Because Setting Up a Foreign Operation Can Involve Significant Costs,MNCs

question 8

Multiple Choice

Because setting up a foreign operation can involve significant costs,MNCs must:

• A)borrow the money necessary for the foreign operation from foreign banks.
• B)borrow the money necessary for the foreign operation from domestic banks.
• C)weigh the benefits of the foreign operation against the costs of the operation.
• D)involve foreign investors in the foreign operation.

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Definitions:

Paid-In-Capital Accounts

Accounts representing the funds contributed by shareholders over and above the nominal value of the shares; it's an equity item on the balance sheet.

Consolidating Journal Entry

A journal entry made in the process of combining the financial statements of several departments or subsidiaries into a single set of statements.

Wholly Owned Subsidiary

A company whose entire stock is held by another company, making it completely controlled by the parent company.

Loss Associate

A situation where a company incurs a loss through its investment in an associate or joint venture.