Jackson Owns a Business in a Foreign Country That Is

question 52

Multiple Choice

Jackson owns a business in a foreign country that is considered "friendly" with the U.S.but which has significant political unrest.Jackson is uneasy about the situation in the country.He is concerned that his business could be the subject of a taking by the foreign country or losses due to civil unrest.What advice would you give him?

• A) He should seek insurance through the Foreign Insurance Services Company, a privately run insurance company specializing in foreign risk.
• B) He should do nothing at the present, but seek reimbursement through the U.S.government should losses be incurred.
• C) He should seek insurance through the Overseas Private Investment Corporation, a U.S.government agency specializing in providing insurance for foreign risk.
• D) He should sell the company and leave the country because insurance is not available

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Definitions:

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance, essential for budgeting and financial planning.

Variable Cost

Costs that vary directly with the level of production or service provision, such as materials and labor.

Break-Even Analysis

A financial calculation to determine the sales volume at which total revenues equal total costs, resulting in no profit or loss.

Fixed Costs

Expenses that do not vary with the level of production or sales, such as rent or salaries.