Which of the Following Is True About Direct Investment as a Mode

question 19

Multiple Choice

Which of the following is true about direct investment as a mode of international expansion?

• A) It allows a firm to retain full control over its investment.
• B) It yields lower returns than joint ventures.
• C) It involves the least amount of risk.
• D) It involves the least cost.
• E) It does not allow the firm to diversify.

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Definitions:

IFRS 3

An International Financial Reporting Standard that outlines the accounting requirements for business combinations.

Entity Method

A consolidation method wherein investments in subsidiaries are reported at cost and income from the investment is recognized to the extent of dividends received.

Subsidiary

A company that is controlled by another company, typically through ownership of more than half of its voting stock.

Entity Method

An accounting approach where investments in subsidiaries are recorded at cost or in accordance with specific accounting standards, without consolidating the financial statements of the parent and subsidiary.