CHAPTER 1

Introduction

 

EASY (definitional)

 
1.1  Historically, the primary motive for U.S. multinationals to produce abroad has been to
a)  lower costs
b)  expand markets
c)  avoid trade barriers
d)  gain tax benefits
 
Ans:      b
Section:  evolution of multinational
Level:  Easy
 
1.2  The primary objective of the multinational corporation is to
a.)  maximize shareholder wealth
b)  maximize world production
c)  minimize debt
d)  minimize the cost of doing business globally
 
Ans:      a
Section:  Multinational Financial Management:  Theory and Practice
Level:  Easy
 

1.  ____________ is defined as the purchase of assets or commodities on one market for immediate resale on another in order to profit form a price discrepancy.

a) internationalization
b) arbitrage
c) financing
d) total risk
 
Ans:      b
Section:  evolution of multinational
Level:  Easy
 

1.  The value of good financial management is ___________ in the global markets because of the much greater probability of market imperfections and multiple tax rates.

a) minimized
b) neutralized
c) enhanced
d) arbitraged away
 
Ans:      c
Section:  role of the financial executive
Level:  Easy
 

1. When a firm operates globally it offers advantages such as

a)  greater political power at home
b)  bless taxes on its profits
c)  greater negotiating power with foreign minority groups
d)  greater negotiating power with labor unions
 
Ans:      d
Section:  The rise of the MNC
Level:  Easy
 

1.  The prime transmitter of global competitive forces is the

a)  public utility firm
b)  financial management experience of the U.S. markets
c)   the multinational corporation
d)  the Federal Reserve System of the U.S.
 
Ans:      c
Section: rise of the multinational
Level:  Easy
 
1.7  ___________ were the earliest multinationals.
a)  raw-material seekers
b)  market seekers
c)  cost minimizers
d)  oil companies
 
Ans:      a 
Section: raw material seekers
Level:  Easy
 

1.   The ___________ are the archetype of the modern multinational firm that goes overseas to produce and sell in foreign markets.

a)  cost minimizers

2. market seekers
3. raw-material seekers
4. whaling companies

 
Ans:      b
Section: market seekers
Level:  Easy
 
1.9 ___________ are a recent category of multinationals that seek out and invest in lower cost production sites overseas.
a)  Cost minimizers
b)  Market seekers
c)  Raw-material seekers
d)  High tech firms
 
Ans:      a
Section:  cost minimizers
Level:  Easy
 

1.   Which one of the following is a consequence of increased global competition?

1. the creation of new steel plants in the old industrial countries
2. the end of free-trade agreements between governments of the world
3. increased comfort level of trade unions with the consequences
4. increased anxiety among workers in the old industrial countries

 
Ans:      d
Section: Consequences of Global Competition
Level:  Easy
 
 

1.   International ________ can reduce the volatility of an investment portfolio because national financial markets tend to move independently of each other.

a)  arbitrage