A Major Disadvantage of Operating a Wholly Owned Subsidiary Is

question 56

Multiple Choice

A major disadvantage of operating a wholly owned subsidiary is that

• A) A loss of technology is likely to occur.
• B) Quality levels are difficult to monitor overseas.
• C) High costs and risk are associated with this type of operation.
• D) Overseas consumers are often resentful of foreigners.
• E) Host countries can impose higher tariffs on the firm.

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Definitions:

Interest Payments

The payments made by a borrower to a lender for the use of borrowed money, usually at a set rate and schedule.

Income Statement

A financial statement that shows a company's revenues, expenses, and profit or loss over a specific period.

Exchange Rates

The value of one currency for the purpose of conversion to another, used in international trade and investment.

Sales

The transactions involving the exchange of goods or services for money; it represents the total amount of revenue generated by a business.