Deck 20: Global Finance and Accounting

Question 1

HewPack Bank is a large bank that supports the financial operations of large businesses worldwide. HewPack Bank borrows from and lend to governments, other banks, and corporations. It is evident that HewPack Bank is a _____.

A) money center bank
B) retail bank
C) commercial bank
D) corporate bank

Answer 1

A

Question 2

_____ is a highly secure form of payment in which an importer's bank offers a guarantee of payment when goods are delivered as long as all selling conditions have been met.

A) Cash in advance
B) A commercial letter of credit
C) An open account agreement
D) Consignment

Answer 2

B

Question 3

Allied Gadgets, an industrial equipment manufacturer, accepts selling terms that are less than favorable in order to secure more business. The company exports its products to a small scale industry (SSI) in Belwick with the terms that the SSI doesn't pay for the goods until after they have been received. The payment method used in this scenario is _____.

A) consignment
B) a commercial letter of credit
C) an open account
D) a documentary collection

Answer 3

C

Question 4

Jacob imports a motorcycle from Powell Motors, an automobile manufacturing company in Belwick. Jacob pays the full amount in advance with his credit card. Given the scenario, which of the following statements is true?

A) The payment method is the least safe for Jacob.
B) The payment method is the least safe for Powell Motors.
C) Jacob does not face any potential risk regarding the delivery of the motorcycle.
D) Powell Motors does not have a window to create an unbalanced value flow.

Question 5

Adam imports a set of audio recording equipment by purchasing it using his credit card from a company in the United States. He pays the full amount to the company before the product is shipped. It is evident that the method of payment in this scenario is _____.

A) cash in advance
B) commercial letter of credit
C) documentary collection
D) consignment

Question 6

_____ are large banks that borrow from and lend to governments, other banks, and corporations.

A) Retail banks
B) Commercial banks
C) Money center banks
D) Corporate banks

Question 7

Unlike the Clearing House Interbank Payments System (CHIPS), the Society of Worldwide Interbank Financial Telecommunications (SWIFT):

A) is privately owned.
B) manages client accounts.
C) does not hold funds.
D) does not transfer money between banks.

Question 8

_____ is a private company that handles large payments to governments and corporations.

A) The International Monetary Fund
B) The Federal Reserve Wire Network
C) The Society of Worldwide Interbank Financial Telecommunications
D) The Clearing House Interbank Payments System

Question 9

Unlike money center banks, conventional banks primarily do business with _____.

A) consumers
B) governments
C) corporations
D) other banks

Question 10

Unlike the Clearing House Interbank Payments System (CHIPS), the Society of Worldwide Interbank Financial Telecommunications (SWIFT):

A) does not manage client accounts.
B) holds funds.
C) is privately owned
D) does not transfer money between banks.

Question 11

Jonathan imports a guitar from MusicStore Inc., a musical instrument manufacturing company in Germany. Jonathan pays the full amount in advance with his credit card. Given the scenario, which of the following statements is true?

A) The payment method is the safest for Jonathan.
B) The payment method is the safest for MusicStore Inc.
C) Jonathan does not face any potential risk regarding the delivery of the guitar.
D) MusicStore Inc. does not have a window to create an unbalanced value flow.

Question 12

LisTop Group is a bank that primarily does business with consumers. It can be said that LisTop Group is a _____.

A) trade center bank
B) federal bank
C) money center bank
D) conventional bank

Question 13

Martha approaches Stellar Constructions to buy construction equipment. Martha provides Stellar Construction with a written commitment issued by her bank stating that payment will be made to Stellar Constructions as long as all selling conditions have been met. It is evident that Martha uses _____ to pay Stellar Constructions.

A) cash in advance
B) a commercial letter of credit
C) an open account agreement
D) a documentary collection

Question 14

Zencorp, a steel manufacturing company, exports its products to Madivis Homes and gets paid by an open account agreement. Given the scenario, which of the following statements is true?

A) The payment method is the least safe for Madivis Homes.
B) The payment method creates an unfavorable balance of value for Madivis Homes.
C) The payment method makes Madivis Homes a lender to Zencorp.
D) The payment method enables Madivis Homes to purchase goods on credit.

Question 15

Widget Corp., a manufacturer and supplier of train coaches worldwide, needs access to more credit than a single bank can handle. Widget Corp. approaches a group of banks that can provide it with the required credit. It is evident that Widget Corp. obtains credit from _____.

A) a syndicate
B) an open account
C) a commercial letter of credit
D) consignment

Question 16

OrStar, an automobile spares manufacturing company, exports its products to Widget Corp. and gets paid by an open account agreement. Given the scenario, which of the following statements is true?

A) The payment method is the least safe for Widget Corp.
B) The payment method creates an unfavorable balance of value for OrStar.
C) The payment method makes Widget Corp. a lender to OrStar.
D) The payment method disables Widget Corp. to purchase goods on credit.

Question 17

In the context of international trade and investment institutions, the International Monetary Fund is an example of a(n):

A) money center bank
B) government financing institution
C) conventional bank
D) international banking institution

Question 18

In the context of methods of payment in international business, unlike cash in advance, a commercial letter of credit:

A) is a safer method of payment for an exporter.
B) is not a safe method of payment for an importer.
C) provides a level of protection to both the exporter and the importer.
D) does not transfer ownership of goods to an importer.

Question 19

_____ is a form of payment in which an importer doesn't pay for goods until after they have been received, creating an unfavorable balance of value for the exporter.

A) Cash in advance
B) A commercial letter of credit
C) An open account agreement
D) A documentary collection

Question 20

_____ is a global telecommunications company that facilitates secure international payment transfers from one bank to another.

A) The International Monetary Fund
B) The Federal Reserve Wire Network
C) The Society of Worldwide Interbank Financial Telecommunications
D) The Clearing House Interbank Payments System

Question 21

When compared with a commercial letter of credit, a documentary collection:

A) offers the same level of protection.
B) requires the exporter to have more trust on the buyer.
C) is more expensive.
D) requires lesser time to get sanctioned.

Question 22

When compared to bonds, stock ownerships:

A) offer potentially higher returns.
B) are much safer.
C) are not affected by a firm's performance.
D) involve potentially lower losses.

Question 23

Widget Corp. wants to make a capital investment. However, before making the investment, the company wants to thoroughly analyze all the risks related to politics, economy, inflation, and tax that can jeopardize its investment plan. Given the scenario, which of the following analysis methods should the company use to assess the riskiness of the capital investment using net present value (NPV)?

A) Five Whys analysis
B) CATWOE analysis
C) SWOT analysis
D) Sensitivity analysis

Question 24

If AlliedTech, a multinational technology company based in Belwick, issues a bond for its investors who live in Belwick, the bond is known as a(n) _____.

A) international bond
B) domestic bond
C) foreign bond
D) eurobond

Question 25

If AlliedTech, a multinational technology company based in the United States (U.S.), issues a bond in US dollars for its Japanese investors, the bond is known as a(n) _____.

A) international bond
B) domestic bond
C) foreign bond
D) eurobond

Question 26

In _____, an exporter's bank is entrusted with collecting payment for goods.

A) an open account agreement
B) a documentary collection
C) a consignment agreement
D) a commercial letter of credit

Question 27

Meghan buys mutual funds that allow her to buy smaller stakes in more companies. Which of the following statements is true of her approach to investment?

A) It is much safer than buying only bonds or savings accounts.
B) It reduces Meghan's risks by spreading investment capital across a range of possibilities.
C) It provides potentially lower returns as compared with the returns obtained from investing solely in bonds and savings accounts.
D) It is the same as investing in exchange-traded funds

Question 28

In the context of international investment, the _____ is the rate of return demanded by stock and bond investors.

A) coupon
B) cost of capital
C) principal
D) maturity rate

Question 29

Widget Corp. issues a bond with an initial amount of $10000, which is to be repaid in 20 years at an interest rate of 6% per annum. In this scenario, $10000 is the _____ of the bond.

A) coupon
B) principal
C) token
D) interest value

Question 30

_____ is a process in which an exporter sends goods to an importer without transferring ownership.

A) Cash in advance
B) A commercial letter of credit
C) A documentary collection
D) Consignment

Question 31

Zencorp issues a bond with an initial amount of $8000 and a maturity date of 12 years at an interest rate of 7% per annum. Given this scenario, which of the following statements is true?

A) Zencorp is due to repay $8000 by the end of 12 years.
B) Zencorp will not be charged the required interest before 12 years.
C) Zencorp will not be allowed to purchase any more bonds for the next 12 years.
D) Zencorp is due to receive double the initial amount at the end of the maturity date.

Question 32

When compared to savings accounts, stock ownerships:

A) offer potentially lower returns.
B) are much safer.
C) are not affected by a firm's performance.
D) involve potentially higher risks.

Question 33

Wordman Bank, Allied Bank, InvestoPac Bank, and Timoso Bank combine their resources and form a syndicate to provide funds for AllieShips, a large ship manufacturing corporation. Which of the following is most likely to be true of the syndicate?

A) The syndicate minimizes the risk to any individual bank.
B) All the banks in the syndicate have the authority to negotiate their own terms of credit.
C) The syndicate requires AllieShips to present a commercial letter of credit from the company's previous bank.
D) The syndicate is not allowed to charge underwriting and commitment fees.

Question 34

Widget Corp., a multinational technology company based in Zaneland, issues a bond for its investors who live in Belwick in the currency of Belwick. This type of bond is known as a(n) _____.

A) transnational bond
B) domestic bond
C) foreign bond
D) eurobond

Question 35

RameTep Inc., a furniture manufacturing company, follows a method of transaction through which it exports goods without transferring ownership to an importer. The importer doesn't pay RameTep until a third party has bought the goods from the importer and unsold goods are returned to the company without any extra expenses. The given scenario is an example of _____, a major method of transacting international business.

A) a documentary collection
B) cash in advance
C) consignment
D) an open account agreement

Question 36

Procter and Sam Inc. issues a bond with an initial amount of $5000 which is to be repaid in 10 years with an interest rate of 5% per annum. In this scenario 5% is the _____ of the bond.

A) coupon
B) principal
C) face value
D) token

Question 37

Victor buys mutual funds that allow him to buy smaller stakes in more companies. Which of the following statements is true of his approach to investment?

A) It is much safer than buying only bonds or savings accounts.
B) It increases Victor's risks by spreading investment capital across a range of possibilities.
C) It helps Victor harness overall market growth rather than the individual growth of any given company.
D) It is the same as investing in exchange-traded funds

Question 38

When compared with a commercial letter of credit, a documentary collection:

A) offers a higher level of protection.
B) requires a higher level of trust between exporters and importers.
C) is more expensive.
D) requires less time to get sanctioned.

Question 39

_____ are pooled and repackaged shares of various stocks-as well as other assets like bonds, real estate, and commodities-that allow individual investors to buy smaller stakes in more companies.

A) Mutual funds
B) Exchange-traded funds
C) Savings accounts
D) Current accounts

Question 40

_____ is a pattern in which stock markets have become increasingly interconnected around the world and markets in different countries have begun reacting similarly.

A) Contagion
B) Consignment
C) A syndicate
D) A tax haven

Question 41

SamTim Corp. aims to make a capital investment. After a careful analysis, the company finds out that the net present value (NPV) of the investment is equal to zero. It is evident that SamTim Corp.:

A) is unlikely to make the investment.
B) is likely to make the investment.
C) is unlikely to obtain a break-even return.
D) is likely to obtain positive returns.

Question 42

What are the advantages of buying mutual funds?

Question 43

Given below is the data regarding investments of AlliTen Inc.: Market value of the company's equity = $600,000, market value of the company's debts = $500,000, total market value = $1.1 million, cost of equity = 0.8%, before-tax cost of debt = 0.6%, and corporate tax rate is 35%.
Calculate the weighted average cost of capital of AlliTen Inc.

A) 4%
B) 5.1%
C) 6.1%
D) 7%

Question 44

Unlike the Generally Accepted Accounting Principles (GAAP), the International Financial Reporting Standards (IFRS):

A) is developed by the United Nations Organization.
B) is developed by a for-profit organization.
C) requires percentage-of-completion when reliable estimates can be made while considering revenue recognition for long-term construction contracts.
D) requires cost recovery method when reliable estimates can't be made while considering revenue recognition for long-term construction contracts.

Question 45

Unlike the International Financial Reporting Standards (IFRS), the Generally Accepted Accounting Principles (GAAP):

A) is developed by a for-profit organization.
B) is developed by the International Accounting Standards Board.
C) requires percentage-of-completion when reliable estimates can be made while considering revenue recognition for long-term construction contracts.
D) requires cost recovery method when reliable estimates can't be made while considering revenue recognition for long-term construction contracts.

Question 46

_____ is the price charged when two parts of the same multinational corporation, often the parent company and a subsidiary in another country, engage in trade with one other.

A) Absolute pricing
B) Principal pricing
C) Transfer pricing
D) Coupon pricing

Question 47

Explain transfer pricing.

Question 48

With the help of a diagram illustrate how Clearing House Interbank Payment System (CHIPS) is used to move money from one company to another in an international location.

Question 49

If you had a business that requires a huge credit that a single bank cannot handle, how else can you gather the credit?

Question 50

TechnoPride aims to make a capital investment. After a careful analysis, the company finds out that the net present value (NPV) of the investment is more than zero. It is evident that TechnoPride:

A) is unlikely to make the investment.
B) is likely to make the investment.
C) is unlikely to obtain a break-even return.
D) is likely to obtain negative returns.

Question 51

AlliedTech aims to make a capital investment. After a careful analysis, the company finds out that the net present value (NPV) of the investment is less than zero. It is evident that AlliedTech:

A) is unlikely to make the investment.
B) is likely to make the investment.
C) is likely to obtain a break-even return.
D) is unlikely to obtain negative returns.

Question 52

Which of the following is a similarity between the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS)?

A) Both are developed by the International Accounting Standards Board.
B) Both are developed by for-profit organizations.
C) When considering revenue recognition for long-term construction contracts, both require percentage-of-completion when reliable estimates can be made.
D) When considering revenue recognition for long-term construction contracts, both require cost recovery method when reliable estimates can't be made.

Question 53

Countries with no or low corporate taxes are called _____.

A) tax havens
B) tax traps
C) investment paradise
D) returns paradise

Question 54

Adam, an investor in ZenTechno, loans an amount of $1 million to the company for a period of 2 years with a total interest of $100,000. Which of the following is most likely the cost of capital to ZenTechno?

A) $1 million
B) $1.1 million
C) $100,000
D) $200,000

Question 55

Evaluate the argument that the net present value (NPV) of an investment affects the capital budgeting decision.

Question 56

Which of the following countries is an example of a tax haven?

A) Andorra
B) India
C) China
D) The United States of America

Question 57

Which of the following is true of the International Accounting Standards Board (IASB)?

A) It is located in Geneva.
B) It is privately funded.
C) It has the legal authority to enforce its rules.
D) It is managed by the United Nations.

Question 58

The financial statements of publicly traded companies in the United States must be prepared according to the guidelines set forth in the _____.

A) Generally Accepted Accounting Principles
B) International Financial Reporting Standards
C) United Nations Charter
D) International Accounting Standards

Question 59

Identify a true statement about the International Accounting Standards Board (IASB).

A) It cannot be used by businesses that are not a part of the United Nations.
B) It is publicly owned.
C) It may not have the legal authority to enforce its rules.
D) It is located in Washington, the United States.

Question 60

Suppose you are exporting goods to a buyer. Which payment method is the safest for you to carry out the transaction?