Random Questions

Question 1

What does the size and importance of the managerial finance function depend on?

Answer 1

The size of the firm.

Question 2

In small companies, who typically handles finance?

Answer 2

The company president or accounting department.

Question 3

In large businesses, how is finance typically structured?

Answer 3

As a separate department linked to the president or owner.

Question 4

What is a multinational firm?

Answer 4

A firm that operates in a number of countries.

Question 5

What is one reason companies go global?

Answer 5

Expanding customer base.

Question 6

Name a factor that encourages companies to go global related to resources.

Answer 6

Access to raw materials.

Question 7

What does vertically integrated investment secure?

Answer 7

Input supply at stable prices.

Question 8

How does adopting new technology influence a company’s decision to go global?

Answer 8

It allows for the adoption of innovations.

Question 9

What is one benefit of production efficiency when going global?

Answer 9

Lower manufacturing costs.

Question 10

Why might companies consider political and regulatory hurdles when going global?

Answer 10

To find favorable business environments.

Question 11

What is the purpose of diversifying risk for a global company?

Answer 11

To reduce dependence on a single market.

Question 12

What is a key difference in currency management between multinational and domestic financial management?

Answer 12

Multinational companies deal with multiple currencies, leading to exchange rate risks.

Question 13

What type of risk do multinational companies face due to foreign governments?

Answer 13

Political risk.

Question 14

What are economic and legal ramifications in multinational financial management?

Answer 14

Different tax systems, labor laws, and trade regulations apply in each country.

Question 15

How is domestic financial management regulated?

Answer 15

Regulated by the national government.

Question 16

What must multinational companies consider due to language and cultural differences?

Answer 16

Business negotiations, marketing, and employee management.

Question 17

True or False: Domestic financial management operates under multiple cultural frameworks.

Answer 17

False.

Question 18

Fill in the blank: Multinational financial management deals with _______ currencies.

Answer 18

[multiple]

Question 19

What are the major players in international finance?

Answer 19

• Central Banks
• Commercial Banks / Investment Banks
• Multinational Corporations
• International Financial Organizations
• Insurance Companies
• Government Entities
• Regulatory Bodies

These entities play significant roles in the functioning of international financial markets and systems.

Question 20

What is the primary role of central banks?

Answer 20

Control money supply (increase or decrease) in the economy.

Central banks are crucial for maintaining economic stability.

Question 21

What are the main instruments of monetary policy used by central banks?

Answer 21

• Legal Reserve Requirements
• Discount Rate
• Open Market Operations

Each instrument has a unique function in regulating the economy.

Question 22

What are Legal Reserve Requirements?

Answer 22

Cash and other liquid assets that the banks are required to keep.

This requirement ensures that banks have enough liquidity to meet withdrawal demands.

Question 23

What is the Discount Rate?

Answer 23

Rate at which banks can borrow from the central banks.

Adjustments in the discount rate influence overall economic activity.

Question 24

What are Open Market Operations?

Answer 24

Buying and selling of securities.

This is a key tool for regulating the money supply.

Question 25

What is the International Monetary System?

Answer 25

A system that forms rules and standards for facilitating international trade among nations and helps in relocating capital and investment from one nation to another. ## Footnote It provides the framework within which exchange rates are determined.

Question 26

What is an Exchange Rate?

Answer 26

The number of units of a given currency that can be purchased for one unit of another currency. ## Footnote Exchange rates are crucial for international trade.

Question 27

What is a Spot Exchange Rate?

Answer 27

The quoted price for a unit of foreign currency to be delivered ‘on the spot’ or within a very short period of time. ## Footnote It is applicable for immediate transactions.

Question 28

What is a Forward Exchange Rate?

Answer 28

The quoted price for a unit of foreign currency to be delivered at a specified date in the future. ## Footnote This rate is used for future transactions.

Question 29

What is a Fixed Exchange Rate?

Answer 29

Set by the government and is allowed to fluctuate only slightly (if at all) around the desired rate. ## Footnote This system aims to maintain a stable currency value.

Question 30

What is a Floating Exchange Rate?

Answer 30

Not regulated by the government. The supply and demand in the market determine the currency value. ## Footnote This system reflects the market's economic conditions.

Question 31

What is meant by Devaluation or Revaluation of a Currency?

Answer 31

The decrease or increase in the stated par value of a currency whose value is fixed. ## Footnote This can impact international competitiveness.

Question 32

What is Depreciation and Appreciation of a Currency?

Answer 32

The decrease or increase in the floating exchange value of a floating currency. ## Footnote These changes can affect import and export dynamics.

Question 33

What is a Direct Quotation?

Answer 33

Home currency price of one unit of foreign currency. ## Footnote This is useful for understanding the cost of foreign currency in domestic terms.

Question 34

What is an Indirect Quotation?

Answer 34

Foreign currency price of one unit of home currency. ## Footnote This helps in assessing how much foreign currency can be bought with the domestic currency.