Chapter 16, Problem 1QA

Country risk is: Group of answer choices A. The risk that a counterparty or obligor will not be able to pay its obligations because of cross-border restrictions. B. An assessment of the political and economic risk of a country. C. Both A & B D. Neither A or B

methods for mitigating risks associated with the analysis of foreign financial statements.

Investors and MNCs exporting or importing goods and services or making foreign investments throughout the global economy are faced with an exchange rate risk,which can have severe financial consequences on firms profitability,cash flows,and their market value,if not managed appropriately. MNC's use a number of external techniques  of risk(exposure)management and resort to contractual relationships outside thier companies in order to reduce (or redistribute)the risk of foreign exchange losses.What are the determinants of hedging currency risk or foreign exchange exposures which pose risks to MNC's cashflows,competitiveness,marker value and financial reporting.

Companies that compete in an international marketplace may be faced with three types of risk owing to foreign exchange.These are: *       A. specific, translation and transaction risk.       B. translation, transaction and economic risk.       C. accounting, transaction and translation risk.       D. accounting, specific and transaction risk.

Entry modes for entering new countries vary in their degree of control. What does control mean? O The degree of risk a firm has in its foreign activities The degree of ownership a firm has in its foreign activities O The degree of profits a firm has in its foreign activities O The degree of influence a firm has in its foreign activities

Which of the following does NOT refer to the ways of how a multinational company can reduce political risk?  Taking a conservative approach to investment and adjusting NPV of the project by reducing expected cash flows or by increasing the cost of capital in accordance with existing trends. Purchasing insurance policy against political risks. Acquiring minor shares in foreign corporations. Creating a joint venture with local partners or a consortium with other multinational companies.

Advise management the different hedging strategies that can be employed by a company  against foreign exchange exposures.

‏What is the disadvantage of international accounting ? Select one : a . uniformity practice b . Harmonization c . Mobilising global resources d . Market risk

Explain the techniques used to measure country risk and financial risk.