Identify the Theory That Seeks to Explain Why Firms Often

question 50

Multiple Choice

Identify the theory that seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets.

• A) internalization theory
• B) product life-cycle theory
• C) perfect markets theory
• D) random walk theory

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Definitions:

Noncurrent Assets

Assets that are not expected to be converted into cash, sold, or consumed within one year or the normal operating cycle of the business, typically including property, plant, and equipment.

Treasury Stock

Stocks that the issuing company initially released and then bought back, decreasing the total shares available for trading.

Cash Dividends

Payments made by a company to its shareholders, usually in cash, out of its profits or reserves.

Financial Statements

Formal records of the financial activities and condition of a business, person, or other entity, including balance sheet, income statement, and cash flow statement.