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Full Test Bank For International Financial Management 14Th Edition Jeff Madura PDF Docx Full Chapter Chapter
Full Test Bank For International Financial Management 14Th Edition Jeff Madura PDF Docx Full Chapter Chapter
7. Which of the following theories identifies the nontransferability of resources as a reason for international business?
a. theory of comparative advantage
b. imperfect markets theory
c. product cycle theory
d. None of these are correct.
ANSWER: b
8. Which of the following theories suggests that firms seek to penetrate new markets over time?
a. theory of comparative advantage
b. imperfect markets theory
c. product cycle theory
d. None of these are correct.
ANSWER: c
9. An industry based on which of the following would most likely take advantage of lower costs in some less developed
foreign countries?
a. assembly line production
b. specialized professional services
c. nuclear missile programs
d. development of more sophisticated computer technology
ANSWER: a
11. A product cycle is the process by which a firm provides a specialized sales or service strategy, support assistance, and
possibly an initial investment in a franchise in exchange for periodic fees.
a. True
b. False
ANSWER: False
12. Licensing is the process by which a firm provides its technology (copyrights, patents, trademarks, or trade names) in
exchange for fees or some other specified benefits.
a. True
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b. False
ANSWER: True
14. An MNC may be more exposed to agency problems if most of its shares are held by:
a. a few mutual funds.
b. a widely dispersed set of individual investors.
c. a few pension funds.
d. All of these would prevent agency problems.
ANSWER: b
15. The Sarbanes-Oxley Act improved corporate governance of MNCs because it:
a. made executives more accountable for verifying financial statements.
b. eliminated stock options as a form of compensation.
c. tied executive compensation to firm performance.
d. placed a limit on the amount of funds that managers can spend.
ANSWER: a
16. MNCs can improve their internal control process by all of the following, except:
a. establishing a centralized database of information.
b. ensuring that all data are reported consistently among subsidiaries.
c. ensuring that the MNC always borrows from countries where interest rates are lowest.
d. using a system that checks internal data for unusual discrepancies.
ANSWER: c
17. Franchising is the process by which national governments sell state-owned operations to corporations and other
investors.
a. True
b. False
ANSWER: False
18. The parent of an MNC can implement compensation plans that directly reward the subsidiary managers for enhancing
the value of the MNC.
a. True
b. False
ANSWER: True
19. If a publicly traded MNC's managers make poor decisions that reduce its value, that may encourage other firms to
acquire the MNC.
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a. True
b. False
ANSWER: True
20. Institutional investors such as mutual funds or pension funds that have large holdings of an MNC's stock do not
normally want to take control of it and therefore have no influence over management of the MNC.
a. True
b. False
ANSWER: False
21. Four MNCs generate the same level of sales. The MNC that _____________would likely have the most direct foreign
investment.
a. exports all of its products
b. produces and sells its products locally
c. imports products from unrelated firms in other countries and sells them locally
d. acquires a foreign firm that produces most of its products to be sold in that foreign country
ANSWER: d
22. Which of the following is an example of direct foreign investment for a U.S.-based MNC?
a. exporting to a country
b. licensing arrangements that will allow a foreign country to use the MNC’s technology
c. purchasing existing companies in a country
d. investing directly (without brokers) in foreign stocks
ANSWER: c
24. Assume that an MNC purchases a foreign building, and then leases the building to another party and allows that party
to operate the business in the building for 30 years if the party follows standards set by the MNC. This process is referred
to as:
a. a foreign acquisition.
b. franchising.
c. a licensing agreement.
d. exporting.
ANSWER: a
25. Imperfect markets reflect conditions under which factors of production are immobile.
a. True
b. False
ANSWER: True
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26. The Sarbanes-Oxley Act (SOX), which was enacted in 2002, required MNCs and other firms to implement an internal
reporting process that could be easily monitored by executives and the board of directors.
a. True
b. False
ANSWER: True
27. If markets were perfect, then labor and other costs of production would be perfectly stable (no movement across
borders).
a. True
b. False
ANSWER: False
28. The valuation of an MNC is reduced if the required rate of return on its investments in foreign countries is reduced.
a. True
b. False
ANSWER: False
29. Which of the following is not mentioned in the text as an additional risk resulting from international business?
a. exchange rate fluctuations
b. political risk
c. interest rate risk
d. exposure to foreign economies
ANSWER: c
30. Which of the following does not possibly represent a form of direct foreign investment?
a. franchising
b. international trade
c. joint ventures
d. acquisitions of existing operations
e. establishment of new foreign subsidiaries
ANSWER: b
31. Which of the following is not a way in which agency problems can be reduced through corporate control?
a. executive compensation
b. threat of hostile takeover
c. acquisition of a foreign subsidiary
d. monitoring by large shareholders
ANSWER: c
32. The goal of a multinational corporation (MNC) is the maximization of shareholder wealth.
a. True
b. False
ANSWER: True
Whilst we thus behold the entire failure of all that was foretold
against the system, it is a subject of just felicitation to its friends, that
all their anticipations of its benefits have been fulfilled, or are in
progress of fulfillment. The honorable gentleman from South
Carolina has made an allusion to a speech made by me, in 1824, in
the other House, in support of the tariff, and to which, otherwise, I
should not have particularly referred. But I would ask any one, who
can now command the courage to peruse that long production, what
principle there laid down is not true? what prediction then made has
been falsified by practical experience?
It is now proposed to abolish the system, to which we owe so much
of the public prosperity, and it is urged that the arrival of the period
of the redemption of the public debt has been confidently looked to
as presenting a suitable occasion to rid the country of evils with
which the system is alleged to be fraught. Not an inattentive observer
of passing events, I have been aware that, among those who were
most early pressing the payment of the public debt, and upon that
ground were opposing appropriations to other great interests, there
were some who cared less about the debt than the accomplishment of
other objects. But the people of the United States have not coupled
the payment of their public debt with the destruction of the
protection of their industry, against foreign laws and foreign
industry. They have been accustomed to regard the extinction of the
public debt as relief from a burthen, and not as the infliction of a
curse. If it is to be attended or followed by the subversion of the
American system, and an exposure of our establishments and our
productions to the unguarded consequences of the selfish policy of
foreign powers, the payment of the public debt will be the bitterest of
curses. Its fruit will be like the fruit
“Of that forbidden tree, whose mortal taste
Brought death into the world, and all our woe,
With loss of Eden.”
January 22, 1840, which gave rise to the “ten cent” charge.
“We are also charged by the Senator from Kentucky with a desire
to reduce the wages of the poor man’s labor. We have often been
termed agrarians on our side of the House. It is something new
under the sun, to hear the Senator and his friends attribute to us a
desire to elevate the wealthy manufacturer, at the expense of the
laboring man and the mechanic. From my soul, I respect the laboring
man. Labor is the foundation of the wealth of every country; and the
free laborers of the North deserve respect, both for their probity and
their intelligence. Heaven forbid that I should do them wrong! Of all
the countries on the earth, we ought to have the most consideration
for the laboring man. From the very nature of our institutions, the
wheel of fortune is constantly revolving, and producing such
mutations in property, that the wealthy man of to-day may become
the poor laborer of to-morrow. Truly, wealth often takes to itself
wings and flies away. A large fortune rarely lasts beyond the third
generation, even if it endure so long. We must all know instances of
individuals obliged to labor for their daily bread, whose grandfathers
were men of fortune. The regular process of society would almost
seem to consist of the efforts of one class to dissipate the fortunes
which they have inherited, whilst another class, by their industry and
economy, are regularly rising to wealth. We have all, therefore, a
common interest, as it is our common duty, to protect the rights of
the laboring man: and if I believed for a moment that this bill would
prove injurious to him, it should meet my unqualified opposition.
“Although this bill will not have as great an influence as I could
desire, yet, as far as it goes, it will benefit the laboring man as much,
and probably more than any other class of society. What is it he
ought most to desire? Constant employment, regular wages, and
uniform reasonable prices for the necessaries and comforts of life
which he requires. Now, sir, what has been his condition under our
system of expansions and contractions? He has suffered more by
them than any other class of society. The rate of his wages is fixed
and known; and they are the last to rise with the increasing
expansion and the first to fall when the corresponding revulsion
occurs. He still continues to receive his dollar per day, whilst the
price of every article which he consumes is rapidly rising. He is at
length made to feel that, although he nominally earns as much, or
even more than he did formerly, yet, from the increased price of all
the necessaries of life, he cannot support his family. Hence the
strikes for higher wages, and the uneasy and excited feelings which
have at different periods, existed among the laboring classes. But the
expansion at length reaches the exploding point, and what does the
laboring man now suffer? He is for a season thrown out of
employment altogether. Our manufactures are suspended; our public
works are stopped; our private enterprises of different kinds are
abandoned; and, whilst others are able to weather the storm, he can
scarcely procure the means of bare subsistence.
“Again, sir; who, do you suppose, held the greater part of the
worthless paper of the one hundred and sixty-five broken banks to
which I have referred? Certainly it was not the keen and wary
speculator, who snuffs danger from afar. If you were to make the
search, you would find more broken bank notes in the cottages of the
laboring poor than anywhere else. And these miserable shinplasters,
where are they? After the revulsion of 1837, laborers were glad to
obtain employment on any terms; and they often received it upon the
express condition that they should accept this worthless trash in
payment. Sir, an entire suppression of all bank notes of a lower
denomination than the value of one week’s wages of the laboring
man is absolutely necessary for his protection. He ought always to
receive his wages in gold and silver. Of all men on the earth, the
laborer is most interested in having a sound and stable currency.
“All other circumstances being equal, I agree with the Senator
from Kentucky that that country is most prosperous where labor
commands the highest wages. I do not, however, mean by the terms
‘highest wages,’ the greatest nominal amount. During the
revolutionary war, one day’s work commanded a hundred dollars of
continental paper; but this would have scarcely purchased a
breakfast. The more proper expression would be, to say that that
country is most prosperous where labor commands the greatest
reward; where one day’s labor will procure not the greatest nominal
amount of a depreciated currency, but most of the necessaries and
comforts of life. If, therefore, you should, in some degree, reduce the
nominal price paid for labor, by reducing the amount of your bank
issues within reasonable and safe limits, and establishing a metallic
basis for your paper circulation, would this injure the laborer?
Certainly not; because the price of all the necessaries and comforts of
life are reduced in the same proportion, and he will be able to
purchase more of them for one dollar in a sound state of the
currency, than he could have done, in the days of extravagant
expansion, for a dollar and a quarter. So far from injuring, it will
greatly benefit the laboring man. It will insure to him constant
employment and regular prices, paid in a sound currency, which, of
all things, he ought most to desire; and it will save him from being
involved in ruin by a recurrence of those periodical expansions and
contractions of the currency, which have hitherto convulsed the
country.
“This sound state of the currency will have another most happy
effect upon the laboring man. He will receive his wages in gold and
silver; and this will induce him to lay up, for future use, such a
portion of them as he can spare, after satisfying his immediate wants.
This he will not do at present, because he knows not whether the
trash which he is now compelled to receive as money, will continue
to be of any value a week or a month hereafter. A knowledge of this
fact tends to banish economy from his dwelling, and induces him to
expend all his wages as rapidly as possible, lest they may become
worthless on his hands.
“Sir, the laboring classes understand this subject perfectly. It is the
hard-handed and firm-fisted men of the country on whom we must
rely in the day of danger, who are the most friendly to the passage of
this bill. It is they who are the most ardently in favor of infusing into
the currency of the country a very large amount of the precious
metals.”
Lewis Cass on the Missouri Compromise.