Question 1: Why is investing in foreign companies an effective way to diversity an individual's investment portfolio?
A) Foreign economies are stronger than the U.S. economy.
B) Foreign stocks are less risky than the stocks of U.S. corporations.
C) Stock dividends received by foreign companies are not subject to US taxes for US citizens.
D) Returns on foreign company stocks do not always change in the same direction as returns on U.S. stocks.
Question 2: What is an advantage of using ratio analysis in comparing financial statements from different countries?
A) Ratios are expressed as percentages, making currency differences irrelevant to the analysis.
B) Ratios highlight the holding gains or losses related to currency translation.
C) Purchasing power gains and losses from currency translation show up clearly in ratio analysis.
D) Comparing business ratios across countries removes the effect of economic conditions and business culture.
Question 3: In order to appropriately analyze the trends in foreign financial statement data, which exchange rates should be used?
A) historical exchange rates
B) beginning of year exchange rates
C) current exchange rates
D) average exchange rates
Question 4: What is a plan for next year expressed in quantitative terms?
A) strategy
B) capital budget
C) operating budget
D) management control system
Question 5: The process of identifying, evaluating, and selecting projects that require substantial amounts of resources and are expected to generate benefits for many years into the future is called:
A) strategy formulation.
B) strategic planning.
C) capital budgeting.
D) operational budgeting.
Question 6: The possibility of loss due to unexpected changes in currency values or interest rates is called:
A) economic risk
B) financial risk
C) business risk
D) political risk
Question 7: Which of the following should not be included in implementing performance evaluation systems?
A) Feedback and review
B) Fair and achievable measures
C) Understandability
D) Changing systems quarterly
Question 8: What group is responsible for developing international auditing standards?
A) IASB
B) IOSCO online
C) IAASB
D) OECD
Question 9: The MOU signed by the FASB and IASB in 2002 is known as the
A) Convergence Agreement
B) Norwalk Agreement
C) Norfolk Agreement
D) US GAAP/IFRS Agreement