Arizona State University - MGT 302

Chapter 20 Accounting and Finance in the International Business

True / False Questions

1)Accounting information is the means by which firms communicate their financial position to the providers of capital.

 

True   False

 

2. Accounting is shaped by the environment in which it operates.

 

True   False

 

3. Accounting standards are rules for preparing financial statements.

 

True   False

 

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

 

True   False

 

5. The standards of U.S. Financial Accounting Standards Board and IASB are vastly different.

 

True   False

 

6. Most international businesses require all budgets and performance data within the firm to be expressed in the currencies of the countries where its subunits are located.

 

True   False

 

7. The initial rate, in the Lessard-Lorange Model, refers to the spot exchange rate when the budget is adopted.

 

True   False

 

8. The ending rate refers to the spot exchange rate forecast for the end of the budget period in the Lessard-Lorange Model.

 

True   False

 

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

 

True   False

10. Lessard and Lorange recommend that firms use the projected spot exchange rate to translate both the budget and performance figures into the corporate currency.

 

True   False

 

11. Performance of international subsidiaries depends on the transfer price set-up by the corporate.

 

True   False

 

12. Most subsidiaries of an international business operate in uniform environments.

 

True   False

 

13. Evaluation of a subsidiary should not be separate from the evaluation of its manager.

 

True   False

 

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

 

True   False

 

15. The connection between cash flows to the parent and the source of financing must be recognized when performing capital budgeting for an international business.

 

True   False

 

16. The governments of some countries require or prefer foreign multinationals to finance projects in their country by local debt financing or local sales of equity.

 

True   False

 

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

 

True   False

 

18. A firm's ability to establish a centralized depository that can serve short-term cash needs might be limited by government-imposed restrictions on capital flows across borders.

 

True   False

 

19. The principles of multilateral netting and bilateral netting are different.

 

True   False

 

20. A tax treaty between two countries is formed to fix the exchange rates between the two countries.

 

True   False

 

21. A tax heaven is a country that gives income tax exemptions to firms that export all or part of its products.

 

True   False

22. Payment of dividends is an uncommon method of transferring funds from foreign subsidiaries to the parent company.

 

True   False

 

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

 

True   False

 

24. Firms cannot use transfer prices to move funds from a subsidiary to the parent company when financial transfers in the form of dividends are blocked by host-country government policies.

 

True   False

 

25. A fronting loan is a loan between a parent and its subsidiary channeled through a financial intermediary.

 

True   False

 

 

 

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