International Corporate Finance 1st Edition Ashok Robin – Test Bank

International Corporate Finance 1st Edition Ashok Robin – Test Bank

Chapter 10
Long-Term Financing

Multiple Choice Questions

1. The two kinds of financing that MNCs seek in international markets are:
A. short-term and long-term.
B. debt and equity.
C. short-term debt and long-term equity.
D. long-term debt and short-term equity.

2. Some of the factors that may cause MNCs to approach financing differently than domestic firms approach financing are:
A. currency rates, interest rates, and inflation rates.
B. their locations, number of employees, and credit rating.
C. their size, knowledge, and diversity.
D. exchange rates, political risk, and economic risk.

3. One of the first decisions that an MNC has to make when considering financing is whether to pursue:
A. internal financing or external financing.
B. debt financing or internal financing.
C. public financing or private financing.
D. equity financing or internal financing.

4. MNCs tend to be relatively large organizations, and their size gives them two advantages in accessing financial markets. These advantages are that:
A. lenders seek them out and offer them loans, and potential competitors try to avoid competing directly with them.
B. they do not often need much money from the financial markets, and, when they do need money, they can borrow at below-market rates.
C. they can take advantage of economies of scale, and their large fixed asset basis reduces risk to lenders.
D. they can seek financing anywhere in the world, and they can insist on the best interest rates available.

5. One characteristic that distinguishes MNCs from domestic organizations and that makes MNCs better risks than domestic organizations is that:
A. MNCs are better organized than domestic organizations.
B. domestic organizations are not as high-profile as MNCs.
C. MNCs are more in touch with markets than domestic organizations.
D. MNCs have diversified portfolios of cash flow.

6. MNCs face some issues in arranging financing that domestic organizations do not face. One of these issues is that MNCs:
A. deal in a variety of foreign currencies and MNCs incur losses when those foreign currencies are converted into the home currency of the MNC.
B. are subject to competition in foreign countries that is different than the competition faced by domestic firms.
C. are vulnerable to political and economic situations in the countries where they operate, and these situations can adversely affect the cash flow of an MNC.
D. cannot borrow money domestically as easily as domestic organizations can borrow money domestically.

7. MNCs face _________________ and _____________________ that can make their cash flows vulnerable that are not faced by domestic firms.
A. country risk and currency risk
B. political risk and economic risk
C. competition and criminal activities
D. declining asset value and rising inflation

8. Traditionally, the primary source of financing for firms has been:
A. bank loans.
B. the sale of securities.
C. the issuance of bonds.
D. transactions in currency markets.

9. Why have U.S. firms preferred to finance their operations through public debt markets rather than through bank loans?
A. Bank loans are less flexible and more public than public debt markets.
B. Bank loans are generally limited in amount and cost more than public debt markets.
C. Bank loans are more difficult to obtain and cost more than public debt markets.
D. Bank loans are subject to many more regulations than public debt markets