Which One of the Following Statements Concerning Political Risk Is

question 94

Multiple Choice

Which one of the following statements concerning political risk is correct?

• A) Political risk can be eliminated by operating only within Canada.
• B) Reducing the parent company involvement in a foreign operation reduces political risk.
• C) Borrowing funds from the government under which a foreign subsidiary operates reduces political risk.
• D) Political risk is independent of the nature of the business.
• E) The more stable a foreign country, the greater the political risk of operating a foreign subsidiary within that country.

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Definitions:

Total Fixed Assets

The sum of all long-term tangible assets that a company owns and uses in its operations, which are not expected to be consumed or converted into cash within a year.

Shareholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities; also known as stockholders' equity.

Sustainable Growth Rate

The maximum rate at which a company can grow its revenues and earnings without increasing its financial leverage or equity financing.

Return On Equity

A measure of financial performance calculated by dividing net income by shareholders' equity, indicating how effectively management is using a company’s assets to create profits.