After Years of Negotiating Short-Term Contracts with Its Suppliers, Icon

question 117

Multiple Choice

After years of negotiating short-term contracts with its suppliers, Icon Images has decided to agree to longer-term contracts.In doing this, Icon Images is hoping to:

• A) reduce transaction costs.
• B) increase negotiating leverage with suppliers.
• C) become less dependent on its suppliers.
• D) move toward horizontal alliances with its suppliers.

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Definitions:

NCI

An interest in a subsidiary not held by the controlling parent, representing a share of the subsidiary’s equity and profits or losses not owned by the parent company.

Subsidiary

A company that is controlled by another company, usually referred to as the parent company, through ownership of more than 50% of its voting stock.

Non-controlling Interest

Equity interest in a subsidiary held by investors other than the parent company, representing their claim to the subsidiary's earnings and assets.

Entity Method

an approach in accounting where the financial transactions of a parent company and its subsidiaries are kept separate, instead of being consolidated.