When the Choice of Financing a Foreign Subsidiary Is Between

question 86

Multiple Choice

When the choice of financing a foreign subsidiary is between external debt and equity financing

• A)political risk considerations tend to favor the latter.
• B)political risk considerations tend to favor the former.
• C)political risk is separate from financial risk and so does not enter into a discussion of debt equity ratios.
• D)none of the above

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Definitions:

Security Interest

A legal claim or lien on assets which secures the performance of an obligation, usually repayment of a loan.

Present and After-Acquired Equipment

Refers to a security interest in equipment that a borrower currently owns and any equipment they will acquire in the future.

Unperfected

A legal term describing a security interest or lien that has not been properly filed or recorded, and therefore does not have priority over claims made by other creditors.

Financing Statement

A document filed to give public notice of a security interest in personal property, thereby protecting the interests of secured creditors.