International Corporate Finance 1st Edition Ashok Robin

Global Business Finance 1st Edition by Ashok Robin

ISBN-10. 0073530662 , ISBN-13:978-0073530666

Extended-Term Financing

Multiple Choice Questions

1. The two forms of funding that Multinational Corporations (MNCs) seek in global markets are:
A. immediate gratification and enduring investment.
B. liability and ownership.
C. short-term liability and long-term ownership.
D. long-term liability and short-term ownership.

2. Some of the factors that may prompt MNCs to approach funding differently than domestic companies approach funding include:
A. foreign currency valuations, interest rates, and inflation rates.
B. their locations, workforce size, and creditworthiness.
C. their scale, expertise, and discretion.
D. exchange rates, political instability, and economic uncertainty.

3. One of the initial determinations that an MNC must make when contemplating funding is whether to pursue:
A. internal funding or external funding.
B. debt-based funding or internal funding.
C. public funding or private funding.
D. ownership funding or internal funding.

4. MNCs are generally sizeable entities, and their scale provides them two benefits in accessing financial markets. These advantages are that:
A. lenders actively seek them out for loan offers, and potential competitors avoid direct rivalry with them.
B. they typically require minimal funds from financial markets, and when needed, they can borrow at competitive rates.
C. they can leverage economies of scale, and their substantial asset base mitigates risk for lenders.
D. they have the flexibility to source funding globally and demand favorable interest rates.

5. One characteristic that distinguishes MNCs from domestic enterprises and exposes MNCs to higher risks than domestic companies is that:
A. MNCs are more structurally complex than domestic enterprises.
B. domestic enterprises lack the visibility that MNCs possess.
C. MNCs exhibit a stronger alignment with various markets compared to domestic enterprises.
D. MNCs hold diversified cash flow portfolios.

6. MNCs encounter challenges in arranging funding that domestic enterprises do not face. One of these challenges is that MNCs:
A. engage in diverse foreign currencies, leading to losses upon conversion to the MNC’s home currency.
B. grapple with distinct international competition compared to domestic entities.
C. are vulnerable to political and economic conditions in the countries they operate, impacting MNCs’ cash flows adversely.
D. do not have the same ease of domestic borrowing as domestic firms.

7. MNCs encounter ________________________ and ________________________ that can jeopardize their cash flows, challenges not commonly encountered by domestic enterprises.
A. nation-specific risks and foreign currency fluctuations
B. political uncertainties and economic instabilities
C. competition and legal disputes
D. declining asset values and escalating inflation

8. Historically, the primary funding source for companies has been:
A. capital injections from financial institutions.
B. issuing securities to investors.
C. bond offerings.
D. engaging in foreign exchange transactions.

9. Why have U.S. firms chosen to finance their operations through public debt markets rather than relying on financial institution loans?
A. Financial institution loans lack adaptability and transparency compared to public debt markets.
B. Financial institution loans are often subject to borrowing constraints and higher costs than public debt markets.
C. Acquiring financial institution loans is more complex and expensive than accessing public debt markets.
D. Financial institution loans are subject to more stringent regulations than public debt markets.

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