Advanced Corporate Finance
Test Preparation
Course Introduction
Advanced Corporate Finance delves into the financial decision-making processes and strategies employed by corporations, building upon foundational corporate finance principles. The course covers topics such as capital structure, dividend policy, mergers and acquisitions, corporate restructuring, and advanced valuation techniques. Students will analyze real-world cases to understand risk management, financial planning, and the impact of market conditions on corporate financial policies. Emphasis is placed on critical thinking, application of quantitative methods, and the evaluation of contemporary issues in corporate finance, preparing students to handle complex financial challenges in a dynamic business environment.
Recommended Textbook
International Corporate Finance 1st Edition by
J. Ashok Robin
Available Study Resources on Quizplus
15 Chapters
741 Verified Questions
741 Flashcards
Source URL: https://quizplus.com/study-set/3350
Page 2
Chapter 1: Introduction
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66553
Sample Questions
Q1) The Gravity Theory of international trade says that the quantity of trade between two countries is positively related to __________________ and negatively related to
A)the value of the products produced by each country;the political leanings of each country.
B)the countries' GNP;the distance between the countries.
C)the status of the world economy;the economy of each country.
D)whether each country is a developed country or a developing country;the political leanings of each country.
Answer: B
Q2) The global business environment is much more ________________ than the domestic business environment.
A)profitable
B)difficult
C)political
D)dynamic
Answer: D
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: International Financial Markets: Structure and Innovation
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66552
Sample Questions
Q1) If a currency quote is given in EUR to USD and USD to JPY,and those quotes can be used to determine EUR to JPY,the quotes are known as:
A)parallel rates.
B)complex rates.
C)cumulative rates.
D)cross rates.
Answer: D
Q2) The currency quote "JPYUSD = 0.0109053" means:
A)0.0109053 USD can be used to buy 1 JPY.
B)0.0109053 JPY can be used to buy 1 USD.
C)0.0109053 JPY can be used to buy 1 of any currency traded in the foreign exchange market where the quote is given.
D)0.0109053 USD can be used to buy 1 of any currency traded in the foreign exchange market where the quote is given.
Answer: A
To view all questions and flashcards with answers, click on the resource link above.
4
Chapter 3: Currency and Eurocurrency Derivatives
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66551
Sample Questions
Q1) What are derivatives and what role do they play in international financial transactions?
Answer: Derivatives are securities that are essentially contracts between two parties,the value of which is determined in relation to some underlying or referenced asset.That is,the value of a derivative depends on an identified stock,bond,commodity,interest rate or market index rather than on the intrinsic value of the derivative security itself.Therefore,the value of a derivative changes as the value of the underlying asset changes.Derivatives can be used for speculative purposes,gambling that the price paid for a derivative will be less than the value of the derivative at a particular point in time,but derivatives have a special importance in international financial transactions because derivatives can be used to hedge risks.For instance,an MNC that anticipates needing a certain amount of a foreign currency at a specific time in the future can guard against increases in the value of that currency,which will mean that the MNC will have to pay more for the currency when it needs it a the specified future date by buying a currency future now that will guaranty a specific exchange rate for the needed currency at the future date when the currency is needed.That allows the MNC to guarantee the exchange rate and the cost to it of acquiring the needed currency and avoid the risks involved in changing values of that currency.
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Currency Systems and Valuation
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66550
Sample Questions
Q1) What economic justification is there for regional currencies such as the euro?
Q2) The value of a foreign currency is:
A)stable,since values are determined by the marketplace.
B)not subject to determination except at the specific time at which a transaction in the currency occurs.
C)subject to change depending on whether it is a pegged or floating currency.
D)subject to change and determined by forces of supply and demand.
Q3) A change in prices not the result of product improvement is called inflation and is generally considered to be a negative economic development,but:
A)downward changes in prices,or deflation,is a positive economic development and can offset inflation.
B)inflation is not uniform across all product categories,so inflation may negatively affect only certain product categories.
C)inflation generally does not last long and is self-correcting,so monetary authorities do not consider inflation to be a concern for currency values.
D)but inflation affects all product categories,so prices of products relative to each other do not change.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Currency Parity Conditions
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66549
Sample Questions
Q1) In the short term:
A)purchasing power parity can be accomplished,but only with government intervention to control prices.
B)purchasing power parity will be accomplished if markets are allowed to operate freely.
C)purchasing power parity is not reached and currency values do not tend to converge because of other factors affecting.
D)purchasing power parity is not reached buy currency values do tend to converge anyway.
Q2) Purchasing Power Parity is:
A)the law of one price applied to national price indices.
B)not a valid index of prices and currency values.
C)used to determine if a country's currency regulations are affecting the value of its currency.
D)used to determine the proper forward premium of a currency.
Q3) What is the International Fisher Effect and what does it say about inflation?
Q4) What is the difference between a risk-free transaction and an arbitrage transaction?
Q5) What is the law of one price?
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 6: Currency Risk Exposure Measurement
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66548
Sample Questions
Q1) __________________ is a measure of the impact of currency values on the financial statements of a firm.
A)Translation exposure
B)Operating exposure
C)Transaction exposure
D)Accounting exposure
Q2) Calculation of the standard deviation of a currency addresses the potential differences in results for high-value and low-value currencies by:
A)averaging the exchange rates of the currency over a specific period of time.
B)discounting the standard deviation of high-value currency.
C)converting currency values into currency returns,which are percentage changes in currency values.
D)adjusting the standard deviation of both currencies when comparing high- and low-value currencies.
Q3) In the Markowitz Portfolio Approach,risk is reduced by:
A)the diversification of assets.
B)the correlation between assets.
C)investing in arrangements that return cash to the firm at different times.
D)investing in real assets rather than derivatives.
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: Currency Exposure Management
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66547
Sample Questions
Q1) Studies have shown that investment opportunities in many industries are negatively correlated with industry cash flow.This means that:
A)firms that can maintain their cash flow when other firms in the industry are experiencing declining cash flow can take advantage of opportunities that other firms cannot pursue.
B)firms within a particular industry are destined to experience the same cash flow declines and increases as other firms in their industry experience.
C)investment opportunities within an industry increase when cash flow within the industry increases.
D)hedging is not a benefit to a firm if the general trend of cash flow within that industry is declining.
Q2) Forward hedges can eliminate cash flow variability:
A)in most cases.
B)to some extent.
C)only occasionally.
D)completely.
Q3) How significant is currency risk compared to other risks that an MNC might face?
Q4) How does hedging assist a firm in reducing its currency exposure?
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Capital Budgeting
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66546
Sample Questions
Q1) The key input in an NPV calculation is:
A)project cash flow over the period of the project.
B)project cash flow for the first year of the project.
C)initial investment necessary to begin the project.
D)total investment necessary for the project.
Q2) What are real options in the context of foreign projects?
A)Real options are the fixed parameters of a project that the firm has agreed to follow as the project develops.
B)Real options are flexible parameters in projects that allow firms to take certain actions when and if conditions are advantageous for the firm.
C)Real options represent the actual return that the firm will receive from a project after the inflation rate is considered.
D)Real options are all of the possible outcomes that can result form a project.
Q3) The components of country risk include:
A)currency risk,interest rate risk,and political risk.
B)political risk,regulatory risk,and economic risk.
C)nationalization risk,insurgency risk,and policy risk.
D)economic risk,conversion risk,and transaction risk.
Q4) What is decentralization and what does it mean for MNCs?
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Advanced Capital Budgeting
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66545
Sample Questions
Q1) Parent-subsidiary asymmetry can arise from forecasting difference between the parent and the subsidiary that can arise because:
A)subsidiaries may be estimating cash flow in one currency and the parent may be estimating cash flow in another currency.
B)parents often do not inform subsidiaries of all of the information that the parent uses in its forecasts.
C)subsidiaries can have a positive bias that causes them to overestimate positive cash flow in order to make projects they want to pursue more attractive.
D)parents often encourage subsidiaries to be aggressive in their estimations of positive future cash flow.
Q2) Differences in NPV of a proposed project between parent and subsidiary can arise from:
A)political risk or currency risk.
B)cash flow or currency asymmetries.
C)cash flow or cost-of-capital asymmetries.
D)political risk or economic risk.
Q3) What are the causes of parent-subsidiary asymmetry?
Q4) What are real options and how do they affect the estimated value of projects?
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Long-Term Financing
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66544
Sample Questions
Q1) A bond issued in a country in a currency other than the currency of the country where it is issued is considered to be a:
A)foreign bond.
B)Eurobond.
C)domestic bond.
D)ninja bond.
Q2) Debt is often considered to be generally less expensive than equity because:
A)debt costs less to acquire than equity.
B)the transactions costs associated with debt are generally less than those associated with equity.
C)dividends are tax-deductible.
D)interest payments on debt are tax-deductible and reduce the payor's taxable income.
Q3) Eurobonds have coupons that pay __________________,while U.S.domestic bonds have coupons that pay _____________________________.
A)twice each year;once each year
B)at different times each year;at the same time every year
C)once each year;twice each year
D)at the same time every year;at different times each year
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Optimizing and Financing Working Capital
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66543
Sample Questions
Q1) In making short-term investments,firms consider:
A)creditworthiness of the company and the interest rate.
B)maturity,liquidity,risk,and flexibility.
C)broker's recommendation and competing opportunities.
D)opportunity costs and flexibility.
Q2) In the duration matching method of evaluating financing,the implicit assumption is that:
A)assets will be used by a firm for a longer period of time than it takes the firm to repay the loan to purchase those assets.
B)asset value will always offset the amount of the liabilities that were incurred to acquire those assets.
C)it is possible to acquire assets that will be productive for exactly the amount of time that it takes to repay the loan to acquire those assets.
D)interest rates affect assets and liabilities in the same way and to the same extent.
Q3) How does a firm monetize receivables?
Q4) In the context of cash management,what are opportunity costs?
Q5) What is working capital,and how is working capital affected by short-term financing?
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: International Alliances and Acquisitions
Available Study Resources on Quizplus for this Chatper
51 Verified Questions
51 Flashcards
Source URL: https://quizplus.com/quiz/66542
Sample Questions
Q1) The per share value of a target in a merger or acquisition is determined by:
A)dividing the equity value of the target by the number of shares outstanding.
B)dividing the total value of the target by the number of shares that the target is authorized to issue.
C)multiplying the number of shares outstanding by the market price of the shares.
D)adding the equity value of the firm and the market price of its shares and dividing by the number of shares outstanding.
Q2) The Sarbanes-Oxley Act:
A)restricts foreign firms from obtaining controlling interests in US energy firms.
B)prohibits foreign firms from acquiring any interest in US defense industry firms.
C)imposes restrictions on how much of a foreign firm's securities can be listed and sold on US security exchanges.
D)has reduced the value of cross-listing for firms outside of the US.
Q3) What is the difference between private equity funds and hedge funds?
Q4) How is outsourcing related to a firm's core competencies?
Q5) Why is overcapacity sometimes a negative condition for a firm?
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: International Trade
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66541
Sample Questions
Q1) A government-sponsored institution that is intended to assist the import and export activities with the country by providing information,financing,and insurance is called a(n):
A)trade improvement council.
B)foreign trade organization.
C)export-import bank.
D)foreign exchange market.
Q2) What development in the 1990's diminished the importance of banker's acceptances?
A)Export-credit insurance became available and minimized the need for letters of credit. B)Import-export banks began to refuse to accept the default risk imposed on them by letters of credit.
C)Improved wire-transfers of funds eliminated most of the need for letters of credit.
D)International credit markets replaced letters of credit with derivatives that assumed the risk addressed by letters of credit.
Q3) Explain the mechanics of open accounts in international transactions.
Q4) Explain the process of documentary collections.
To view all questions and flashcards with answers, click on the resource link above.
15
Chapter 14: International Taxation and Accounting
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/66540
Sample Questions
Q1) How can MNCs benefit from using foreign tax credits?
Q2) The foreign taxes that an MNC can usually use as credits against its domestic income taxes include:
A)all foreign taxes paid by the MNC or its subsidiaries.
B)only those taxes that the MNC pays directly.
C)foreign corporate income taxes and foreign withholding taxes.
D)only those taxes that are paid to countries approved by the home country of the MNC.
Q3) When a firm chooses to use a foreign currency as its functional currency,it translates its assets and liabilities into USD using the:
A)average exchange rate.
B)forward exchange rate.
C)exchange rate existing when the assets were acquired and the liabilities incurred.
D)spot exchange rate.
Q4) How does the concept of double taxation apply to MNCs?
Q5) What does transfer pricing mean in the context of the operations of MNCs?
Q6) How can MNCs use payments received from subsidiaries to reduce the overall tax burden of the MNC-subsidiary group?
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: International Portfolio Investments
Available Study Resources on Quizplus for this Chatper
40 Verified Questions
40 Flashcards
Source URL: https://quizplus.com/quiz/66539
Sample Questions
Q1) What factor might lead a government to control or limit the payments made by domestic companies to foreign investors?
A)Currency fluctuations and difficulty importing goods
B)Current account deficits and balance of payment problems
C)Not enough domestic currency available locally and national pride
D)High inflation and low GDP
Q2) Mutual funds that allow additional investment by existing owners of shares in the fund or investments by new investors are called:
A)ongoing funds.
B)investment funds.
C)churned funds.
D)open-end funds.
Q3) The fundamental risk in a foreign investment that reflects the risk that investors take that the value of the thing invested in will change is called:
A)economic risk.
B)default risk.
C)currency risk.
D)asset risk.
Q4) What is corporate governance and how does it affect foreign investments?
To view all questions and flashcards with answers, click on the resource link above. Page 17