Many Firms Choose Direct Investment in Assets in Foreign Countries

question 11

True/False

Many firms choose direct investment in assets in foreign countries (e.g., establishing new subsidiaries, making acquisitions, or building joint ventures) over direct investment because it provides better protection for their assets.

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Definitions:

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to fixed costs and profit.

Common Fixed Expenses

Expenses that remain constant in total regardless of changes in the level of activity or volume of production.

Variable Expenses

Costs that change in proportion to the level of activity or volume of production in a company.

Traceable Fixed Expenses

Fixed costs that can be directly associated with a specific business segment or product line.