Part 1
Question 1
Investing in several corporate stocks that have different characteristics is referred to as _______.
a. Diversification
b. Portfolio consolidation
c. Asset translation
d. Income determination
Question 2
There are two primary taxes imposed on profits earned by corporations in international trade. One is the corporate income tax. What is the other type of tax on earnings of multinational corporations?
a. Excise tax
b. Payroll tax
c. Withholding tax
d. Value-added tax
Question 3
Which of the following is a potential problem in analyzing foreign financial statements?
a. Language
b. Data accessibility
c. Terminology
d. All of the above pose potential problems.
Question 4
Lack of information about accounting methods used, operating segments, and interim financial results is a problem of _______.
a. Disclosure
b. Relevance
c. Comparability
d. Format
Question 5
Which of the following is a reason for analyzing the financial statements of foreign corporations?
a. Making credit decisions about foreign customers
b. Evaluating international business combinations
c. Diversifying an investment portfolio
d. All of the above are reasons for analyzing foreign financial statements.
Question 6
Which is NOT one of the basic steps in financial statement analysis?
a. Prospective analysis
b. Accounting analysis
c. Translation analysis
d. Financial analysis
Question 7
What is the optimal tax objective for multinational corporations?
a. Minimize domestic taxes paid on worldwide income
b. Minimize worldwide taxes paid, within the limitations of applicable tax law
c. Minimize worldwide taxes paid
d. Minimize foreign taxes
Question 8
On what SEC form must foreign corporations with shares listed on U.S. stock exchanges present a reconciliation of net income and stockholders' equity to U.S. GAAP?
a. Form 1040
b. Form 10-K
c. Form 20-F
d. Form 8-Q
Question 9
In order to address accounting diversity, financial analysts have adopted which of the following strategies?
a. Limiting the geographic spread of their investments
b. Taking a diversification strategy within a foreign country
c. Investing only in foreign government bonds
d. All of the above
Question 10
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 returns of companies in foreign companies are highly correlated with stock returns of U.S. companies.
d. Returns on foreign company stocks do not always change in the same direction as returns on U.S. stocks.
Part 2-
Question 1
What is the primary characteristic of a decentralized organization?
a. Size of divisions
b. Number of divisions
c. Delegation of decision-making authority
d. Diversity of foreign operations
Question 2
What is goal congruence?
a. Making the goals of individual managers the same as corporate goals
b. Equating managerial goals to corporate goals
c. Aligning managerial goals with corporate goals
d. Giving managers complete autonomy to make decisions
Question 3
The monetary amount used to record intercompany transactions is called _______.
a. Exchange rate
b. Transfer price
c. Conversion rate
d. Incremental cost
Question 4
What is the term used for intercompany transactions from a subsidiary to a parent?
a. Upstream transfer
b. Downstream transfer
c. International transfer
d. None of the above
Question 5
In addition to regulating the transfer prices on tangible property, the Internal Revenue Service also provides guidance on _______.
a. Interest charged on intercompany loans.
b. Transfer prices for intangible property.
c. Charges for intercompany services.
d. All of the above.
Question 6
What is the term used for intercompany transactions from a parent to a subsidiary?
a. Upstream transfer
b. Downstream transfer
c. International transfer
d. None of the above
Question 7
Which of the following is a reason for a parent to use discretionary transfer prices?
a. Improve competitive position of foreign operation
b. Minimize import duties
c. Avoid restrictions on repatriation of funds
d. All of the above
Question 8
For what reason are the transfer prices of imports more closely monitored worldwide than are exports?
a. Political implications
b. Effect on local job availability
c. Impact on a country's balance of trade
d. All of the above
Question 9
Which of the following is a limitation of cost-based transfer pricing?
a. Determining which cost to use
b. Lack of incentive for selling division to control cost
c. Inefficiencies in one unit may be transferred to another unit
d. All of the above
Question 10
A cost-plus transfer pricing scheme is allowed by the Internal Revenue Service when _______.
a. It is easiest for the taxpayer to calculate.
b. The related party is primarily a sales subsidiary.
c. There is no readily comparable market price and the related buyer is more than just a distributor.
d. The average industry mark-up is greater than the taxpayer's standard markup.
Part 3-
Question 1
Which of the following are reasons to report segmented accounting information for multinational enterprises?
a. There are different risks in different parts of the world that a reader may need to know about.
b. Different lines of business have different levels of risk that may affect business success.
c. Growth opportunities differ from one nation to another that could affect share value.
d. All of the above are reasons for segmented reporting.
Question 2
What is the role of accounting in formulating strategy?
a. Quantifying opportunities and threats
b. Preparing budgets
c. Making estimates of costs and benefits of various alternatives
d. All of the above
Question 3
In addition to having very low effective tax rates, which of the following is also a characteristic of tax havens?
a. Lack of transparency in financial reporting
b. Lack of effective exchange of information
c. Absence of substantial activities requirement
d. All of the above
Question 4
What is a tax haven?
a. A jurisdiction where taxes are abnormally low
b. A location where tax cheats live to escape prosecution
c. A tax jurisdiction where world-wide tax is eliminated
d. Locations that provide tax-based incentives to corporations
Question 5
What term does IAS 31 use for "a contractual arrangement whereby two or more parties undertake an activity which is subject to joint control?"
a. Merger
b.Consolidation
c. Joint venture
d. Business combination
Question 6
What term is used to refer to presenting the financial statements for a group of enterprises as if it was a single entity?
a. Harmonization
b. Translation
c. Consolidation
d. transformation
Question 7
How do differences in the effective corporate tax rates between countries affect capital investment decisions?
a. Taxes have a negative effect on cash flows from the investment.
b. Taxes determine the rate used in calculating the discounted cash flows.
c. Taxes affect the amount of depreciation that will be recorded on the investment.
d. All of the above
Question 8
The process of identifying, evaluating, and selecting projects that require substantial numbers 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 9
What is a capital investment?
a. Using money to buy goods or services
b. Issuing shares of stock of the corporation
c. Authorizing and issuing shares of common stock by a multinational corporation
d. Committing resources to projects that have costs and benefits well into the future
Question 10
What is a withholding tax?
a. Income tax paid on corporate earnings
b. An amount subtracted from a dividend payout and remitted to the government
c. This is an income tax corporations pay to local governments in addition to the national income tax
d. taxes that lower the effective tax rate in a country
Question 11
Which of the following affect the effective corporate tax rate?
a. Tax-based incentives
b. Local corporate tax rate
c. Method of determining taxable income
d. All of the above
Question 12
Cash flows related to a proposed capital investment project are subject to what kind of risk?
a. Economic risk
b. Financial risk
c. Political risk
d. All of the above
Question 13
What is a plan for next year, expressed in quantitative terms?
a. Strategy
b. Capital budget
c. Operating budget
d. Management control system
Question 14
Why is it believed that Japanese companies prefer the payback period over the discounted cash flow methods for evaluating capital investment alternatives?
a. It is consistent with their corporate strategy of investing in new technology.
b. Japanese companies compete using very short product life cycles.
c. Cash flows over a long period of time are difficult to predict with much accuracy.
d. All of the above
Question 15
Which of the following is NOT part of the capital budgeting process?
a. Project identification
b. Project evaluation
c. Project monitoring
d. All of the above are parts of the capital budgeting process.
Question 16
Determining a firm's long-term goals and objectives, adopting courses of action, and allocating resources required to achieve goals is a process called _______.
a. Strategy formulation
b. Strategic planning
c. Strategy implementation
d. Capital budgeting
Question 17
What term is used to describe the process of revising existing goals and adopting new goals?
a. Strategy formulation
b. Strategic planning
c. Strategy implementation
d. Capital budgeting
Question 18
How do multinational corporations combine operations?
a. The acquired firm is dissolved and is merged into the acquiring company.
b. One company acquires a majority of shares of another company, but both entities continue to exist.
c. Two or more entities dissolve their legal status and merge to create a new corporation.
d. All of the above
Question 19
How can a multinational enterprise incorporate its perception of high level of risk into its capital budgeting process?
a. Conservative estimates of cash inflows
b. Liberal estimates of expected cash outflows
c. High discount rate
d. All of the above
Question 20
According to IAS 27, how can effective control be achieved without owning more than 50% of another company's voting shares?
a. Representation on the company's board of directors
b. Being the primary entity exercising voting rights
c. Through a contract between the entities
d. All of the above may result in control by one corporation over another.