Test Bank For
Multinational Financial Management, 12th Edition Alan C. Shapiro, Paul Hanouna,
Atulya Sarin
Chapter 1-18
CHAPTER 1
Introduction: Multinational Corporations and Financial Management
EASY (definitional)
1.1 Which of the following is true regarding the strategic alliance?
a) the partner firms can make cross-shareholding investments in each other
b) allows partner firms the flexibility to retain their own organizational structure and
corporate culture
c) allows an easier way to exit
d) all of the above
Ans: d
Section: Overseas Production
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
1.3 Traditionally, ____________ has been 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: Relationship to Domestic Financial Management
Level: Easy
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
Ans: c
Section: The role of the financial executive in an efficient market
Level: Easy
1.5 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 Multinational corporation
Level: Easy
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.
Ans: c
Section: The 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: Evolution of the multinational corporation
Level: Easy
1.8 The ___________ are the archetype of the modern multinational firm that goes
overseas to produce and sell in foreign markets.
a) cost minimizers
b) market seekers
c) raw-material seekers
d) whaling companies
Ans: b
, Section: Evolution of the multinational corporation
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
1.10 Which one of the following is a consequence of increased global competition?
a) the creation of new steel plants in the old industrial countries
b) the end of free-trade agreements between governments of the world
c) increased comfort level of trade unions with the consequences
d) increased anxiety among workers in the old industrial countries
Ans: d
Section: Consequences of Global Competition
Level: Easy
1.11 International ________ can reduce the volatility of an investment portfolio because
national financial markets tend to move independently of each other.
a) arbitrage
b) centralization of the MNC‟s cash
c) diversification
d) investment
Ans: c
Section: The Importance of Total Risk
Level: Easy
1.12 Which one of the following has been a major driver of globalization?
a) massive deregulation
b) the collapse of the communist bloc
c) revolution in information technologies
d) all of the above
Ans: d
Section: The rise of the multinational corporation
Level: Easy
, 1.13 Companies gradually increase their commitment to international business with
strategies that are progressively more sophisticated. Which one of the following steps is
NOT one of the steps?
a) exporting
b) setting up a sales subsidiary
c) setting up a distribution system
d) creating a legal entity in the new target country
Ans: D
Section: The Process of Overseas Expansion by Multinationals
Level: Easy
1.14 Which one of the following is an alternate and/or a precursor to setting up a
production facility abroad?
a) exporting
b) setting up a sales subsidiary
c) setting up a distribution system
d) licensing
Ans: D
Section: The Process of Overseas Expansion by Multinationals
Level: Easy
1.15 In which category of multinational is McDonald‟s most likely to fall?
a) raw materials seeker
b) market seeker
c) cost minimizer
d) hedge fund
Ans: b
Section: Evolution of the multinational corporation
Level: Medium
1.16 Opponents of free trade and globalization claim that competition by low and
medium income countries for jobs and investment by multinational
corporations_______.
a) promotes higher environmental standards for a country is to raise its wealth
b) helps developing countries to afford the cleaner environment their wealthier citizens
will now demand
c) unleashes the forces of creative destruction
d) encourages a “race to the bottom” in environmental and labor standards
Ans: d
Section: Political and labor union concerns about global competition
Level: Medium
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