International Finance Quiz 4

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?

-11.96%

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 USD revenues for the USA division over the last year?

-2.03%

Mary Chalmers , who lives in Minnesota, purchased 100 shares of Delton Cables, a diversified machinery company headquartered in Germany. She purchased the stock in January of 2011 for €62.50 per share when the exchange rate was at $1.330/€. Today, the stock is trading for €68.00 per share and the exchange rate is $1.48/€. If Mary sells her shares today, what is the total return on her investment?

20.08%

Mary Chalmers , who lives in Minnesota, purchased 100 shares of Delton Cables, a diversified machinery company headquartered in Germany. She purchased the stock in January of 2011 for €62.50 per share when the exchange rate was at $1.330/€. Today, the stock is trading for €68.00 per share and the exchange rate is $1.48/€. If Mary sells her shares today, what is the return on her investment due to price appreciation of the stock?

8.80%

MultiProducts, Inc. has two classes of common stock. Class A has 1 million shares with 10 votes per share. Class B has 2 million shares with 1 vote per share. If the dividends per share are equal for both class A and B stock, then Class A shareholders have ________ of the votes and ________ of the dividends.

83.33%; 33.33%

Which of the following is the "signature" clause of the Sarbanes -Oxley Act?

CEOs and CFOs of publicly-traded firms must vouch for the veracity of the firm's financial statements.

When discussing the structure of corporate governance, the authors distinguish between internal and external factors. ________ is an example of an internal factor, and ________ is an example of an external factor.

Executive management; auditors

According to an article in the French newspaper Le Figaro, French firms that are mostly privately held are out-performed by firms that are more widely held public firms. Note: In this context performance is measured by return to the owners.

False

Systematic risk can be eliminated through portfolio diversification.

False

Under the shareholder wealth maximization model of corporate governance it is assumed that the long-term or "loyal" stockholders should influence corporate strategy more than the transient portfolio investor.

False

Warren Buffett and his investment firm Berkshire Hathaway is an outstanding example of impatient capital investing.

False

According to a 2010 McKinsey survey, family businesses have a lower cost of debt financing than comparable publicly traded firms.

True

Corporate wealth maximization, also known as the stakeholder capitalism model, holds that total risk (operational and financial) is more important than just systematic risk.

True

The shareholder wealth maximization model assumes as a universal truth that the market is efficient.

True

What are frequently taught as universal truths in a finance classroom may in fact just be cultural norms.

True

Anglo-American equity markets are characterized by widespread ownership of shares. In other parts of the world ownership is often dominated by consortiums of controlling shareholders. Which of the following is NOT an example of a common consortium of controlling shareholders?

U.S. labor unions

In finance, an efficient market is one in which

all of the above

It may be (is probably the case) that family owned businesses the world over out-perform their publicly traded brethren. Which of these factors is attributed to family owned firm dominance over public firms?

all of the above

The stakeholder capitalism model is characterized by the desire of controlling shareholders to maximize long-term return to equity just as in the shareholder wealth maximization model of corporate governance. However, stakeholder capitalism controlling shareholders are more constrained by which of the following groups than in the shareholder wealth maximization model?

all of the above

The Shareholder Wealth Maximization Model

clearly places shareholders as the primary stakeholder.

Which of the following is a common operational financial objective for MNEs?

correct positioning of the firm's income, cash flow, and available funds as to country and currency

Privatization is a term used to describe

government operations that are purchased by corporations and other investors.

Empirical studies of firms in Norway and Sweden show that firms with Anglo-American board members

have higher values than firms without such directors.

The Board of Directors

is the legal body which is accountable for the governance of the corporation.

Which of the following is generally NOT considered to be a viable operational goal for a firm?

maintaining a strong local currency

Which of the following is a common operational financial objective for MNEs?

maximization of consolidated after-tax income

The deliberation of the process demonstrated in the European-Japanese system of corporate governance has sometimes been termed ________.

patient capital

Anglo-American is defined to mean

the United States, United Kingdom, Canada, Australia and New Zealand.

Systematic risk can be defined as

the added risk that a firm's shares bring to a diversified portfolio

Unsystematic risk can be defined as

the total risk to the firm.

Benny Simpson is considering an investment in Pontoon Industries Inc. He anticipates a dividend of $0.50 next year and an increase in the stock price from the current price of $18.25 per share to $20 per share. If he plans to hold the stock for one year, should Mr Simpson buy the stock if he requires an annual return of 12% on similar-risk investments?

yes because his anticipated return of 12.33% exceeds his required return of 12%