Chapter 10 Quiz
tax haven
A country that offers low fees on corporate financial transfers is sometimes called a ________.
Selling shares to outside investors
A small publishing company has long-term goals for international growth and wants to start raising capital. Managers at the firm are exploring ways to use equity financing. Which of the following is the best method for the managers to consider?
translation
A small technology firm is in its first fiscal year of international operations. The firm's accountants are concerned with the process of consolidation, or combining the results of their foreign subsidiaries into the main financial records. Adjustments made during consolidation will not affect actual cash earned, but they will affect how results appear on paper. In this scenario, accountants are most concerned with which type of exposure?
obtain capital without debt
By using equity financing, the XYZ company can now ________.
greater variety of investment options
For a company, what is a key advantage of global capital markets?
bankruptcy
If a company has a high level of debt, the result could be ________.
the project will add value to the company
In evaluating an upcoming planned construction project, a manager finds that the net present value of the project is positive. What conclusion can the manager reasonably draw from this analysis?
currency swapping
In the process of ________, two parties agree to exchange a set amount of money from one country for money from another country.
funds its operations from within its own network of affiliates
Intracorporate financing occurs when a company ________.
financial centers
In ________, such as New York and Tokyo, companies can access major capital suppliers through banks, stock exchanges, and venture capitalists.
Choosing a capital structure
Many tasks contribute to an MNE's financial management success. Which task determines a company's long-term financing mix for conducting global business?
Some Japanese managers seek to lower their taxes legally.
The Japanese government places a high tax on malt, which is a key ingredient in the production of beer. As a result, Japanese brewers use distillation technology that omits malt. Although the product tastes like beer, it is liquor. What does this example best illustrate?
determine the project that yields the most profit
The purpose of capital budgeting is to ________.
current rate
The ________ method uses the spot exchange rate in effect on the day (in the case of balance sheets) or for the period (in the case of income statements) the statements are prepared.
Bank loans and bond sales
What are the two sources of debt financing?
The project's perspective and the parent's perspective
What are the two ways that managers can use NPV?
Transparent firms are reliable in reporting financial information to stockholders.
What is a characteristic of transparency in reporting financial information?
transfer price
When the Daimler plant in Germany received truck parts from its affiliate Daimler USA, it paid a(n) ________ to shift profits to a lower-tax country and increase cash flows.
Decreasing the transparency of accounting systems
Which of the following is NOT a goal of harmonizing accounting practices globally?
The global money market raises short-term financing, and the global capital market raises long-term financing.
Which statement correctly identifies the difference between the global money market and the global capital market?
Speed of global financial transactions
Why has the global market experienced a significant level of growth?
direct quote
You are working as a broker in a major U.S. financial center. One of your clients has requested information regarding the number of dollars needed to obtain one euro. Which of the following will be most helpful for your client?
equity financing
________ involves selling shares of stock to investors, who then receive an ownership interest in the firm.
transaction exposure
________ is the currency risk that firms encounter when accounts receivable or payable are denominated in foreign currencies.
working capital
________ refers to the current assets of a company.
