Standard Financial Theory Advocates That MNCs Separate Their Financing and Investing

question 27

Multiple Choice

Standard financial theory advocates that MNCs separate their financing and investing decisions:

• A)so MNCs generally do consider decisions on where and how to invest separately from their decisions on how to finance their investments.
• B)but MNCs,in particular,often reject this advice and take chances with currency exposure by combining investing and financing decisions.
• C)but currency risk can require that firms considering financing opportunities with consideration of investment opportunities.
• D)so MNCs often finance their capital needs in one currency and make their investments in another currency.

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Definitions:

Transactions

Financial activities or dealings that involve the transfer of money or goods between parties.