tb10 - Kirt C Butler Multinational Finance 3rd edition...

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Kirt C. Butler, Multinational Finance , 3 rd edition Chapter 10 Multinational Treasury Management True/False 1. A freight shipper is a shipping agent used to select the best mode of transportation and arrange for a carrier to handle the physical shipment of goods. ANS: True. 2. An open account is most convenient for the buyer. ANS: True. 3. An open account provides the seller with the greatest protection against nonpayment. ANS: False. Cash in advance provides the greatest protection for the exporter. 4. An open account is most often used when the buyer has a poor credit history. ANS: False. Cash in advance or another more secure payment mechanism should be used. 5. A site draft is an international method of payment that is payable at a particular site. ANS: False. There is no such thing as a site draft. (Don’t confuse this with a sight draft.) 6. A letter of credit is irrevocable if payment can be withheld at the discretion of the buyer. ANS: False. Payment may not be withheld with an irrevocable L/C. 7. Countertrade is defined as trade conducted “over-the-counter” rather than through a registered export agent. ANS: False. Countertrade is the exchange of goods or services without exchanging money. 8. A banker’s acceptance is a time draft drawn on and accepted by a commercial bank. ANS: True. 9. Commercial banks will not accept trade drafts. ANS: False. Commercial banks are willing to accept trade drafts at a discount to their face value. 10. Factoring refers to the purchase of a firm’s accounts receivable. ANS: True. 11. Factoring refers to the purchase of a firm’s inventory at a discount to book value. ANS: False. Factoring is the purchase of accounts receivables. 12. Forfaiting resembles factoring but involves medium- to long-term receivables and larger transactions. ANS: True. 13. Multinational netting identifies offsetting currency exposures within the corporation. ANS: True. 14. Multinational netting is a process whereby expatriate managers are brought back to work at corporate headquarters. ANS: False. Multinational netting identifies offsetting currency exposures within the firm. 76
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Kirt C. Butler, Multinational Finance , 3 rd edition 15. A passive approach to currency risk management is called technical analysis. ANS: False. Technical analysis uses exchange rate history to predict future exchange rates. Multiple Choice 1. The modern corporate treasury performs each of the following functions except ____. a. arranging financing for domestic and international trade b. consolidating and managing the financial flows of the firm c. identifying, measuring, and managing the firm’s risk exposures d. managing the risks of domestic and international financial transactions e. setting sales targets and monitoring progress toward these targets ANS: E 2. The process of creating a strategic business plan includes each of a) through d) except ____. a.
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tb10 - Kirt C Butler Multinational Finance 3rd edition...

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