of the firm, and rulers of sovereign states, who may prioritize the interests of their country over the interests of the global economy. Therefore, the correct choice is C.

Question 6

Of the following,which was NOT mentioned by the authors as an increase in the demands of financial management services due to increased globalization by the firm?
A) evaluation of the credit quality of foreign buyers and sellers
B) foreign consumer method of payment preferences
C) credit risk management
D) evaluation of foreign exchange risk

Accepted Answer

While the authors discuss the need to evaluate credit quality, manage credit risk, and evaluate foreign exchange risk when dealing with global business, they do not mention an increase in demand for knowledge of foreign consumer payment preferences.

Question 7

The authors describe the multinational phase of globalization for a firm as one characterized by the:
A) ownership of assets and enterprises in foreign countries.
B) potential for international competitors or suppliers even though all accounts are with domestic firms and are denominated in dollars.
C) imports from foreign suppliers and exports to foreign buyers.
D) requirement that all employees be multilingual.

Accepted Answer

The multinational phase of globalization for a firm is characterized by the ownership of assets and enterprises in foreign countries, indicating a deeper level of international business involvement than merely trading or potential competition.

Question 8

The objectives and responsibilities of the modern multinational have grown significantly more complex in the twenty-first century.Develop and argument as to why this is the case.

Accepted Answer

The answer of The objectives and responsibilities of the modern...

Question 9

The phase of the globalization process characterized by imports from foreign suppliers and exports to foreign buyers is called the:
A) domestic phase.
B) multinational phase.
C) international trade phase.
D) import-export banking phase.

Accepted Answer

The phase of globalization characterized by imports and exports is commonly referred to as the international trade phase. This phase involves the exchange of goods and services between countries and is typically associated with the movement of raw materials, finished goods, and services across national borders. While multinational companies may be involved in this phase of globalization, it is not exclusive to this group and can involve small and medium-sized enterprises as well. The domestic phase refers to the stage in which companies focus solely on their home markets, while the multinational phase involves establishing operations in foreign countries. The import-export banking phase is not a recognized phase of globalization.

Question 10

In determining why a firm becomes multinational there are many reasons.One reason is that the firm is a knowledge seeker.They operate in foreign countries to exploit existing technological expertise.

Accepted Answer

The answer of In determining why a firm becomes multinational...

Question 11

Because countries have different financial regulations and customs,it is common for MNEs to apply their domestic rules and regulations when doing financial business in a foreign country.

Accepted Answer

MNEs are required to comply with the financial regulations and customs of the foreign country they operate in, rather than applying their domestic rules and regulations. Failure to do so can result in legal and financial penalties.

Question 12

________ investments are designed to promote and enhance the growth and profitability of the firm.________ investments are designed to deny those same opportunities to the firm's competitors.
A) Conservative; Aggressive
B) Defensive; Proactive
C) Proactive; Defensive
D) Aggressive; Proactive

Accepted Answer

Proactive investments are designed to promote and enhance the growth and profitability of the firm, while defensive investments are designed to deny those same opportunities to the firm's competitors. Therefore, option C is the correct choice.

Question 13

Domestic firms do not have foreign exchange risk.

Accepted Answer

Domestic firms do have foreign exchange risk if they engage in international trade or have foreign investments. Fluctuations in exchange rates can affect their profits, cash flows, and debts.

Question 14

In determining why a firm becomes multinational there are many reasons.One reason is that the firm is a market seeker.Which of the following is NOT a reason why market-seeking firms produce in foreign countries?
A) satisfaction of local demand in the foreign country
B) satisfaction of local demand in the domestic markets
C) political safety and small likelihood of government expropriation of assets
D) All of the above are market-seeking activities.

Accepted Answer

Market-seeking firms produce in foreign countries primarily to satisfy local demand in those markets, not for political safety or to avoid expropriation.

Question 15

For firms competing in a world characterized by oligopolistic competition,strategic motives can be subdivided into proactive and defensive investments.

Accepted Answer

This statement is true. Proactive investments refer to actions taken to increase market share, develop new products, or expand into new markets. Defensive investments, on the other hand, refer to actions taken to protect market share, such as investing in brand reputation or building barriers to entry for competitors. Oligopolistic competition is characterized by a small number of large firms dominating the market, creating a need for strategic investments to maintain or gain market share.

Question 16

Typically,a firm in its domestic stage of globalization has all financial transactions in its domestic currency.

Accepted Answer

In its domestic stage of globalization, a firm typically conducts all financial transactions in its domestic currency.

Question 17

A firm in the International Trade Phase of Globalization:
A) makes all foreign payments in foreign currency units and all foreign receipts in domestic currency units.
B) receives all foreign receipts in foreign currency units and makes all foreign payments in domestic currency units.
C) bears direct foreign exchange risk.
D) none of the above

Accepted Answer

A firm in the International Trade Phase bears direct foreign exchange risk, meaning that they make both foreign payments and receipts in foreign currency units. This exposes them to the potential risk of currency fluctuations and requires them to actively manage their foreign exchange positions. Options A and B involve only one side of the currency exchange, which does not encompass the full risk faced by a firm in this phase of globalization.

Question 18

In determining why a firm becomes multinational there are many reasons.One reason is that the firm is a raw material seeker.Which of the following is NOT a reason why raw material seeker extract raw materials in foreign countries?
A) They extract raw materials wherever they can be found to export from the host country.
B) They extract raw materials wherever they can be found for sale in the host country.
C) They extract raw materials wherever they can be found for further processing in the host country.
D) All of the above.

Accepted Answer

The answer of In determining why a firm becomes multinational...

Question 19

Typically,a "greenfield" investment abroad is considered an investment having a greater foreign presence than a joint venture with a foreign firm.

Accepted Answer

A "greenfield" investment involves creating a new facility or business from scratch in a foreign country, which often results in a greater foreign presence than a joint venture. In a joint venture, the foreign firm typically only owns a portion of the business.

Question 20

List and explain three strategic motives why firms become multinationals and give an example of each.

Accepted Answer

The answer of List and explain three strategic motives why...

Quiz 1: Multinational Financial Management: Opportunities and Challenges

The five strategic motives driving the decision to invest abroad and become an MNE (market seekers,raw material seekers,production efficiency seekers,knowledge seekers,and political safety seekers)are mutually exclusive.

A number of financial instruments that are used in domestic financial management have been modified for use in international financial management.Examples are foreign currency options and futures,interest rate and currency swaps,and letters of credit.

Defensive measures are designed to enhance growth and profitability of the firm itself.

Domestic firms tend to make GREATER use of financial derivatives than MNEs because they can bear the greater risk presented by these financial instruments.

The twin agency problems limiting financial globalization are caused by these two groups acting in their own self-interests rather than the interests of the firm.

Of the following,which was NOT mentioned by the authors as an increase in the demands of financial management services due to increased globalization by the firm?

The authors describe the multinational phase of globalization for a firm as one characterized by the:

The objectives and responsibilities of the modern multinational have grown significantly more complex in the twenty-first century.Develop and argument as to why this is the case.

The phase of the globalization process characterized by imports from foreign suppliers and exports to foreign buyers is called the:

In determining why a firm becomes multinational there are many reasons.One reason is that the firm is a knowledge seeker.They operate in foreign countries to exploit existing technological expertise.

Because countries have different financial regulations and customs,it is common for MNEs to apply their domestic rules and regulations when doing financial business in a foreign country.

investments are designed to promote and enhance the growth and profitability of the firm. investments are designed to deny those same opportunities to the firm's competitors.

Domestic firms do not have foreign exchange risk.

In determining why a firm becomes multinational there are many reasons.One reason is that the firm is a market seeker.Which of the following is NOT a reason why market-seeking firms produce in foreign countries?

For firms competing in a world characterized by oligopolistic competition,strategic motives can be subdivided into proactive and defensive investments.

Typically,a firm in its domestic stage of globalization has all financial transactions in its domestic currency.

A firm in the International Trade Phase of Globalization:

In determining why a firm becomes multinational there are many reasons.One reason is that the firm is a raw material seeker.Which of the following is NOT a reason why raw material seeker extract raw materials in foreign countries?

Typically,a "greenfield" investment abroad is considered an investment having a greater foreign presence than a joint venture with a foreign firm.

List and explain three strategic motives why firms become multinationals and give an example of each.