Chapter 1—Multinational Financial Management: An Overview

11. A product cycle is the process by which a firm provides a
specialized sales or service strategy, support assistance, and possibly an
initial investment in the franchise in exchange for periodic fees.
a. True
b. False

12. Licensing is the process by which a firm provides its technology
(copyrights, patents, trademarks, or trade names) in exchange for fees or some
other specified benefits.
a. True
b. False

13. The agency costs of an MNC are likely to be lower if it:

a.

scatters its subsidiaries across many foreign countries.

b.

increases its volume of international business.

c.

uses a centralized management style.

d.

A and B.

14. An MNC may be more exposed to agency problems if most of its
shares are held by:

a.

a few mutual funds

b.

a widely dispersed set of individual investors

c.

a few pension funds

d.

all of the above would prevent agency problems

15. The Sarbanes-Oxley Act improves corporate governance of MNCs
because it:

a.

makes executives more accountable for verifying financial
statements

b.

eliminates stock options as a form of compensation

c.

ties executive compensation to firm performance

d.

places a limit on the amount of funds that managers can spend

16. MNCs can improve their internal control process by all of the
following, except:

a.

establishing a centralized data base of information

b.

ensuring that all data are reported consistently among
subsidiaries

c.

ensuring that the MNC always borrows from countries where
interest rates are lowest

d.

using a system that checks internal data for unusual
discrepancies