Question 1

The purpose of accounting is to communicate the organization's financial position to company managers,investors,banks,and the government.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements is true about bilateral netting?

Accepted Answer

A) It refers to the process of financing long-term outlays for major projects such as plant expansion,entry into new markets,or research and development. 
B) It refers to raising capital by borrowing the money and agreeing to repay the entire amount plus agreed-upon interest at a specific date in the future. 
C) It refers to raising capital by selling shares of stock across many countries. 
D) It refers to a set of procedures used to estimate the economic value of an owner's interest in a business. 
E) It refers to a technique that companies use to reduce the costs of cross-border payments between two subsidiaries.

Question 3

_____ is the risk of a change in the exchange rate that will adversely affect the company.

Accepted Answer

The answer of _____ is the risk of a change...

Question 4

The downsides of a(n) _____ financial organization structure are higher costs (due to having to hire more employees),some unavoidable duplication of effort,and a diminishment of control.

Accepted Answer

The answer of The downsides of a(n) _____ financial organization...

Question 5

Which of the following statements holds true for international financial reporting standards (IFRS)?

Accepted Answer

A) It refers to a set of accounting standards issued by theInternational Public Sector Accounting Standards (IPSAS) Board for use by public sector entities throughout the world to prepare their financial statements. 
B) It refers to the standards that are developed by the International Accounting Standards Board (IAS
B)  for reporting company financial results and that are followed by over one hundred nations throughout the world. 
C) It refers to the set of standards developed by the European Union for reporting any discrepancies in financial reporting by non-EU firms. 
D) It refers to the standards that are developed by the International Monetary Fund to assess the financial strength and credit worthiness of countries throughout the world. 
E) It refers to the standards that are developed by the US Financial Accounting Standards Board (FAS
B)  for reporting company financial results and that all US companies or companies operating in the US must follow.

Question 6

Two friends consider opening a driving range for golfers.They estimate such a range could generate rentals of 20,000 buckets at $3 a bucket in the first year,and expect rentals to grow at 750 buckets a year thereafter.The equipment requirements include ball dispensing machines,the ball pick-up,and the vehicle tractor that will cost $8,000,$2,000,and $8,000 respectively.The net working capital is $3,000 to start with,and is expected to grow at 5% per year.The annual fixed operating cost for balls and baskets will initially be $3,000 and is expected to grow at 5% per year.The fixed costs of leasing the land and its upkeep will be $53,000 per year.The above is an example of:

Accepted Answer

A) debt financing. 
B) capital budgeting. 
C) equity financing. 
D) trade credit. 
E) multilateral netting.

Question 7

_____ refers to a central location where the cash balances of a parent and its subsidiaries are pooled.

Accepted Answer

The answer of _____ refers to a central location where...

Question 8

Which of the following statements holds true for transnational financing?

Accepted Answer

A) It refers to the process of financing major projects such as plant expansion in different countries,entry into new countries,or research and development in new countries. 
B) It refers to investing capital in foreign markets. 
C) It refers to the process and a set of procedures used to estimate the economic value of an owner's interest in a transnational business. 
D) It refers to seeking capital from foreign sources. 
E) It refers to a technique that companies use to reduce the costs of cross-border payments between subsidiaries.

Question 9

Sharia prohibits "gharar" which means "_____" and includes conventional practices like short selling.

Accepted Answer

A) interest rate 
B) uncertainty 
C) gambling 
D) lease 
E) partnership

Question 10

_____ refers to a country that has very advantageous (i.e.,low) corporate income taxes.

Accepted Answer

The answer of _____ refers to a country that has...

Question 11

Which of the following statements holds true for trade credit?

Accepted Answer

A) It refers to the process of financing long-term outlays for major projects such as plant expansion,entry into new markets,or research and development. 
B) It refers to raising capital by borrowing the money and agreeing to repay the entire amount plus agreed-upon interest at a specific date in the future. 
C) It refers to a process that lets the customer buying the goods or services defer payment on the good or services for a specified period of time,typically thirty or ninety days. 
D) It refers to the process and a set of procedures used to estimate the economic value of an owner's interest in a business. 
E) It refers to the rate of return that a company could earn if it chose a different investment of equivalent risk.

Question 12

Adhering to GAAP as well as IFRS helps companies in creating globally shared service center for accounting,rather than having accounting departments in different regions.

Accepted Answer

A) True 
 B)False

Question 13

Joan wants to buy a new loom for her weaving business.She applies to a bank for a loan of $50,000.It is a long-term loan that she intends to pay in five years time at a fixed interest rate.This is an example of:

Accepted Answer

A) debt financing. 
B) capital budgeting. 
C) equity financing. 
D) trade credit. 
E) multilateral netting.

Question 14

_____ refers to Islamic law which,in terms of finance,prohibits charging interest on money and other common business activities,including short selling.

Accepted Answer

The answer of _____ refers to Islamic law which,in terms...

Question 15

Explain how Brazilian government policies have boosted foreign investment and innovation.

Accepted Answer

The answer of Explain how Brazilian government policies have boosted...

Question 16

GE is commissioned to build a new power station for which the overall construction effort is contracted through GE Power Systems.But in addition to generators,GE may need other items such as switching technology or light fixtures that are manufactured by its subsidiary.GE Power Systems would purchase items it doesn't manufacture internally from GE Automation,another subsidiary of GE and then sell them on to the customer as part of the construction project.The above serves as an example of:

Accepted Answer

A) debt financing. 
B) capital budgeting. 
C) equity financing. 
D) transfer pricing. 
E) multilateral netting.

Question 17

_____ refers to a method of foreign currency translation that uses exchange rates based on the rate at which the assets and liabilities were originally acquired or incurred.

Accepted Answer

A) Hedging process 
B) Current-rate method 
C) Monte Carlo method 
D) Temporal method 
E) Markov process

Question 18

Which of the following statements holds true for a centralized financial organization structure?

Accepted Answer

A) The government of the host country in which the subsidiary is located makes financing or investment decisions for the organization,taking advantage of local knowledge and moving quickly to respond to opportunities or uncertainties. 
B) Multinational firms choose a centralized financial organization structure due to variations in language,consumers,cultures,business practices,and government rules,laws,and regulations among different countries. 
C) Subsidiaries or regions make financing or investment decisions for their region,taking advantage of local knowledge and moving quickly to respond to opportunities or uncertainties. 
D) The financial institutions which fund the organization set guidelines for the headquarters as well as the subsidiaries to follow,pool funds,leverage the benefits of scale for investment and borrowing,and hire knowledgeable staff to make the most effective firm-wide decisions. 
E) All finance decisions are performed at headquarters,which sets guidelines for subsidiaries to follow,pools funds,leverages the benefits of scale for investment and borrowing,and hires knowledgeable staff to make the most effective firm-wide decisions.

Question 19

In the case of _____ financing,firms can borrow money from banks or by selling bonds.

Accepted Answer

The answer of In the case of _____ financing,firms can...

Question 20

Why do some firms choose a decentralized financial organization structure?

Accepted Answer

The answer of Why do some firms choose a decentralized...

Exam 15: Understanding the Roles of Finance and Accounting in Global Competitive Advantage