What Is the Primary Difficulty of Using Market-Based Transfer Prices

question 37

Multiple Choice

What is the primary difficulty of using market-based transfer prices for intercompany transactions?

• A) Markets that are too complex
• B) Lack of a well-developed market
• C) Lack of objectivity
• D) Operating inefficiencies are transferred from one subsidiary to another

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Definitions:

Hedge Derivatives

Hedge derivatives are financial instruments used to reduce or mitigate the risk of adverse price movements in an asset, typically involving futures, options, and swaps.

Cash Flows

The total amount of money being transferred into and out of a business, especially affecting its liquidity.