Question

Which of the following statements increases the complexity of the manager's task in a multinational corporation?​

	a.	The currency values of different countries in which a firm operate experience fluctuations.​
	b.	​Cash flows in various parts of a multinational corporate system are often denominated in the same currencies.
	c.	​No nation can place constraints on the transfer of corporate resources.
	d.	​The management personnel of a firm in different countries are fluent in English and several other languages.
	e.	​All the countries in which a firm operates have uniform political and economic institutions.

Answer 1

Ans) a. The currency values of different countries in which firm operates experience fluctuations

If currency values of different countries in which firm operates experience fluctuations than it will be difficult for the company to estimate profit or company might suffer loss due to adverse movements in prices. Thus utmost care has to be taken to keep company safe from exchange rate risk. This increases complexity of the manager's task in MNCs

Option B is wrong as if all cash flows are denominated in same currency than exchange risk gets eliminated

Option C is wrong as free transfer of resources will make sure that company can take aways as much profit as it can from other country

Option D is wrong as Langauge barrier won't be there for the company to overcome and communication can be done smoothly

Option E is wrong as there will be no political risk for the company if all the countries in which a firm operates have uniform political and economic institutions.