The Usual Impetus for Transactions That Create a Long-Term Debtor-Creditor

question 16

Multiple Choice

The usual impetus for transactions that create a long-term debtor-creditor relationship between members of a consolidated group is due to the:​

• A)​subsidiary's ability to borrow larger amounts of capital at more favorable terms than would be available to the parent.
• B)​parent's ability to borrow larger amounts of capital at more favorable terms than would be available to the subsidiary.
• C)​parent's desire to decentralize asset management and credit control.
• D)​parent's desire to eliminate long-term debt.

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Definitions:

Variable Costs

Expenses that fluctuate directly with changes in production volume or activity level, such as raw materials and direct labor costs.

Flexible Budgets

Budgets that can adjust or flex for changes in the volume of activity or other relevant factors, allowing for more accurate forecasts and analysis.

Contribution Margin

The selling price per unit minus the variable cost per unit, representing the incremental money generated for each product/unit sold.

Fixed Budget

A budget that is set for a specific period and does not change, regardless of variations in activity levels, sales volume, or other external factors.