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Multinational Finance Answers

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Questions and Problems


Multinational Finance

by Kirt C. Butler

Second Edition
PART I Overview and Background

Chapter 1 Introduction to Multinational Finance

Answers to Conceptual Questions

1.1 Describe the ways in which multinational financial management is different from domestic financial management.

Multinational financial management is conducted in an environment that is influenced by more than one cultural, social, political, or economic environment.

1.2 What is country risk? Describe several types of country risk one might face when conducting business in another country.

Country risks refer to the political and financial risks of conducting business in a particular foreign country. Country risks include foreign exchange risk, political risk, and cultural risk.

1.3 What is foreign exchange risk?

Foreign exchange (or currency) risk is the risk of unexpected changes in foreign currency exchange rates.

1.4 What is political risk?

Political risk is the risk that a sovereign host government will unexpectedly change the rules of the game under which businesses operate.

1.5 In what ways do cultural differences impact the conduct of international business?

Because they define the rules of the game, national business and popular cultures impact each of the functional disciplines of business from research and development right through to marketing, production, and distribution.

1.6 What is the goal of financial management? How might this goal be different in different countries? How might the goal of financial management be different for the multinational corporation than for the domestic corporation?

The goal of financial management is to make decisions that maximize the value of the enterprise to some group of stakeholders. The…...

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