Exam 1: Multinational Financial Management: an Overview

Market capitalization refers to the total value of all a company's shares of stock. It is calculated by multiplying the price of a stock by its number of stock exchange listings.

In comparing exporting to direct foreign investment (FDI), an exporting operation will likely incur ____ fixed production costs and ____ transportation costs than DFI.

A major threat to both the company and its employees is the threat of a ___ if the MNC is inefficiently managed.

Which of the following industries would most likely take advantage of lower costs in some less developed foreign countries?

When MNCs enter foreign markets to sell products, the demand for these products is dependent on the economic conditions in those markets.

The goal of a multinational corporation (MNC) is the maximization of shareholder wealth.

Shareholder wealth is defined as the present value of the expected future returns to the owners (that is, shareholders) of the firm.

Although MNCs may need to convert currencies occasionally, they do not face any exchange rate risk, as exchange rates are stable over time.

Investor monitoring tends to focus on broad issues. Which of the following is not one of these issues?

One of the most prevalent factors conflicting with the realization of the goal of an MNC is the existence of agency problems.

Franchising is the process by which national governments sell state owned operations to corporations and other investors.

Licensing involves selling copyrights, patents, trademarks or trade names or legal rights in exchange for fees known as royalties. Thus a company is selling the right to produce their goods.

Which of the following is not a way in which agency problems can be reduced through corporate control?

Licensing obliges a firm to provide ____, while franchising obligates a firm to provide ____.

In some countries, bribes are commonplace. If a MNC decides to adhere to a strict code of ethics and not pay bribes, its subsidiary may be at a competitive disadvantage in the foreign country.

Which of the following is not mentioned in the text as an additional risk resulting from international business?

____ are most commonly classified as a direct foreign investment.

When we talk about the value of a firm being the discounted future-free cash flows, we mean which financial model?

When an MNC is cross-listed, its shares are quoted on more than one stock exchange.

An indirect benefit to the MNC of following a worldwide code of ethics is: