D080 Unit 5: Global Business Practices Test with accurate expert responses + rationales

A global company that makes promotional products, like those for corporate gifts, allows customers to engrave their corporate name and logo onto finished products. The company then ships these products to the customers.

Which production process is the company using?

A. Make-to-stock

B. Mass production

C. Mass customization

D. Make-to-order

C. Mass customization

Mass customization combines the advantages of customized products with those of mass production, where the already finished products are customized at the very end of the production process.

A high-end global computer company concludes that it needs to concentrate on gaining production efficiencies with its manufacturing processes. The company decides to outsource the manufacturing of key strategic parts of its products to Vietnam. Why does this company decide to utilize outsourcing?

A. To reduce costs

B. For tighter process control

C. For higher skilled labor

D. To increase quality

A. To reduce costs

Cost savings is an advantage of outsourcing and may result from outsourcing the manufacturing process to Vietnam.

A German company is considering outsourcing the manufacturing process to Japan. Some of the executive board directors are concerned that the Japanese company may not follow the exact production processes the German company normally uses. Which risk represents this concern?

A. Higher than expected transaction cost

B. Loss of control

C. Loss of organization trust

D. Loss of innovation

B. Loss of control

The German company is concerned that the Japanese company will not follow its normal production process and might cause quality issues. This concern is related to loss of control of the production process due to outsourcing.

A company is considering using a direct distribution strategy.

What is a disadvantage of this distribution strategy?

A. Required to arrange for transportation

B. Longer distribution channel

C. Decreased product control

D. Increased costs of the logistic chain

A. Required to arrange for transportation

Arranging for transportation adds complexity to the company operations and is therefore a disadvantage of a direct distribution channel.

Which distribution strategy has grown rapidly due to the increase in e-commerce?

A. Direct channel distribution

B. Wholesaler-to-consumer

C. Business-to-business

D. Indirect channel distribution

A. Direct channel distribution

Direct channel distribution has grown rapidly as a result of the popularity of e-commerce.

Which source of funding uses technology platforms to invite consumers to invest small amounts in support of a business idea or venture?

A. Bank loan

B. Venture capital

C. Crowdsourcing

D. Angel investment

C. Crowdsourcing

Crowdsourcing uses technology platforms to invite consumers to invest small amounts in support of a business idea or venture. Supporters generally receive a product or other incentives.

A company in the United States has encountered a financial reporting situation that is not currently addressed by the accounting standards of the country.

How should the U.S. company proceed?

A. Contact the IASB

B. Proceed without GAAP

C. Move to using IFRS

D. Consult with the FASB

D. Consult with the FASB

The Financial Accounting Standards Board (FASB) is an independent group that developed and oversees revisions to the generally accepted and standardized methods of recording and reporting financial accounting information used exclusively in the United States.

Which type of risk refers to the impact of random change in the value of one currency with respect to other currencies?

A. Legal risk

B. Political risk

C. Cultural risk

D. Currency risk

D. Currency risk

The fluctuation in currency value that causes potential risk is referred to as currency risk.

Which term defines using currency derivatives to reduce potential currency risks due to currency exchange rate movement that could lead to losses for a firm?

A. Hedging

B. Long position

C. Speculation

D. Short position

A. Hedging

This is the definition of hedging.

A company has achieved a monetary advantage by using a fronting loan with a subsidiary in a country with a low corporate income tax rate. Which type of tax situation in this country allows the company to achieve this monetary advantage?

A. Graduated tax rate

B. Flat tax rate

C. Tax haven

D. Consumption tax

C. Tax haven

A tax haven, a country with a low tax rate, would keep the subsidiary from paying taxes on the interest earned from the loan. This reduces the amount of taxes in comparison to a regular corporate tax situation.