The Partition Effect in Relation to a Group of Companies

question 68

Multiple Choice

The partition effect in relation to a group of companies arose when:

• A) It was not permitted under corporations law to consolidate an entity that was not a company. This resulted not only in the non-company entity not being consolidated, but also all the entities (company or otherwise) that it controlled not being consolidated.
• B) The minority shareholders in a number of companies controlled by a parent entity organised themselves to block the transfer of funds within a group.
• C) Companies in a group co-ordinated to transfer assets in such a way as to protect part of the group from being taxed, thus reducing the total tax owing for the group as a whole.
• D) Dividends were declared and paid in such a way as to manage cash reserves within a group.
• E) None of the given answers.

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Definitions:

Expected Marginal Benefit

The additional benefit perceived by a consumer or producer from consuming or producing one more unit of a good or service.

Expected Marginal Cost

Refers to the anticipated increase in cost for producing one additional unit of a good or service.

Macroeconomics

The study of the economic behavior of entire economies, as measured, for example, by total production and employment.

Chinese Economy

The economy of China, characterized by its large size, rapid growth, and transition from a centrally planned economy to a more market-oriented system.