Test bank International Finance MCQ wordChap 10.docx
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TestbankInternationalFinanceMCQwordChap10
FundamentalsofMultinationalFinance,3e(Moffett)
Chapter10
OperatingExposure
10.1
MultipleChoiceandTrue/FalseQuestions
1)
Anothernameforoperatingexposureis________exposure.
A)
economic
B)
competitive
C)
strategic
D)
alloftheabove
Answer:
D
Topic:
OperatingExposure
Skill:
Recognition
2)
Whattypeofinternationalriskexposuremeasuresthechangeinpresentvalueofafirmresultingfromchangesinfutureoperatingcashflowscausedbyanyunexpectedchangeinexchangerates?
A)
transactionexposure
B)
accountingexposure
C)
operatingexposure
D)
translationexposure
Answer:
C
Topic:
OperatingExposure
Skill:
Recognition
3)
Thegoalofoperatingexposureanalysisistoidentifystrategicoperatingtechniquesthefirmmightadopttoenhancevalueinthefaceofunanticipatedexchangeratechanges.
Answer:
TRUE
Topic:
OperatingExposure
Skill:
Conceptual
4)
________cashflowsarisefromintracompanyandintercompanyreceivablesandpaymentswhile________cashflowsarepaymentsfortheuseofloansandequity.
A)
Financing;operating
B)
Operating;financing
C)
Operating;accounting
D)
Accounting;financing
Answer:
B
Topic:
OperatingandFinancialCashFlows
Skill:
Recognition
5)
Operatingcashflowsmayoccurindifferentcurrenciesandatdifferenttimes,butfinancingcashflowsmayoccuronlyinasinglecurrency.
Answer:
FALSE
Topic:
OperatingandFinancialCashFlows
Skill:
Recognition
6)
WhichofthefollowingisNOTanexampleofafinancialcashflow?
A)
parentinvestedequitycapital
B)
interestonintrafirmlending
C)
paymentforgoodsandservices
D)
intrafirmprincipalpayments
Answer:
C
Topic:
FinancialCashFlows
Skill:
Recognition
7)
WhichofthefollowingisNOTanexampleofanoperatingcashflow?
A)
managementfeesanddistributedoverhead
B)
royaltiesandlicensefees
C)
rentandleasepayments
D)
dividendpaidtoparentcompany
Answer:
D
Topic:
OperatingCashFlows
Skill:
Recognition
8)
________exposureisfarmoreimportantforthelong-runhealthofabusinessthanchangescausedby________or________exposure.
A)
Operating;translation;transaction
B)
Transaction;operating;translation
C)
Accounting;translation;transaction
D)
Translation;operating;transaction
Answer:
A
Topic:
Operating;Transaction;andTranslationExposure
Skill:
Conceptual
9)
Expectedchangesinforeignexchangeratesshouldalreadybefactoredintoanticipatedoperatingresultsbymanagementandinvestors.
Answer:
TRUE
Topic:
Expectations
Skill:
Conceptual
10)
Underconditionsofequilibrium,managementwoulduse________exchangerateasanunbiasedpredictoroffuturespotrateswhenpreparingoperatingbudgets.
A)
thecurrentspot
B)
theforwardrate
C)
theblackmarket
D)
noneoftheabove
Answer:
B
Topic:
ForwardRate
Skill:
Conceptual
11)
SimpsonSignCompanybasedinFrostbiteFalls,Minnesotahasa6-monthC$100,000contracttocompletesignworkinWinnipeg,Manitoba,Canada.Thecurrentspotrateis$1.02/C$andtheforwardrateis$1.01/C$.Underconditionsofequilibrium,managementwouldusetoday________whenpreparingoperatingbudgets.
A)
$102,000
B)
$101,000
C)
$100,000
D)
Noneoftheabove
Answer:
B
Topic:
ForwardRate
Skill:
Analytical
12)
Inequilibrium,expectedcashflowtoamortizeinternationaldebtobligationsshouldreflectthe________.
A)
currentspotrate
B)
thespotratewhentheloanwascontracted
C)
theinternationalFishereffect
D)
noneoftheabove
Answer:
C
Topic:
ExchangeRateEquilibrium
Skill:
Conceptual
13)
Fromaninvestor'sperspective,iftheforeignexchangemarketisefficient,informationaboutexpectedchangesinexchangeratesshouldbewidelyknownandthusreflectedinafirm'smarketvalue.Only________inexchangeratesoran________foreignexchangemarket,shouldcausemarketvaluetochange.
A)
expectedchanges;efficient
B)
unexpectedchanges;efficient
C)
expectedchanges;inefficient
D)
unexpectedchanges;inefficient
Answer:
D
Topic:
ExchangeRateEquilibrium
Skill:
Conceptual
14)
WhichofthefollowingisNOTanexampleofdiversifyingoperations?
A)
diversifyingsales
B)
diversifyinglocationofoperations
C)
raisingfundsinmorethanonecountry
D)
sourcingrawmaterialsinmorethanonecountry
Answer:
C
Topic:
ForeignExchangeDiversification
Skill:
Recognition
15)
WhichofthefollowingisNOTanexampleofdiversificationinfinancing?
A)
raisingfundsinmorethanonemarket
B)
raisingfundsinmorethanonecountry
C)
diversifyingsales
D)
Alloftheabovequalify.
Answer:
C
Topic:
ForeignExchangeDiversification
Skill:
Recognition
16)
Managementmustbeabletopredictdisequilibriaininternationalmarketstotakeadvantageofdiversificationstrategies.
Answer:
FALSE
Topic:
ForeignExchangeDiversification
Skill:
Conceptual
17)
Whendisequilibriaininternationalmarketsoccur,managementcantakeadvantageby
A)
doingnothingiftheyarealreadydiversifiedandabletorealizebeneficialportfolioeffects.
B)
recognizingdisequilibriafasterthanpurelydomesticcompetitors.
C)
shiftingoperationaloffinancingactivitiestotakeadvantageofthedisequilibria.
D)
alloftheabove.
Answer:
D
Topic:
ForeignExchangeDiversification
Skill:
Conceptual
18)
PurelydomesticfirmswillbeatadisadvantagetoMNEsintheeventofmarketdisequilibriabecause
A)
domesticfirmslackcomparativedatafromitsownsources.
B)
internationalfirmsarealreadysolarge.
C)
allofthedomesticfirm'srawmaterialsareimported.
D)
Noneoftheabove.Domesticfirmsarenotatadisadvantage.
Answer:
A
Topic:
ForeignExchangeDiversification
Skill:
Conceptual
19)
WhichofthefollowingisprobablyNOTanadvantageofforeignexchangeriskmanagement?
A)
thereductionofthevariabilityofcashflowsduetodomesticbusinesscycles
B)
increasedavailabilityofcapital
C)
reducedcostofcapital
D)
Alloftheabovearepotentialadvantagesofforeignexchangeriskmanagement.
Answer:
D
Topic:
ForeignExchangeDiversification
Skill:
Recognition
20)
WhichofthefollowingisNOTanexampleofaformofpoliticalriskthatmightbeavoidedorreducedbyforeignexchangeriskmanagement?
A)
expropriationofassets
B)
destructionofrawmaterialsthroughnaturaldisaster
C)
war
D)
unfavorablelegalchanges
Answer:
B
Topic:
PoliticalRisk
Skill:
Recognition
21)
WhichofthefollowingisNOTidentifiedbyyourauthorsasaproactivemanagementtechniquetoreduceexposuretoforeignexchangerisk?
A)
matchingcurrencycashflows
B)
currencyswaps
C)
remainingapurelydomesticfirm
D)
parallelloans
Answer:
C
Topic:
ManagementofForeignExchangeRisk
Skill:
Recognition
22)
Whichoneofthefollowingmanagementtechniquesislikelytobestoffsettheriskoflong-runexposuretoreceivablesdenominatedinaparticularforeigncurrency?
A)
borrowmoneyintheforeigncurrencyinquestion
B)
lendmoneyintheforeigncurrencyinquestion
C)
increasesalestothatcountry
D)
increasesalesinthiscountry
Answer:
A
Topic:
ManagementofForeignExchangeRisk
Skill:
Conceptual
23)
Whichoneofthefollowingmanagementtechniquesislikelytobestoffsettheriskoflong-runexposuretopayablesdenominatedinaparticularforeigncurrency?
A)
borrowmoneyintheforeigncurrencyinquestion
B)
lendmoneyintheforeigncurrencyinquestion
C)
relyontheFederalReserveBoardtoenactmonetarypolicyfavorabletoyourexposurerisk
D)
noneoftheabove
Answer:
B
Topic:
ManagementofForeignExchangeRisk
Skill:
Conceptual
24)
Theparticularstrategyoftryingtooffsetstableinflowsofcashfromonecountrywithoutflowsofcashinthesamecurrencyisknownas________.
A)
hedging
B)
diversification
C)
matching
D)
balancing
Answer:
C
Topic:
ManagementofForeignExchangeRisk
Skill:
Recognition
25)
WhichofthefollowingisNOTanacceptablehedgingtechniquetoreduceriskcausedbyarelativelypredictablelong-termforeigncurrencyinflowofJapaneseyen?
A)
ImportrawmaterialsfromJapandenominatedinyentosubstitutefordomesticsuppliers.
B)
Paysuppliersfromothercountriesinyen.
C)
ImportrawmaterialsfromJapandenominatedindollars.
D)
Acquiredebtdenominatedinyen.
Answer:
C
Topic:
ManagementofForeignExchangeRisk
Skill:
Recognition
26)
AnMNEhasacontractforarelativelypredictablelong-terminflowofJapaneseyenthatthefirmchoosestohedgebyseekingoutpotentialsuppliersinJapan.Thishedgingstrategyisreferredtoas________.
A)
anaturalhedge
B)
currency-switching
C)
matching
D)
diversification
Answer:
A
Topic:
NaturalHedge
Skill:
Recognition
27)
AnMNEhasacontractforarelativelypredictablelong-terminflowofJapaneseyenthatthefirmchoosestohedgebypayingforimportsfromCanadainJapaneseyen.Thishedgingstrateg