Multinational Financial

Management MCQ PDF

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17 Chapters
997 Verified Questions
 Multinational Financial Management
MCQ PDF
Cou
Multinational Financial Management explores the complexities of financial

decision-making in firms operating across international borders. This course examines

topics such as foreign exchange markets, international financing and investment

strategies, risk management, and the impact of global economic environments on

financial operations. Students learn how multinational corporations assess and manage

currency risk, make capital budgeting decisions for international projects, navigate

international taxation, and structure cross-border investments. Emphasis is placed on

both theoretical frameworks and practical tools used to optimize financial outcomes

while adhering to diverse regulatory and economic environments worldwide.

Recommended Textbook
Fundamentals of Multinational Finance 5th Edition by Michael H. Moffett

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17 Chapters
997 Verified Questions
997 Flashcards
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Page 2
 Chapter 1: Multinational Financial Management:

Opportunities and Challenges

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39 Verified Questions
39 Flashcards
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Sample Questions
Q1) Of the following, which would NOT be considered a way that government interferes
with comparative advantage?
A) tariffs
B) managerial skills
C) quotas
D) other non-tariff restrictions
Answer: B

Q2) The global financial marketplace consists of assets, institutions, and linkages. Explain
how these factors come together to form the marketplace we know today.
Answer: Financial assets, such as government securities, are at the heart of today's
global financial marketplace. These securities set the standard and establish rate and
price benchmarks for other financial assets sourced by private and public firms and
NGOs. Central banks help establish and implement monetary policy and regulate the
commercial banks which take deposits and make loans. The assets and institutions are
linked by the interbank networks operating worldwide that are so necessary for actual
trading to take place.

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Page 3
 Chapter 2: The International Monetary System
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Sample Questions
Q1) According to the authors, one of the concerns for Peoples Republic of China driving
restrictions on its capital flows is that
A) RMB can appreciate to an extent of eroding PRC's export competitiveness.
B) PRC can face rapid capital flight of Chinese Savings in search of high yielding returns.
C) growing unease over the ability of the US dollar and the Euro to maintain value over
time.
D) All of the above
Answer: D

Q2) The United States currently uses a ________ exchange rate regime.
A) crawling peg
B) pegged
C) floating
D) fixed
Answer: C

Q3) The use of EURO is obligatory to member countries of the European Union.
A)True
B)False
Answer: False

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Page 4
 Chapter 3: The Balance of Payments
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Sample Questions
Q1) In general, a country's exports decrease as foreign income decreases.
A)True
B)False
Answer: True

Q2) The balance of payments is most like a(an)

A) cash flow statement.
B) balance sheet.
C) income statement.
D) proxy statement.
Answer: A

Q3) What is a country's balance of (merchandise) trade and why is it so widely reported
in the financial and popular press?
Answer: The balance of trade (BOT) is the largest and most important subset of a
country's current account. It measures the difference in a country's imports and exports
over a specified time period. It is often reported because it is intuitively easy to
understand (i.e., we either sell more or buy more from foreign countries) and it is a
reasonable representation of the total current account balance. (For example, for the
U.S. the BOT was -$504B in 2009 while the current account balance was -$378B.

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Page 5
 Chapter 4: Financial Goals and Corporate Governance
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Sample Questions
Q1) Which of the following is NOT an important concept when distinguishing between
international and domestic financial management?
A) corporate governance
B) culture, history, and institutions
C) political risk
D) All of the above are important distinguishing concepts.

Q2) Fissler AG, headquartered in Germany, records all of it sales worldwide in euros. Its
USA division realized sales of €2,675,000 last year when the exchange rate was $1.33/€
and sales of €2,355,000 this year when the exchange rate was $1.48/€. What was the
percent change in euro revenues for Fissler for the USA division over the last year?
A) -13.99%
B) -11.96%
C) -2.03%
D) -20.89%

Q3) The Sarbanes-Oxley Act (SOX) was passed in 2002 by the U.S. Congress to address
corporate governance reform. SOX has not been without controversy to put it mildly.
Identify and discuss several positive and negative impacts of SOX on corporations here
and abroad.

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Page 6
 Chapter 5: The Foreign Exchange Market
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Sample Questions
Q1) The primary motive of foreign exchange activities by most central banks is profit.
A)True
B)False

Q2) Refer to Table 5.1. The ask price for the two-year swap for a British pound is
A) $1.4250/£.
B) $1.4257/£.
C) -$230.
D) -$238.

Q3) Liquidity seekers profit of the profit seekers because

A) profit seekers are usually much better informed about the market and share that
information with liquidity seekers.
B) profit seekers simply wish to secure enough of currency for their transactions.
C) profit seekers are inducing exceptional growth of the foreign exchange market.
D) None of the above. Profit seekers generally profit from liquidity seekers.

Q4) Identify and explain the three functions of the foreign exchange market.

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Page 7
 Chapter 6: International Parity Conditions
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Sample Questions
Q1) Consider the price elasticity of demand. If a product has price elasticity less than one
it is considered to have relatively elastic demand.
A)True
B)False

Q2) According to the International Fisher effect, the differential between nominal 6
months interest rates is equal to but opposite in sign with the yearly forecast on the
change in the spot rate.
A)True
B)False

Q3) If the current exchange rate is 113 Japanese yen per U.S. dollar, the price of a Big Mac
hamburger in the United States is $3.41, and the price of a Big Mac hamburger in Japan
is 280 yen, then other things equal, the Big Mac hamburger in Japan is
A) correctly priced.
B) under priced.
C) over priced.
D) There is not enough information to determine if the price is appropriate or not.

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Page 8
 Chapter 7: Foreign Currency Derivatives and Swaps
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Sample Questions
Q1) What is the reason for an investor to pay for a zero intrinsic value option?
A) there is always a chance that the spot rate will move before expiration putting the
option in the money
B) there is always a chance that the strike price for options with different maturities will
increase
C) investors are typically not investing in zero intrinsic value options
D) the premiums for zero intrinsic value options are very small

Q2) Which of the following statements regarding currency futures contracts and forward
contracts is NOT true?
A) A futures contract is a standardized amount per currency whereas the forward
contact is for any size desired.
B) A futures contract is for a fixed maturity whereas the forward contract is for any
maturity you like up to one year.
C) Futures contracts trade on organized exchanges whereas forwards take place
between individuals and banks with other banks via telecom linkages.
D) All of the above are true.

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Page 9
 Chapter 8: Foreign Exchange Rate Determination
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Sample Questions
Q1) The more efficient the foreign exchange market is, the more likely it is that exchange
rate movements are random walks.
A)True
B)False

Q2) The Asian currency crisis was primarily a

A) parity conditions problem.
B) an asset markets problem.
C) balance of payments problem.
D) PPP problem.

Q3) ________ is the alteration of economic or financial fundamentals which are

thought to be drivers of capital to flow in and out of specific currencies.
A) Proportional intervention
B) Direct intervention
C) Indirect intervention
D) Hopeless intervention

Q4) The authors claim that the theories of international currency values hold better for
less liquid and poorly capitalized markets.
A)True
B)False

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Page 10
 Chapter 9: Transaction Exposure
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Sample Questions
Q1) Refer to Instruction 9.1. If Plains States locks in the forward hedge at $1.38/euro, and
the spot rate when the transaction was recorded on the books was $1.40/euro, this will
result in a "foreign exchange loss" accounting transaction of
A) $0.
B) $25,000.
C) This was not a loss; it was a gain of $25,000.
D) There is not enough information to answer this question.

Q2) Company Y submits 7 day validity offer for spare parts to be exported in Germany
starting from January 1st in the following year. By doing so the company has
A) created transactional, but not quotation exposure.
B) created billing exposure in next fiscal year.
C) created limited quotation exposure.
D) did not create any types of exposure.

Q3) Does foreign currency exchange hedging both reduce risk and increase expected
value? Explain, and list several arguments in favor of currency risk management and
several against.

Q4) List and define the three types of foreign exchange exposure presented by your
authors.

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Page 11
 Chapter 10: Translation Exposure
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Sample Questions
Q1) The two methods for the translation of foreign subsidiary financial statements are
the current rate and temporal methods. Briefly, describe how each of these methods
translates the foreign subsidiary financial statements into the parent company's
consolidated statements. Identify when each technique should be used and the major
advantage(s) of each.

Q2) ________ exposure is the potential for an increase or decrease in the parent
company's net worth and reported net income caused by a change in exchange rates
since the last transaction.
A) Transaction
B) Operating
C) Currency
D) Translation

Q3) The biggest advantage of the current rate method of reporting translation
adjustments is the fact that the gain or loss goes directly to the reserve account on the
consolidated balance sheet and does not pass through the consolidated income
statement.
A)True
B)False

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Page 12
 Chapter 11: Operating Exposure
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Sample Questions
Q1) Another name for operating exposure is ________ exposure.
A) economic
B) competitive
C) strategic
D) all of the above

Q2) An unexpected change in exchange rates impacts a firm's expected cash flows at
four levels; a) the short run, b) medium run: equilibrium, c) medium run: disequilibrium,
and d) the long run. Describe the impact on cash flows over each of these categories
identifying the time frame for each as well as the price changes, volume changes, and
structural changes associated with each stage.

Q3) Under conditions of equilibrium, management would use ________ exchange rate
as an unbiased predictor of future spot rates when preparing operating budgets.
A) the current spot
B) the forward rate
C) the black market
D) none of the above

Q4) Currency swaps are exclusively for periods of time under one year.
A)True
B)False

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Page 13
 Chapter 12: The Global Cost and Availability of Capital
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Sample Questions
Q1) One of the distinct features of international equity markets is that over the last 100 or
so years, the average market risk premium is almost identical across major industrial
countries.
A)True
B)False

Q2) A MNEs marginal cost of capital is constant for considerable ranges in its capital
budget, but this statement cannot be made for most domestic firms.
A)True
B)False

Q3) Which of the following is NOT a portfolio diversification technique used by portfolio
managers?
A) diversify by type of security
B) diversify by the size of capitalization of the securities held
C) diversify by country
D) All of the above are diversification techniques.

Q4) Market imperfections do not necessarily imply that national securities markets are
inefficient.
A)True
B)False

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Page 14
 Chapter 13: Raising Equity and Debt Globally
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Sample Questions
Q1) Eurocurrencies are NOT the same as the euro developed for the common European
currency.
A)True
B)False

Q2) Which of the following would likely be the ultimate step in a firm's efforts to source
equity globally?
A) an international bond issue
B) an equity listing in less-prestigious markets
C) an equity listing in a target market
D) a Euroequity issue in global equity markets

Q3) The domestic theory of optimal capital structure does not need to be modified for
MNEs.
A)True
B)False

Q4) Empirical evidence has found that on average public firms that have been
privatized by issuing public equity have
A) lowered capital investment levels.
B) decreased efficiency.
C) expanded their employment.
D) all of the above.

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answers,
 Chapter 14: Multinational Tax Management
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Sample Questions
Q1) The value-added tax is
A) similar to an ad valorem tax on imports.
B) a form of direct taxation on corporate income.
C) a form of national sales tax.
D) none of the above.

Q2) A country CANNOT have both a territorial and a worldwide approach as a national
tax policy.
A)True
B)False

Q3) In the mid 1980s the U.S. led the way to higher corporate income tax rates worldwide.
Today, most of the G7 nations have surpassed the U.S. and have higher corporate
income tax rates than the U.S.
A)True
B)False

Q4) All indications are that the value-added tax will soon be the dominant form of
taxation in the U.S.
A)True
B)False

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Page 16
 Chapter 15: International Trade Finance
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Sample Questions
Q1) A Firm sells its 90 days receivables through recourse base factoring thus
A) it avoids the costs of determining counterparty creditworthiness.
B) increases political and FX risk.
C) receives cash proceeds at lower cost compared to standard credit line.
D) accepts the risk that not all receivables will be collected.

Q2) What is the trade dilemma and how is the dilemma generally solved?

Q3) When a confirmed letter of credit is used, the exporting firm gains because
A) the government in effect subsidizes shipping costs.
B) the time involved in shipping is generally reduced.
C) the firm can sell against the promise of a local bank rather than a firm.
D) the exporting firm is considered of higher risk.

Q4) Refer to Instruction 15.1. What is the size of the commission Jackson Automotive will
pay the bank for the banker's acceptance?
A) $7,000
B) $5,000
C) $12,000
D) $14,000

Q5) Most drafts in international trade are "clean."

A)True
B)False
Page 17
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 Chapter 16: Foreign Direct Investment and Political Risk
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Sample Questions
Q1) Which of the following is NOT a potential advantage to a cross-border acquisition
compared to a Greenfield investment?
A) Market imperfections may under-price local assets and allow the purchase of assets
at significant discount.
B) Cross-border acquisitions take longer, thus allowing the firm a better understanding
of the local market before attempting sales.
C) Acquisitions may be a cost-effective way of gaining competitive advantages such as
technology or brand names.
D) All of the above are advantages of acquisition over green field investment.

Q2) Which of the following is NOT a form of FDI?

A) wholly-owned affiliate
B) joint venture
C) exporting
D) Greenfield investment

Q3) Negotiations under the General Agreement on Tariffs and Trade (GATT) have NOT
had much impact on reducing the level of tariffs over the last several decades.
A)True
B)False

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Page 18
 Chapter 17: Multinational Capital Budgeting and

Cross-Border Acquisitions
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Sample Questions
Q1) Affiliate firms are consolidated on the parent's financial statements on a ________
basis.
A) prorated
B) 50%
C) 75%
D) 100%

Q2) When dealing with international capital budgeting projects, the value of the project
is NOT sensitive to the firm repatriating dividends to its parent.
A)True
B)False

Q3) Refer to Table 17.1. The NPV for the British investment is estimated at
A) $3,092.
B) $6,420.
C) £3,092.
D) $0.

Q4) What is project financing and what are the factors critical to its success?

Q5) Compared to a greenfield investment, list advantages and disadvantages of a

cross-border merger or acquisition.
Page 19
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