Spot Transactions

question 24

Multiple Choice

Spot transactions

• A)involve immediate settlement.
• B)may only take place in face-to-face trading.
• C)take place on-the-spot, rather than on an organized exchange.
• D)are relatively unimportant in financial markets.

Identify scenarios where internal transfers are financially beneficial for both divisions.

Assess the lost contribution margin from transferring products internally versus selling to outside customers.

Determine the maximum price a buying division should be willing to pay for internal transfers.

Understand how idle capacity affects transfer pricing decisions.

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Definitions:

Multinational

Refers to a corporation or enterprise that operates in several countries but is managed from one (home) country.

Ethnocentric

An attitude or policy where one's own culture, nation, or group is considered superior to others, often leading to biased judgments.

Polycentric

An approach in international business that emphasizes and adapts to the cultural differences of the countries in which it operates.

Performance Orientation

A cultural or organizational focus on performance and achievement of specific outcomes, often measured against predefined standards.