Multinational Business Finance 15th Global Edition by David K. Eiteman test bank

Diff: 1
L.O.:  1.3 What Is Different about International Financial Management?
Skill:  Recognition
AACSB:  Application of knowledge
 
8) Domestic firms tend to make GREATER use of financial derivatives than MNEs because they can bear the greater risk presented by these financial instruments.
Answer:  FALSE
Diff: 2
L.O.:  1.3 What Is Different about International Financial Management?
Skill:  Recognition
AACSB:  Application of knowledge
 
9) 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.
Answer:  FALSE
Diff: 1
L.O.:  1.3 What Is Different about International Financial Management?
Skill:  Conceptual
AACSB:  Application of knowledge
 

10) 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.
Answer:  TRUE
Diff: 2
L.O.:  1.3 What Is Different about International Financial Management?
Skill:  Recognition
AACSB:  Application of knowledge
 
11) Domestic firms do not have foreign exchange risk.
Answer:  FALSE
Diff: 2
L.O.:  1.3 What Is Different about International Financial Management?
Skill:  Recognition
AACSB:  Application of knowledge
 
12) Large international firms are better able to exploit product differentiation than are their local competitors.
Answer:  TRUE
Diff: 1
L.O.:  1.3 What Is Different about International Financial Management?
Skill:  Recognition
AACSB:  Application of knowledge
 
13) For firms competing in a world characterized by oligopolistic competition, strategic motives can be subdivided into proactive and defensive investments.
Answer:  TRUE
Diff: 1
L.O.:  1.3 What Is Different about International Financial Management?
Skill:  Recognition
AACSB:  Application of knowledge
 
14) Defensive measures are designed to enhance growth and profitability of the firm itself.
Answer:  FALSE
Diff: 1
L.O.:  1.3 What Is Different about International Financial Management?
Skill:  Recognition
AACSB:  Application of knowledge
 
15) 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.
Answer:  FALSE
Diff: 1
L.O.:  1.3 What Is Different about International Financial Management?
Skill:  Recognition
AACSB:  Application of knowledge
 
16) 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.
Answer:  FALSE
Diff: 1
L.O.:  1.3 What Is Different about International Financial Management?
Skill:  Recognition
AACSB:  Application of knowledge
 
17) In the recent past, much of the business development in multinational firms was led by cross-functional teams, teams of professionals who are competent over a broader array of functional fields. Develop an argument as to why this is the case.
Answer:  Teams are increasingly virtual and unique, each team custom-tailored for the business proposal or opportunity, and often drawing upon the available talent across geographies, markets, and cultures. Organizational agility, a phrase often used to describe decision-making rather than the decision-makers, requires different skills. This require business professionals who are fundamentally competent over a broader array of functional fields — and that would include more than a passing of knowledge of multinational finance and how impacts investments and operations. Knowledge of the financial dimensions of the business in the international business environment is more and more a concern for all.
Diff: 2
L.O.:  1.3 What Is Different about International Financial Management?
Skill:  Conceptual
AACSB:  Application of knowledge
 
18) List and explain three strategic motives why firms become multinationals and give an example of each.
Answer:  The authors provide 5 strategic motives for firms to become multinationals: market seekers, raw materials seekers, production efficiency seekers, knowledge seekers, and political safety seekers. Market seekers are looking for more consumers for their products such as automobiles or steel. Knowledge seekers may be looking for an educated work force similar to the way firms seeking R and D set up shop in university towns. Raw materials seekers may be after commodities such as oil or copper. Production efficiencies may occur in countries like Mexico that have capable workers and lower wages. Political safety seekers are looking for countries that will not expropriate their assets, so they may stay away from countries that in the post have engaged in such activities.