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1

Which of the following groups is a supranational organization?
A) United Nations
B) Organization for Economic Cooperation and Development
C) International Federation of Accountants
D) All of the above

D) All of the above

2

Determination of net present value involves:
A) forecasting future profits and cash flows.
B) discounting future cash flows back to their present value.
C) analysis on an after-tax basis.
D) All of the above

D) All of the above

3

International accounting can be defined in terms of which the following levels?
A) Supranational organizations
B) Company
C) Country
D) All of the above

D) All of the above

4

The factor used to convert from one country's currency to another country's currency is called the:
A) Interest rate.
B) Cost of capital.
C) Exchange rate.
D) Strike price.

C) Exchange rate.

5

What is the term used to describe the possibility that a foreign currency will decrease in US $ value over the life of an asset such as Accounts Receivable?
A) foreign exchange translation
B) foreign exchange risk
C) hedging
D) foreign currency options

B) foreign exchange risk

6

Foreign exchange risk arises when:
A) business transactions are denominated in foreign currencies.
B) sales are made to customers in a foreign country.
C) goods or services are purchased from suppliers in a foreign country.
D) accounting reports are prepared in a foreign currency.

A) business transactions are denominated in foreign currencies.

7

As used in international accounting, a “hedge” is:
A) a business transaction made to reduce the exposure of foreign exchange risk.
B) the legal barrier between the various divisions of a multinational company.
C) the loss in US $ resulting from a decline in the value of the US $ relative to foreign currencies.
D) one form of foreign direct investment.

A) a business transaction made to reduce the exposure of foreign exchange risk.

8

Purchasing an option to buy foreign currency at a predetermined exchange rate in order to reduce exchange risk is called:
A) transfer pricing.
B) hedging.
C) translating.
D) cross-listing.

B) hedging.

9

What term is used to describe the process of reducing foreign exchange risk?
A) international accounting
B) exposure
C) hedging
D) globalization

C) hedging

10

The ownership and control of foreign assets such as a manufacturing plant is called:
A) a hedge.
B) foreign direct investment.
C) exposure.
D) derivatives.

B) foreign direct investment.

11

What is a “greenfield” investment?
A) Farm land held for speculation
B) Foreign direct investment whereby a new facility is constructed abroad
C) Purchasing an existing facility as a foreign direct investment
D) A foreign investment that has been approved by the Environmental Protection Agency

B) Foreign direct investment whereby a new facility is constructed abroad

12

Which of the following is an example of a greenfield investment?
A) Nike contracts with a footwear company in China to make athletic shoes.
B) A Chinese oil company buys a U.S. oil company.
C) Toyota, a Japanese automaker, builds an assembly plant in Ohio.
D) Daimler, a German automaker, merges with Chrysler, a U.S. automaker.

C) Toyota, a Japanese automaker, builds an assembly plant in Ohio.

13

Which of the following is a reason for foreign direct investment?
A) Reduce costs of doing business
B) Protect domestic markets
C) Protect foreign markets
D) All of the above

D) All of the above

14

A translation adjustment may be necessary when:
A) notes to financial statements are converted from one language to another.
B) foreign currency financial statements are converted to another currency.
C) consolidated financial statements are prepared.
D) hedging foreign currency.

B) foreign currency financial statements are converted to another currency.

15

What is “transfer pricing?”
A) The cost to convert from one country's GAAP to another country's GAAP
B) The value of sales made in a foreign country
C) The method of recording transactions between divisions within the same company
D) The taxes paid on sales in a foreign country

C) The method of recording transactions between divisions within the same company

16

ABCO Corporation has a parts division in country A. Its assembly division is in country B, which has a higher tax rate than country A. To minimize the corporation's overall income tax, how should ABCO set its transfer prices between its parts and assembly divisions?
A) The parts division should sell parts to the assembly division at low prices.
B) The parts division should sell parts to the assembly division at high prices.
C) It doesn't matter what transfer price is used because the divisions are part of the same company.
D) Transfer pricing has nothing to do with the total tax paid by the corporation.

B) The parts division should sell parts to the assembly division at high prices.

17

The process by which a domestic company sells its stock, already sold on its domestic exchange, on a foreign stock exchange is known as:
A) SEC registration
B) Initial public offering
C) Consolidation
D) Cross-listing

D) Cross-listing

18

In 2008 the country with the largest amount of exports was:
A) the United States of America.
B) China.
C) Japan.
D) Germany.

D) Germany.

19

The multinationality index (MNI) includes the following ratio:
A) foreign working capital to total working capital.
B) foreign cash to total cash.
C) foreign employment to total employment.
D) foreign loans to total loans.

C) foreign employment to total employment.

20

The number of companies involved in international trade has grown significantly in recent years. What percent of U.S. exporters are relatively small (i.e. less than 500 employees)?
A) Less than 5%
B) 10%
C) 25%
D) more than 90%

D) more than 90%

21

What is the advantage of foreign direct investment?
A) Retain advantage over competition
B) Reducing transportation costs
C) Creating a company tailored to a foreign market's unique characteristics
D) All of the above

D) All of the above

22

OECD is an important supranational entity. What do the letters OECD stand for?
A) Organization of Electrical Companies Directorate
B) Oil Exporting Countries and Developers
C) Organization for Economic Cooperation and Development
D) Oil Exporting Corporations and Divisions

C) Organization for Economic Cooperation and Development

23

What countries are collectively known as “the triad”?
A) France, Spain and Italy
B) Germany, Russia and China
C) United States, Japan and members of the European Union
D) United States, Canada and Mexico

C) United States, Japan and members of the European Union

24

What is one reason for the tremendous increase in the flow of foreign direct investment from 1982 to 2007?
A) Transfer pricing
B) The liberalization of investment laws in many countries
C) The similarities in tax rates and tax laws across the globe
D) The availability of hedging instruments

B) The liberalization of investment laws in many countries

25

Foreign companies whose stocks are listed on the New York Stock Exchange (NYSE) must report their income in terms of:
A) International Accounting Standards.
B) the GAAP of their home country.
C) the generally accepted accounting principles of the United States.
D) All of the above.

C) the generally accepted accounting principles of the United States.

26

Which of the following is a reason a company might cross-list itself on a foreign stock exchange?
A) It wants to hedge against currency fluctuations.
B) It is less expensive than listing itself solely on a domestic exchange.
C) It wants to obtain acquisition currency for acquiring a foreign company.
D) It is a means of accomplishing foreign direct investment.

C) It wants to obtain acquisition currency for acquiring a foreign company.

27

What is KPMG?
A) It is a Dutch manufacturing company with plants in over 50 countries worldwide.
B) It is an international public accounting firm.
C) It is the largest of the multinational corporations listed on the NYSE.
D) It is a governmental agency whose aim is promoting international business.

B) It is an international public accounting firm.

28

Which of the following is true about foreign direct investment?
A) It is a means of reducing transportation costs.
B) Since the 1980's foreign direct investment has been relatively stable worldwide.
C) Only very large corporations are undertaking foreign direct investment.
D) Foreign direct investment refers only to the amount of money U.S. corporations put into non-U.S. businesses.

A) It is a means of reducing transportation costs.

29

When a foreign subsidiary pays dividends to its U.S. parent, this process is known as:
A) repatriation.
B) the reverse authoritative principle.
C) income-splitting.
D) earnings management.

A) repatriation.

30

Why would a company want its stock cross-listed on the stock exchanges of several countries?
A) To make financial reporting less burdensome for its accounting firm
B) In order to use International Financial Reporting Standards
C) To gain access to more financial resources than are available in its home country
D) All of the above

C) To gain access to more financial resources than are available in its home country