CHAPTER 1

Introduction

EASY (definitional)

1.1 Historically, the primary motive for U.S. multinationals to produce abroad has been to
a) lower costs
b) respond more quickly to the marketplace
c) avoid trade barriers
d) gain tax benefits

Ans: b
Section: evolution of multinational
Level: Easy

1.2 The primary objective of the multinational corporation is to
a.) maximize shareholder wealth
b) maximize world production
c) minimize debt
d) minimize the cost of doing business globally

Ans: a
Section: Multinational Financial Management: Theory and Practice
Level: Easy

3. ____________ is defined as the purchase of assets or commodities on one market for immediate resale on another in order to profit form a price discrepancy.
a) internationalization
b) arbitrage
c) financing
d) total risk

Ans: b
Section: evolution of multinational
Level: Easy

4. The value of good financial management is ___________ in the global markets because of the much greater probability of market imperfections and multiple tax rates.
a) minimized
b) neutralized
c) enhanced
d) arbitraged away

Ans: c
Section: role of the financial executive
Level: Easy

5. When a firm operates globally it offers advantages such as
a) greater political power at home
b) bless taxes on its profits
c) greater negotiating power with foreign minority groups
d) greater negotiating power with labor unions

Ans: d
Section: The rise of the MNC
Level: Easy

6. The prime transmitter of global competitive forces is the
a) public utility firm
b) financial management experience of the U.S. markets
c) the multinational corporation
d) the Federal Reserve System of the U.S.

Ans: c
Section: rise of the multinational
Level: Easy

1.7 ___________ were the earliest multinationals.
a) raw-material seekers
b) market