MIDTERM EXAM – GLOBAL FINANCE

MULTIPLE CHOICE

A summary of the flow of funds between one specific country and all other
countries due to cash flows generated by income-producing financial
assets *
2 points

a. Current Account
b. Capital Account
c. Financial Account
d. Balance of Payments

A deficit in the balance of trade means that the value of merchandise and
services exported by a country is less than the value of the imported
merchandise and services. *
2 points

a. True
b. False

Statement 1: Capital Account refers to the summary of the flow of funds

resulting from the sale of assets between a specified country and all other
countries. Statement 2. Balance of Payment compares new foreign
investment made by a country with foreign investments within a country
over a given time. Statement 3. The capital account initially includes
financial accounts. *
2 points

a. True, True, True

b. True, False True
c. False, True, True
d. True, True, False

It is necessary to consider how products and markets will change over time
and must be managed as it moves through different phases. *
2 points

a. Theory of Comparative Advantage

b. Imperfect Market Theory
c. Product life Cycle

If the country has a positive current account balance, then it should have
positive capital and financial account. *

This study source was downloaded by 100000863775449 from CourseHero.com on 03-13-2023 10:27:14 GMT -05:00

https://www.coursehero.com/file/106831530/MIDTERM-EXAMdocx/
 2 points

a. True
b. False

A theory that states that a country enjoys an absolute advantage in the

production of goods, the trade can still be beneficial to both trading
partners *
2 points

a. Theory of comparative advantage

b. Imperfect Market Theory
c. Product life Cycle

The unfavorable credit environment may decrease international trade by

making it difficult for some MNCs to obtain the funds needed to purchase
exports. *
2 points

a. True
b. False

It summarizes transactions between domestic and foreign residents for a

specific country over a specified period *
2 points

a. Current Account
b. Capital Account
c. Financial Account
d. Balance of Payments

Countries that have low labor cost are typically has a disadvantage when
competing globally especially in labor-intensive industries. *
2 points

a. True
b. False

Statement 1. Agency problems are greater in MNCs because of the distance

of their subsidiaries Statement 2. The MNCs agency cost are cheaper
depending on the culture of the managers Statement 3. The agency cost is
expensive because MNCs are large companies *
2 points

A. True, True, True

B. True, False True

This study source was downloaded by 100000863775449 from CourseHero.com on 03-13-2023 10:27:14 GMT -05:00

https://www.coursehero.com/file/106831530/MIDTERM-EXAMdocx/
 C. False, True, True
D. True, True, False

IDENTIFICATION:

An agreement to make regulations uniform and removed many taxes on goods

traded among themselves *

2 points

SINGLE EUROPEAN ACT

It is the conservative approach the firms used to penetrate the market and by
obtaining supplies *

2 points

INTERNATIONAL TRADE

The common goal of an MNC? *

2 points

MAXIMIZE SHAREHOLDER WEALTH

It is owned and operated by two or more firms that enter in foreign markets and
allows them to apply their respective comparative advantages in a given project *

2 points

JOINT VENTURE or PARTNERING

It represents the investment in fixed assets in foreign countries that can be used
to conduct business operations *

This study source was downloaded by 100000863775449 from CourseHero.com on 03-13-2023 10:27:14 GMT -05:00

https://www.coursehero.com/file/106831530/MIDTERM-EXAMdocx/
 2 points

DIRECT FOREIGN INVESTMENT

It is a conflict of goals between managers and shareholders *

2 points

THE AGENCY PROBLEM

Refers to the business practice of hiring another company to perform services and
creates goods that traditionally were performed by internal employees and staff *

2 points

OUTSOURCING

Allows firms to use their technology in foreign markets without a major investment
in foreign countries and without transportation cost from exporting *

2 points

Your answer

These are firms that engage in international business operations *

2 points

Your answer

It is a symbolic event that improved the relationship between Eastern and Western
Europe that encourages free enterprise and privatization that the government-
owned *

REMOVAL OF THE BERLIN WALL

ESSAY:

This study source was downloaded by 100000863775449 from CourseHero.com on 03-13-2023 10:27:14 GMT -05:00

https://www.coursehero.com/file/106831530/MIDTERM-EXAMdocx/
 In your opinion, why do is the internet would result in more international business?

Enumerate and explain briefly factors that cause some firms to become more
internationalized than others?

Would you consider businesses through the internet to be more of an international

business? (Discuss briefly).

This study source was downloaded by 100000863775449 from CourseHero.com on 03-13-2023 10:27:14 GMT -05:00

https://www.coursehero.com/file/106831530/MIDTERM-EXAMdocx/
Powered by TCPDF (www.tcpdf.org)