If the Portions of the Firm's Foreign Operations in Higher-Tax-Rate

question 14

Multiple Choice

If the portions of the firm's foreign operations in higher-tax-rate countries grew more rapidly than foreign operations in lower-tax-rate countries, the company may seek out more tax effective ways of operating abroad through all of the following means except :

• A) Assess whether transfer prices or cost allocations can be adjusted to shift income from high-tax-rate to low-tax-rate jurisdictions.
• B) Shift from domestic to foreign borrowing to increase deductions for interest against foreign-source income.
• C) Shift from debt to equity financing of foreign operations to increase interest deductions against foreign-source income.
• D) Shift some operations, like marketing, to the United States where the average tax rate is lower.

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Definitions:

Venture Capitalists

Investors who provide capital to startups and early-stage companies with high growth potential in exchange for equity.

Entrepreneurial Team

A group of individuals with diverse skills and roles who come together to found and build a startup or new venture.

Outsourced

The practice of delegating certain job functions or tasks to external contractors or firms, rather than handling them internally.

Business Plan

A formal document that outlines a company's goals, strategies, market analysis, financial forecasts, and operational structures.