Fin426, Chapter1 Testbank Questions
CHAPTER 1
Introduction
EASY (factual)
1.1 Historically, the primary motive for U.S. multinationals to produce abroad has been to
a. lower costs
b. respond more quickly to the marketplace
c. avoid trade barriers
d. gain tax benefits
ANSWER: b: p.8, evolution of multinational
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
ANSWER: a: p.21, Multinational Financial Management: Theory and Practice
1.3 ____________ 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
ANSWER: b: p.8, evolution of multinational
1.4 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
ANSWER: c: p.26, role of the financial executive
1.5 When a firm operates globally it offers advantages such as
a. greater political power at home
b. less taxes on its profits
c. greater negotiating power with foreign minority groups
d. greater negotiating power with labor unions
ANSWER: d: p. 3, rise of the multinational
1.6 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.
ANSWER: c: p.3, rise of the multinational
1.7 ___________ were the earliest multinationals. a. raw-material seekers
b. market seekers
c. cost minimizers
d. oil companies
e. the Federal Reserve System of the U.S.
ANSWER: a: p.10, raw material seekers
1.8 The ___________ are the archetype of the modern multinational firm that goes overseas to produce and
Introduction
EASY (factual)
1.1 Historically, the primary motive for U.S. multinationals to produce abroad has been to
a. lower costs
b. respond more quickly to the marketplace
c. avoid trade barriers
d. gain tax benefits
ANSWER: b: p.8, evolution of multinational
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
ANSWER: a: p.21, Multinational Financial Management: Theory and Practice
1.3 ____________ 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
ANSWER: b: p.8, evolution of multinational
1.4 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
ANSWER: c: p.26, role of the financial executive
1.5 When a firm operates globally it offers advantages such as
a. greater political power at home
b. less taxes on its profits
c. greater negotiating power with foreign minority groups
d. greater negotiating power with labor unions
ANSWER: d: p. 3, rise of the multinational
1.6 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.
ANSWER: c: p.3, rise of the multinational
1.7 ___________ were the earliest multinationals. a. raw-material seekers
b. market seekers
c. cost minimizers
d. oil companies
e. the Federal Reserve System of the U.S.
ANSWER: a: p.10, raw material seekers
1.8 The ___________ are the archetype of the modern multinational firm that goes overseas to produce and