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

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Definitions:

Economies of Scale

The cost advantage that arises with increased output of a product, leading to a lower cost per unit.

M-Form Organization

A structure for corporations characterized by decentralized divisions, where each operates as an individual profit center, allowing for specialization and efficiencies across the organization.

Customer Demand

The desire and willingness of consumers to purchase goods or services at a given price.

Coordination

The organization of the different elements of a complex body or activity so as to enable them to work together effectively.