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Question;11.2 Measuring Operating Exposure;1) Operating;exposure;A) creates;foreign exchange accounting gains and losses.;B) causes exchange;rates to fluctuate.;C) is the;possibility that future cash flows will change due to an unexpected change in;foreign exchange rates.;D) measures a;country's propensity to import and export.;Answer: C;2) An unexpected;change in exchange rates impacts a firm's cash flows at what level(s)?;A) short run;B) medium run;(equilibrium case);C) long run;D) all of the;above;3) Which of the;following is NOT an operating cash flow?;A) intra-firm;payable;B) account;receivable from an unrelated party;C) interest payment;by a subsidiary to a parent company;D) account;payable to a foreign subsidiary;4) ________ risk;measures the change in value of the firm that results from changes in future;operating cash flows caused by unexpected changes in exchange rates.;A) Transaction;B) Accounting;C) Operating;D) Translation;11.3 Strategic Management of Operating Exposure;1) Which of the;following is NOT an example of diversifying operations?;A) diversifying;sales;B) diversifying;location of operations;C) raising funds;in more than one country;D) sourcing raw;materials in more than one country;2) Which of the;following is NOT an example of diversification in financing?;A) raising funds;in more than one market;B) raising funds;in more than one country;C) diversifying;sales;D) All of the;above qualify.;3) Management;must be able to predict disequilibria in international markets to take;advantage of diversification strategies.;4) When;disequilibria in international markets occur, management can take advantage by;A) doing nothing;if they are already diversified and able to realize beneficial portfolio;effects.;B) recognizing;disequilibria faster than purely domestic competitors.;C) shifting;operational of financing activities to take advantage of the disequilibria.;D) all of the;above.;Purely domestic;firms will be at a disadvantage to MNEs in the event of market disequilibria;because;A) domestic firms;lack comparative data from its own sources.;B) international;firms are already so large.;C) all of the;domestic firm's raw materials are imported.;D) None of the;above. Domestic firms are not at a disadvantage.;6) Which of the;following is NOT an advantage of foreign exchange risk management?;A) the reduction;of the variability of cash flows due to domestic business cycles;B) increased;availability of capital;C) reduced cost;of capital;D) All of the;above are potential advantages of foreign exchange risk management.;7) The primary;method by which a firm may protect itself against operating exposure impacts is;A) money market hedges.;B);diversification.;C) forward;contract hedges.;D) balance sheet;hedging.;8) An advantage;of international diversification is the;A) reduction in;the variability of future cash flows due to domestic business cycles.;B) increase in;the availability of capital.;C);diversification of political risk.;D) all of the;above.;9) Diversifying sources of financing, regardless;of the currency of denomination, can lower a firm's cost of capital and;increase its availability of capital

 

Paper#51185 | Written in 18-Jul-2015

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