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Flashcards in Final - MID TERM 2 Deck (47)
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1

A capital market brings together those who want to invest money and those who want to borrow money.

 

True or False

 

 

True

2

Systematic risk refers to the movements in a stock portfolio's value that are attributable to macroeconomic forces affecting all firms in an economy.

True or False

 

 

True

3

Market makers are companies that make large investments in governmental bonds.

 

True or False

 

 

 

False

4

Commercial banks perform a direct connection function in capital markets.

 

True or False

 

 

 

False

5

An investor purchases the right to receive a specified fixed stream of income from the corportion when he purchases a share of stock.

True or False

 

 

False

6

A debt loan requires a corporation to repay a predetermined potion of the loan amount at regular intervals regardless of how much profit it is making.

True or False

 

 

True

7

Debt loans include cash loans from banks and funds raised from the sale of corporate bonds to investors.

 

True or False

 

 

 

True

8

The liquidity of the market is limited in a purely domestic capital market.

 

True or False

 

 

 

True

9

The cost of capital is the difference between cost of inputs and outputs.

 

True or False

 

 

 

False

10

The cost of capital is higher in a global market than in a purely domestic capital market.

 

True or False

 

 

 

False

11

By using the global capital market, investors have a much wider range of investment opportunities than in a purly domestic capital market.

 

True or False 

 

 

 

True

12

The risk associated with a portfolio increases as the investor increases the nuber of stock in her portfolio.

 

True or False

 

 

 

False

13

Investors can reduce the level of risk by diversifying a portfolio internationally.

 

True or False

 

 

 

True 

14

The systamtic risk is the level of diversifiable risk in an economy.

 

True or False

 

 

False

15

The relatively low correlation between the movements of stock markets in different countries indicates that countries face different economic conditions.

 

True or False

 

 

 

True

 

16

The projected rate will typically be the forward exchange rate as as determined by the foreign echange market when firms use the projected spot exchange rate to translate both the budget and performance figures into the corporate currency.

 

True or False

 

 

 

True

17

The price at which goods and services are transferred between subsidiary companies in a multinational firm is referred to as minimum retail price.

 

True or False

 

 

 

False

18

Performance of international subsidiaries depends on the transfer price set-up by the corporate.

 

True or False

 

 

 

True

19

Most subsidiaries of an international business operate in uniform environments.

 

True or False

 

 

 

False

20

Evaluation of a subsidiary should not be separate from the evaluation of its manager.

True or False

 

 

False

21

Capital budgeting is the technique financial managers use to try to quantify the benefits, costs, and risks of an investment.

 

True or False

 

 

 

True

22

The theoretical framework for performing capital budgeting for a foregin project is vastly different from domestic capital budgeting.

 

True or False

 

 

 

False

23

Moving up the experience curve allows a firm to reduce its cost of creating value and increase its profitability.

 

True or False

 

 

 

False 

24

Once a firm has established a low-cost position, it can act as a barrier to new competition.

 

True or False

 

 

 

True

25

In a multinational enterprise, skills are always generated at the headquarters location and are then disperesed to rest of the organization.

 

True or False

 

 

 

False 

26

To leverage subsidiary skills, companies should establish incentive systems that encourage local employees to acquire new skills.

 

True or False

 

 

 

True

27

Two types of competitive pressure that affect the ability of mulitnational enterprises to compete in the global marketplace are pressure for cost reductions and pressure for local responsiveness.  

True or False

 

 

True

28

Because differentation across countries can involve significant duplication and a lack of product standardization, it may reduce costs.

 

True or False

 

 

 

False

29

Universal needs exist when the tastes and preferences of consumers in different nations are similar if not identical.

 

True or False

 

 

True 

30

Pressures for cost reduction are minimal in industries where major competitors are based in low cost locations where there is persistent excess capacity, and where consumers are powerful and face low switching costs.

 

True or False

 

 

 

False