Test Bank for Multinational Business Finance 14th Edition By David K. Eiteman

Test Bank for Multinational Business Finance 14th Edition By David K. Eiteman

Multinational Business Finance, 14e (Eiteman)

Chapter 1   Multinational Financial Management: Opportunities and Challenges

1.1   Financial Globalization and Risk

1) Financial globalization has not resulted in:

A) continuing imbalances of balance of payments.

B) an increase in quantity and speed in the flow of capital across the world.

C) capital markets less open and a decrease in the availability of capital for many organizations.

D) uniform ways of ownership, control, and governance across the world.

Answer:  D

Diff: 1

L.O.:  1.1 Financial Globalization and Risk

Skill:  Recognition

AACSB:  Application of knowledge

2) BRICs is a term used in international finance to represent assets that are considered to be inexpensive and sturdy, but fundamentally unsound and and incapable of coping with the upheavals now apparent in international financial markets.

Answer:  FALSE

Diff: 1

L.O.:  1.1 Financial Globalization and Risk

Skill:  Recognition

AACSB:  Application of knowledge

3) Multinational enterprises (MNEs) are firms, both for profit companies and not-for-profit organizations, that have operations in more than one country, and conduct their business through foreign subsidiaries, branches, or joint ventures with host country firms.

Answer:  TRUE

Diff: 1

L.O.:  1.1 Financial Globalization and Risk

Skill:  Recognition

AACSB:  Application of knowledge

4) Ownership, control, and governance changes radically across the world. The publicly traded company is not the dominant global business organization—the privately held or family-owned business is the prevalent structure—and their goals and measures of performance differ dramatically.

Answer:  TRUE

Diff: 1

L.O.:  1.1 Financial Globalization and Risk

Skill:  Recognition

AACSB:  Application of knowledge

5) The theme dominating global financial markets today is the complexity of risks associated with financial globalization. List and explain examples of the complexity of risks affecting the leading and managing of multinational firms in the rapidly moving marketplace.

Answer:  The following is a sampling of this complexity of risks: 1) The international monetary system is under constant scrutiny. The rise of the Chinese renminbi is changing much of the world’s outlook on currency exchange, reserve currencies, and the roles of the dollar and the euro. 2) Large fiscal deficits, including the current eurozone crisis, plague most of the major trading countries of the world, complicating fiscal and monetary policies, and ultimately, interest rates and exchange rates. 3) Many countries experience continuing balance of payments imbalances, and in some cases, dangerously large deficits and surpluses. 4) Ownership, control, and governance vary radically across the world. 5) Global capital markets that normally provide the means to lower a firm’s cost of capital, and even more critically, increase the availability of capital, have in many ways shrunk in size and have become less open and accessible to many of the world’s organizations. 6) Financial globalization has resulted in the ebb and flow of capital in and out of both industrial and emerging markets, greatly complicating financial management.

Diff: 1

L.O.:  1.1 Financial Globalization and Risk

Skill:  Conceptual

AACSB:  Application of knowledge

1.2   The Global Financial Marketplace

1) A well-established, large U.S.-based MNE will probably NOT be able to overcome which of the following obstacles to maximizing firm value?

A) an open market place

B) high quality strategic management

C) access to capital

D) none of the above

Answer:  D

Diff: 1

L.O.:  1.2 The Global Financial Marketplace

Skill:  Conceptual

AACSB:  Application of knowledge

2) A well-established, large China-based MNE will probably be most adversely affected by which of the following elements of firm value?

A) an open marketplace

B) high-quality strategic management

C) access to capital

D) access to qualified labor pool

Answer:  A

Diff: 2

L.O.:  1.2 The Global Financial Marketplace

Skill:  Conceptual

AACSB:  Application of knowledge