With Regard to the Financial Structure of a Foreign Subsidiary

question 55

Multiple Choice

With regard to the financial structure of a foreign subsidiary

• A)Using local financing can reduce political risk.
• B)A MNC that finances a foreign investment with home-country equity faces greater risk of expropriation than if it had financed the investment with at least some local debt or equity.
• C)There may be advantages other than a reduction in political risk that encourage MNCs to finance foreign subsidiaries with local money.
• D)All of the above

Recognize the importance of source documents in the accounting process.

Describe the link between major financial statements: income statement, balance sheet, and statement of owner's equity.

Explain the role of accounting in the measurement, analysis, and reporting of financial performance and position.

Understand the concept and calculation of net income and capital within a stated period.

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Definitions:

Constitution

The fundamental law or set of principles by which a nation or state is governed, outlining the powers and duties of the government and the rights of the citizens.

Unitary Government

A system of political organization in which most or all of the governing power resides in a centralized government.

Written Constitution

A formal document that defines the structure of a government, the rights of the citizens, and the powers of the authorities; distinct from unwritten or customary constitutions.

United Kingdom

A sovereign country located off the northwestern coast of mainland Europe, comprising England, Scotland, Wales, and Northern Ireland.