Question 1

Which of the following is an accounting problem that only international businesses face?

Accepted Answer

A)   Lack of consistency in the accounting standards
B)   Inaccurate filing of profit-and-loss statements
C)   False reporting of income to the government
D)   Lack of a dedicated accounting function within the firm

Question 2

Which of the following statements is true of tax havens?

Accepted Answer

A)   Firms that export to tax havens get special tax concessions from home governments.
B)   Firms would require huge capital investments to start business in tax havens.
C)   Nations such as United States are widely regarded as tax havens.
D)   Firms can save tax by establishing a non-operating subsidiary in the tax haven.

Question 3

Transnational financing occurs when a firm based in one country enters another country to raise capital:

Accepted Answer

A)   by borrowing from financial institutions.
B)   from the sale of stocks or bonds.
C)   by borrowing from banks.
D)   through exchange policies of governments.

Question 4

The total size of a firm's cash pool increases when it pools cash reserves of subsidiaries.

Accepted Answer

A) True 
 B)False

Question 5

A _____ is compensation for professional services or expertise supplied to a foreign subsidiary by the parent company or another subsidiary.

Accepted Answer

A)   fronting loan
B)   fee
C)   royalty
D)   transfer price

Question 6

Royalties and fees have certain tax advantages over _____, particularly when the corporate tax rate is higher in the host country than in the parent's home country.

Accepted Answer

A)   transaction costs
B)   deferrals
C)   dividends
D)   transfer fees

Question 7

_____ is the most common method by which firms transfer funds from foreign subsidiaries to the parent company.

Accepted Answer

A)   Issue of long-term loans
B)   Payment of annual fee
C)   Issue of bonds
D)   Payment of dividends

Question 8

Auditing standards are rules that define the accounting principles and monetary policy of a nation.

Accepted Answer

A) True 
 B)False

Question 9

The age of a foreign subsidiary:

Accepted Answer

A)   has no influence on payment of dividends.
B)   indicates the number of capital investment needs; older subsidiaries have higher needs.
C)   influences dividend policy in that younger subsidiaries tend to remit a higher proportion of their earnings in dividends to the parent company.
D)   influences dividend policy in that older subsidiaries tend to remit a higher proportion of their earnings in dividends to the parent company.

Question 10

Describe the three exchange rates that Lessard and Lorange pointed out.

Accepted Answer

Lessard and Lorange pointed out three ex...

Question 11

_____ are the most important source of external capital for business enterprises in the United States.

Accepted Answer

A)   Stocks or bonds
B)   World Bank loans
C)   Banks
D)   Venture capitalists

Question 12

Every time a firm changes cash from one currency into another currency it must bear a(n)  _____.

Accepted Answer

A)   transaction cost
B)   tax
C)   transfer fee
D)   audit

Question 13

_____ costs are incurred every time a firm changes cash from one currency into another currency.

Accepted Answer

A)   Dividend
B)   Capital
C)   Fixed
D)   Transaction

Question 14

A deferral principle specifies that parent companies are not taxed on foreign source income until:

Accepted Answer

A)   the subsidiary providing income makes some profit.
B)   they actually receive a dividend.
C)   they acquire majority stake in the subsidiary.
D)   the subsidiary providing income is listed in the United States.

Question 15

Of the five combinations, Lessard and Lorange recommend that firms use the _____ spot exchange rate to translate both the budget and performance figures into the corporate currency.

Accepted Answer

A)   ending
B)   initial
C)   final
D)   projected

Question 16

Using the ending rate to translate the budget is a valid practice according to the Lessard-Lorange Model.

Accepted Answer

A) True 
 B)False

Question 17

A fee is compensation for professional services or expertise supplied to a foreign subsidiary by the parent company or another subsidiary.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following combinations of exchange rates was recommended for translating budget and performance by Lessard and Lorange?

Accepted Answer

A)   Translating budget using projected rate and translating actual performance using initial rate
B)   Translating both actual performance and budget using initial rate
C)   Translating budget using ending rate and translating actual performance using initial rate
D)   Translating both actual performance and budget using projected rate

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Money management decisions attempt to manage the firm's _____ most efficiently.

Accepted Answer

A)   cash flow
B)   corporate expenses
C)   working capital
D)   corporate revenues

Exam 20: Accounting and Finance in the International Business

Every time a firm changes cash from one currency into another currency it must bear a(n) _____.

Correct AnswerverifiedShow Answer

_____ is the most common method by which firms transfer funds from foreign subsidiaries to the parent company.

Correct AnswerverifiedShow Answer

Royalties and fees have certain tax advantages over _____, particularly when the corporate tax rate is higher in the host country than in the parent's home country.

Correct AnswerverifiedShow Answer

A fee is compensation for professional services or expertise supplied to a foreign subsidiary by the parent company or another subsidiary.

Correct AnswerverifiedShow Answer

Transnational financing occurs when a firm based in one country enters another country to raise capital:

Correct AnswerverifiedShow Answer

Using the ending rate to translate the budget is a valid practice according to the Lessard-Lorange Model.

Correct AnswerverifiedShow Answer

The total size of a firm's cash pool increases when it pools cash reserves of subsidiaries.

Correct AnswerverifiedShow Answer

Which of the following is an accounting problem that only international businesses face?

Correct AnswerverifiedShow Answer

The age of a foreign subsidiary:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

_____ are the most important source of external capital for business enterprises in the United States.

Correct AnswerverifiedShow Answer

Which of the following statements is true of tax havens?

Correct AnswerverifiedShow Answer

Describe the three exchange rates that Lessard and Lorange pointed out.

Correct AnswerverifiedLessard and Lorange pointed out three ex...View AnswerShow Answer

Which of the following combinations of exchange rates was recommended for translating budget and performance by Lessard and Lorange?

Correct AnswerverifiedShow Answer

Auditing standards are rules that define the accounting principles and monetary policy of a nation.

Correct AnswerverifiedShow Answer

Money management decisions attempt to manage the firm's _____ most efficiently.

Correct AnswerverifiedShow Answer

_____ costs are incurred every time a firm changes cash from one currency into another currency.

Correct AnswerverifiedShow Answer

A _____ is compensation for professional services or expertise supplied to a foreign subsidiary by the parent company or another subsidiary.

Correct AnswerverifiedShow Answer

Of the five combinations, Lessard and Lorange recommend that firms use the _____ spot exchange rate to translate both the budget and performance figures into the corporate currency.

Correct AnswerverifiedShow Answer

A deferral principle specifies that parent companies are not taxed on foreign source income until:

Correct AnswerverifiedShow Answer

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Lessard and Lorange pointed out three ex...
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