Q&A Hero

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Q: Describe the three exchange rates that can be used to translate foreign currencies into the corporate currency in setting budgets and in the subsequent tracking of performance that Lessard and Lorange pointed out.

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Q: A firm s ability to establish a centralized depository that can serve short-term cash needs might be limited by government-imposed restrictions on capital flows across borders. ⊚ true ⊚ false

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Q: Most subsidiaries of an international business operate in uniform environments. ⊚ true ⊚ false

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Q: Performance of international subsidiaries depends on the transfer price set up by the corporation. ⊚ true ⊚ false

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Q: A _____ between two countries is an agreement specifying which items of income will be taxed by the authorities of the country where the income is earned. A) tax deferral agreement B) fixed-rate treaty C) tax treaty D) free trade agreement

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Q: Multilateral netting is used primarily to A) reduce transaction costs between subsidiaries. B) avail tax credit from governments. C) establish a tax treaty among multiple countries. D) reduce the fixed costs of establishing a subsidiary.

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Q: By pooling cash resources centrally, firms can A) better handle short-term cash needs of subsidiaries. B) increase liquidity of independent subsidiaries. C) reduce the total size of the cash pool it must hold in liquid accounts. D) avoid government-imposed restrictions on capital flows.

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Q: Pooling the cash of all the subsidiaries centrally A) lowers the interest rate earned. B) reduces the earning potential for firms. C) increases the interest rate paid. D) increases the earning potential for firms.

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Q: Money management decisions attempt to manage the firm s _____ most efficiently. A) cash flow B) corporate expenses C) working capital D) corporate revenues

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Q: Critics of adjusting discount rates to reflect a location s riskiness argue that it A) does not penalize either distant or early cash flows enough. B) penalizes distant cash flows too heavily. C) does not penalize early cash flows enough. D) penalizes early cash flows too heavily.

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Q: _____ is the technique financial managers use to try to quantify the benefits, costs, and risks of an investment. A) Capital budgeting B) External audit C) Transfer pricing D) Control system analysis

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Q: Capital budgeting for a foreign project A) begins with an audit of the current cash flows. B) is vastly different from domestic capital budgeting. C) begins with converting all cash flow to Eurocurrency. D) uses the same theoretical framework that domestic capital budgeting uses.

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Q: _____ occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area. A) Trade deficit B) Trade diversion C) Trade creation D) Trade distortion

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Q: A political benefit of economic integration is that it A) enables participants to achieve gains from the free flow of trade. B) enables participants to achieve gains from the free flow of investment. C) allows countries to specialize in the production of goods and services that they can produce most efficiently. D) reduces the potential for violent conflict and war.

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Q: _____ eliminates trade barriers between member nations, adopts a common external policy, and permits factors of production to move freely between member countries but it also requires a common currency, harmonization of members tax rates, and a common monetary and fiscal policy. A) A free trade area B) A common market C) An economic union D) A customs union

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Q: Which of the following is a reason the European Union is considered an imperfect economic union? A) Factors of production are not allowed to move freely between member countries. B) Not all members of the union have adopted the euro. C) Almost all markets are heavily regulated. D) Products and services are not allowed to move freely between member countries.

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Q: Explain the North American Free Trade Agreement and then debate its ratification.

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Q: Political turmoil and tribalism in several African nations has persistently impeded any meaningful progress in economic integration. ⊚ true ⊚ false

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Q: The European Union is an example of an economic union. ⊚ true ⊚ false

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Q: Firms outside of trading areas run the risk of being shut out of the single market by the creation of a A) trade fortress. B) contracting economy. C) single-market zone. D) destabilized economy.

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Q: Which of the following established the second largest currency zone in the world? A) Treaty of Rome B) Maastricht Treaty C) Treaty of Lisbon D) Single European Act

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Q: The United States, Canada, and Mexico are member nations of A) CAFTA. B) Mercosur. C) the Andean Pact. D) NAFTA.

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Q: The most recent attempt to reenergize the free trade movement in Africa occurred in early 2001, when _____, Uganda, and Tanzania, member states of the East African Community (EAC), committed themselves to relaunching their bloc, 24 years after it collapsed. A) Sudan B) Ethiopia C) Kenya D) Somalia

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Q: The establishment of the euro required participating countries to A) first convert their currency to U.S. dollars, then to euros. B) give up national control over monetary policy. C) create national banks at which citizens can convert their existing currency. D) maintain their own currency in parallel to the euro.

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Q: In ____, similarities in the underlying structure of economic activity make it feasible to adopt a single currency and use a single exchange rate as an instrument of macroeconomic policy. A) an optimal currency area B) a unified economic area C) a uniform currency zone D) a monetary zone

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Q: Explain briefly the regulatory influences on pricing.

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Q: In the context of a tube of toothpaste, the box in which the toothpaste is shipped to the store from the warehouse is the primary packaging. ⊚ true ⊚ false

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Q: Managers in a source factory operate in essentially the same way that managers in an offshore factory operate. They have very little say in purchasing or logistics decisions. ⊚ true ⊚ false

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Q: What is a drawback of a just-in-time system? A) Transport costs are high when using a just-in-time system. B) It leaves a firm without a buffer stock of inventory. C) It increases the warranty costs associated with products. D) It leaves a firm with high scrap costs associated with defective products.

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Q: When a multinational corporation buys products or services from one of its suppliers that produces them somewhere else, whether domestically or globally, it is referred to as A) offshoring. B) insourcing. C) outsourcing. D) co-sourcing.

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