Global Business Strategy
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Course Introduction
Global Business Strategy explores the frameworks, tools, and approaches organizations use to compete successfully in international markets. The course examines how globalization impacts competitive dynamics, decision-making, and resource allocation across borders. Topics include strategic analysis of the global business environment, entry strategies, international market selection, transnational organizational structures, and the impact of cultural, economic, and political factors on global operations. Through case studies and real-world examples, students learn to formulate and execute strategies that address challenges and opportunities in diverse and rapidly changing global contexts.
Recommended Textbook
International Financial Management Canadian Perspectives 2nd Edition by Cheol Eun
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21 Chapters
535 Verified Questions
535 Flashcards
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Page 2
Chapter 1: Globalization and the Multinational Firm
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Sample Questions
Q1) Market imperfections include all of the following except:
A)Taxes on imported goods
B)Taxes on exported goods
C)Stock markets
D)Two different classes of shareholders for one company
Answer: C
Q2) The goal of shareholder wealth maximization
A)is not appropriate for non-U.S.business firms
B)means that all business decisions and investments that a firm makes are done for the purpose of making the owners of the firm better off financially
C)is a sub-objective the firm should attempt to achieve after the objective of customer satisfaction is met
D)is in conflict with the privatization process taking place in third-world countries
Answer: B
Q3) What are some of major recent trends in globalization?
Answer: The major trends are (1)the emergence of globalized financial markets,(2)the advent of the euro,(3)trade liberalization and economic integration,and (4)privatization.
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Chapter 2: International Monetary System
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Q1) A key element of the Jamaica Agreement from 1976 is
A)fixed exchange rates were declared unacceptable to the IMF members
B)pegged exchange rates were declared unacceptable to the IMF members
C)flexible exchange rates were declared acceptable to the IMF members
D)mixed exchange rates were declared acceptable to the IMF members
Answer: D
Q2) Which of the following is NOT a benefit of a monetary union?
A)Elimination of exchange rate uncertainty
B)Reduced transactions costs
C)Ability to absorb economic shocks
D)Enhanced efficiency and competitiveness
Answer: C
Q3) If,under the Gold Standard,the price of 1oz of gold was $15 or £5,what was the $/£ exchange rate?
A)0.25 $/£
B)0.33 $/£
C)1 $/£
D)3 $/£
Answer: D
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Page 4
Chapter 3: Balance of Payments
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Sample Questions
Q1) The reserve account of the Balance of Payments records:
A)the stock of foreign exchange held by the government
B)changes in foreign exchange reserves held by the government
C)the stock of gold held by foreign governments
D)changes in foreign exchange reserves held by foreign governments
Answer: B
Q2) A country's international transactions can be grouped into the following three main types:
A)current account, medium term account, and long term account
B)current account, long term account, and capital account
C)current account, capital account, and reserve account
D)capital account, reserve account, trade account
Answer: C
Q3) A Chinese state-owned company buys a Canadian saw mill.This transaction will be recorded in the balance of payments as
A)a credit in the current account
B)a debit in the current account
C)a credit in the capital account
D)a debit in the capital account
Answer: C
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Chapter 4: Corporate Governance Around the World
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Sample Questions
Q1) If CIBC posts 1.10CAD/USD - 1.14 CAD/USD bid-ask exchange rates,Scotiabank posts 1.12CAD/USD - 1.15 CAD/USD bid-ask exchange rates,and RBC posts 1.13-1.16 bid-ask exchange rates,which of the following statements is correct:
A)You can make an arbitrage by exchanging CAD for USD at CIBC and then exchanging USD for CAD at RBC
B)You can make an arbitrage by exchanging USD for CAD at CIBC and then exchanging CAD for USD at RBC
C)You can make an arbitrage but none of these strategies allows you to make the arbitrage
D)Arbitrage is not possible
Q2) Intervention in the foreign exchange market is the process of:
A)A central bank requiring the commercial banks of that country to trade at a set price level.
B)Commercial banks in different countries coordinating efforts in order to stabilize one or more currencies.
C)A central bank buying or selling its currency in order to influence its value.
D)The government of a country prohibiting transactions in one or more currencies.
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Page 6
Chapter 5: The Market for Foreign Exchange
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Sample Questions
Q1) When Interest Rate Parity (IRP)does not hold
A)there is a high degree of inflation
B)the financial markets are in equilibrium
C)there are opportunities for covered interest arbitrage
D)b and c
Q2) Which statement about real exchange rates is not true?
A)Real exchange rate changes are caused by changes in nominal exchange rates
B)Real exchange rates measure deviations from PPP
C)Real exchange rates are always unity
D)Real exchange rates affect the international competitive positions of countries
Q3) If the annual inflation rate is 5.5 percent in the United States and 4 percent in the U.K.,and the dollar depreciated against the pound by 3 percent,then the real exchange rate,assuming that PPP initially held,is:
A)0.07
B)0.98
C)1.05
D)7.3
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Chapter 6: International Parity Relationships and Forecasting Foreign Exchange Rates
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Sample Questions
Q1) In reference to capital requirements,value-at-risk analysis
A)refers to traditional bank loans and deposits
B)refers to a "risk-focused" approach to determining adequate bank capital
C)provides a level of confidence measure of the probability of the maximum loss that can occur during a period of time
D)b and c
Q2) The payment amount under this FRA is:
A)$9,985
B)$10,111
C)$60,667
D)$120,000
Q3) ABC Bank (seller)has made a "three against six" Forward Rate Agreement (FRA),with XYZ Bank (buyer)with a notional amount of $1,000,000.The settlement and agreement rates are 6% and 5% respectively.There are 91 actual days in the three-month agreement period.
a)When is this agreement settled?
b)Who pays whom?
c)What is the dollar amount of the settlement?
Q4) Explain Eurocommerical papers.
Page 8
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Chapter 7: Futures and Options on Foreign Exchange
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Sample Questions
Q1) The implicit SF/$ exchange rate at maturity of a Swiss franc/U.S.dollar dual currency bonds that pay $581.40 at maturity per SF1,000,is
A)SF0.58/$1.00
B)SF1.58/$1.00
C)SF1.72/$1.00
D)SF1.95/$1.00
Q2) Fixed-rate notes issued by a corporation with maturities ranging from less than 1 year to about 10 years in the international bond markets are called
A)international straight-fixed rate notes
B)euro-medium term notes
C)euro floating-rate bonds
D)international equity-related bonds
Q3) Bonds with fixed coupon payments in regular intervals and a designated maturity date are called
A)straight-fixed rate bonds
B)euro-medium term bonds
C)floating-rate bonds
D)equity-related bonds
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Chapter 8: Management of Transaction Exposure
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Sample Questions
Q1) Factors affecting international equity returns are:
A)macroeconomic variables that influence the overall economy
B)exchange rate changes
C)the industrial structure of the country
D)all of these
Q2) A measure of "liquidity" for a stock market is
A)the turnover ratio
B)the ratio of stock market transactions over a period of time divided by the size, or market capitalization, of the stock market
C)the LIBOR rate
D)a and b
Q3) The no arbitrage U.S.price of one ADR is:
A)$4.87
B)$5.87
C)$6.87
D)$7.87
Q4) Assume that Accor shares are trading at A$2.5 in Sydney and $28 in New York.Each ADR equals 20 shares.The current exchange rate is A$1.5/$.At what transaction cost per share would there be no profit opportunity?
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Chapter 9: Management of Economic Exposure
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Sample Questions
Q1) Which of the following statements is true?
A)The buyer of a forward contract holds a short position.
B)The buyer of a futures contract holds a losing position.
C)The buyer of a forward contract holds a wining position.
D)The buyer of a futures contract holds a long position.
Q2) An "option" is:
A)a contract giving the seller (writer) the right, but not the obligation, to buy or sell a given quantity of an asset at a specified price at some time in the future
B)a contract giving the owner (buyer) the right, but not the obligation, to buy or sell a given quantity of an asset at a specified price at some time in the future
C)not a derivative, nor a contingent claim, security
D)unlike a futures or forward contract
Q3) Determine the implied 3-month LIBOR yield for March 2010.
A)6.38%
B)6.41%
C)9.36%
D)need more information
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Chapter 10: Management of Translation Exposure
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Sample Questions
Q1) The following information is given:
Q2) Examples of "single-currency interest rate swap" and "cross-currency interest rate swap" are:
A)fixed-for-floating rate interest rate swap, where one counterparty exchanges the interest payments of a floating-rate debt obligations for fixed-rate interest payments of the other counter party
B)fixed-for-fixed rate debt service (currency swap), where one counterparty exchanges the debt service obligations of a bond denominated in one currency for the debt service obligations of the other counter party denominated in another currency
C)a and b
D)none of these
Q3) Canada Corporation enters into a 2-year interest rate swap with Bank A in which it agrees to pay the swap bank a fixed-rate of 5 percent annually on a notional amount of US$1,000,000 and receive LIBOR - 1 percent.Determine the price of the swap on the first reset date,assuming that the fixed-rate at which Canada Corporation can borrow has stayed unchanged.
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Page 12
Chapter 11: International Banking and Money Market
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Sample Questions
Q1) in pure-discount U.S.bonds.The investment was liquidated one year later when the exchange rate was 110 yen per dollar.If the rate of return earned on this investment was 46% in terms of yen,calculate the dollar amount that the bonds were sold at.
A)$10,618,000
B)$10,720,000
C)$14,600,000
D)None of these
Q2) Which of the following is not a potential explanation for the home bias in portfolio holdings?
A)Domestic portfolios allow for hedging inflation risk
B)Legal and institutional restrictions
C)Taxes and transaction/information costs
D)Higher rate of return on domestic stocks
Q3) To evaluate the gains from holding international portfolios over purely domestic portfolios we can use
A)the increase in the Sharpe performance measure
B)the increase in the portfolio return
C)a and b
D)cannot be evaluated
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Page 13
Chapter 12: International Bond Market
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Sample Questions
Q1) It is conventional to classify foreign currency exposures into the following types:
A)economic exposure, transaction exposure, and translation exposure
B)economic exposure, noneconomic exposure, and political exposure
C)national exposure, international exposure, and trade exposure
D)conversion exposure, and exchange exposure
Q2) Operating exposure can be managed by:
A)flexible sourcing policy
B)diversification of the market
C)financial hedging
D)all of these
Q3) Which of the following is not a strategy for managing operating exposure
A)Financial hedging
B)Diversification of the market
C)Lowering sale prices
D)Product differentiation
Q4) How can operating exposure be managed?
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14
Chapter 13: International Equity Markets
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Sample Questions
Q1) Suppose that on the maturity date of the forward contract,the spot rate turns out to be $1.40/£ (i.e.less than the forward rate of $1.46/£).Which of the following is true?
A)Boeing would have received $14.0 million, rather than $14.6 million, had it not entered into the forward contract
B)Boeing gained $0.6 million from forward hedging
C)a and b
D)none of these
Q2) The future dollar amount of this receivable using the forward hedge is:
A)$800,000
B)$820,000
C)$836,400
D)$856,900
Q3) Buying a currency options provides:
A)a flexible hedge against exchange exposure
B)limits the downside risk while preserving the upside potential
C)a right, but not an obligation, to buy or sell a currency
D)all of these
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Chapter 14: Interest Rate and Currency Swaps
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Sample Questions
Q1) The "functional currency" is:
A)the currency of the primary economic environment in which the entity operates
B)the currency in which the MNC prepares its consolidated financial statements
C)a currency that is not the parent firm's home country currency
D)b and c
Q2) The "reporting currency" is:
A)the currency of the primary economic environment in which the entity operates
B)the currency in which the MNC prepares its consolidated financial statements
C)a currency that is not the parent firm's home country currency
D)a and c
Q3) Which of the following is a translation method where the gain or loss due to translation adjustment does not affect reported cash flows?
A)current/non-current method
B)current rate method
C)current/future method
D)short/long term method
Q4) Assume that translation or transaction exposure cannot be hedged at the same time and you have to decide on the firm's hedging policy.What should you do?
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Page 16
Chapter 15: International Portfolio Investment
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Sample Questions
Q1) The most important mode of entering a foreign market via FDI in the last few years is
A)Greenfield investments
B)Brownfield investments
C)Mergers & acquisitions
D)All modes are equally important
Q2) What percentage of FDI originates in developed countries?
A)60%
B)80%
C)90%
D)95%
Q3) Political risk is classified into:
A)Macro- and micro risk
B)Major- and minor risk
C)Macro- and minor risk
D)Major- and micro risk
Q4) Explain political risk and its three main classifications.How can political risk be incorporated in the decision making process when firms decide on whether to invest in foreign project or not?
Q5) Explain the role of market imperfections in FDI.
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Chapter 16: Foreign Direct Investment and Cross-Border Acquisitions
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Q1) If XYZ's debt-to-total-market-value ratio is 40%,then its weighted average cost of capital,K,is:
A)8%
B)9%
C)10%
D)12%
Q2) Which of the following statements is correct?
A)If international financial markets are integrated, the market portfolio in the CAPM formula represents the world market portfolio.
B)If international financial markets are integrated, the market portfolio in the CAPM formula represents the domestic market portfolio.
C)If international financial markets are divided, the market portfolio in the CAPM formula represents the domestic market portfolio.
D)If international financial markets are divided, the market portfolio in the CAPM formula represents the world market portfolio.
Q3) What are the alternative financial structures for a subsidiary? Which of the alternatives is the best?
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Page 18
Chapter 17: International Capital Structure and the Cost of Capital
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Q1) Which of the following statements is false about "borrowing capacity"?
A)it is an especially important point in international capital budgeting analysis because of the frequency of large concessionary loans
B)it creates tax shields for APV analysis regardless of how the project is actually financed
C)is synonymous to the "project debt"
D)is based on the firm's optimal capital structure
Q2) The "net present value" of a capital project is calculated by using:
A)(i), (ii), and (iii)
B)(ii), (iv), and (vi)
C)(i), (iii), (v), and (vii)
D)(iv), (v), (vi), and (vii)
Q3) Which of the following is not an example of a real option?
A)Timing option
B)Abandonment option
C)Growth option
D)Exercise option
Q4) Which cash flows are relevant for the international capital budgeting analysis?
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Chapter 18: International Capital Budgeting
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Q1) Which of the following statements about multilateral netting system are correct? (i)- each affiliate nets all its interaffiliate receipts against all its disbursements (ii)- it transfers or receives a balance,depending on whether it is a net payer or receiver (iii)- the net funds to be received by the affiliates will equal the net disbursements to be made by the affiliates
(iv)- only two foreign exchange transactions are necessary since the affiliates' net receipts will always be equal to zero
(v)- only two foreign exchange transactions are necessary since the affiliates' net disbursements will always be equal to zero
A)(i) and (ii)
B)(i), (ii), and (iii)
C)(i), (ii), (iii), and (iv)
D)(i), (ii), (iii), and (v)
Q2) Explain why governments regulate transfer prices for international transactions.What are the major rules that are applied?
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Chapter 19: Multinational Cash Management
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Q1) The time from acceptance to maturity on a banker's acceptance (B/A)is 90 days,the importing bank's acceptance commission is 1 percent and the B/A's discounted value at the time of acceptance is $1,000,000.What is the 90-day B/A rate if the value at maturity is $1,034,000?
Q2) A form of barter in which the counterparties contract to purchase a certain amount of goods and services from one another is called
A)counterpuchase
B)clearing arrangement
C)barter
D)offset
Q3) If the market rate for 90-day B/As is 6.0 percent,calculate the amount the exporter will receive if he discounts the B/A with the importer's bank.
A)$2,945,625
B)$2,990,625
C)$3,000,000
D)$3,009,375
Q4) Explain the major differences between international and domestic trade.
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Chapter 20: International Trade Finance
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Q1) Value-added tax (VAT)is:
A)a direct national tax levied on the value added in the production of a good (or service) as it moves through various stages of production
B)an indirect national tax levied on the value added in the production of a good (or service) as it moves through various stages of production
C)the equivalent of imposing a national sales tax
D)b and c
Q2) Calculate the American foreign tax credit for a subsidiary in Germany.Assume that the German income tax rate is 50%,the American income tax rate is 35%,and the withholding tax rate is 10%.The taxable income in Germany is 500.Assume that all income is remitted to the parent immediately.
Q3) Withholding tax is
A)a tax levied on passive income earned by an individual or corporation of one country within the jurisdiction of another country
B)a direct tax on personal and corporate income
C)an indirect national tax levied on the value added in the production of a good or service
D)an indirect national tax levied on personal and corporate income
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Chapter 21: International Tax Environment and Transfer Pricing
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Q1) There would be agency problems only if
A)Complete contracts could be written
B)If managers and shareholders would know all future contingencies
C)Complete contracts cannot be written
D)In the absence of conflicts of interest
Q2) Discuss the concept of "private benefits of corporate control".
Q3) Corporate governance reform requires all except:
A)increasing the decision making power of managers
B)strengthening the independence of boards of directors with more outsiders
C)enhancing the transparency and disclosure standard of financial statements
D)energizing the regulatory and monitoring functions of securities commissions
Q4) Weak investor protection is associated with all of the following except:
A)valuable stock markets
B)sharp market declines during a financial crisis
C)lower stock market capitalization
D)fewer publicly traded companies
Q5) How can listing overseas benefit the corporate governance of a public company?
Q6) How are investors protected under English common law? What are the implications?
Q7) Discuss the major advantage and key weakness of a public corporation. Page 23
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