Because Tax Rates Are Different in Different Countries,companies Have Incentives

question 20

Multiple Choice

Because tax rates are different in different countries,companies have incentives to set transfer prices that will

• A)increase revenues in low-tax countries.
• B)decrease costs in high-tax countries.
• C)decrease revenues in low-tax countries.
• D)None of the answers is correct.

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Definitions:

Financial Decisions

Choices regarding the management of finances of an entity, including investment, budgeting, borrowing, and saving activities.

Cash Flow

The complete sum of cash moving in and out of a company, influencing its ability to cover short-term obligations.

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period, often used to assess liquidity and manage cash flow.

Fixed Asset Turnover Ratio

A financial metric that measures how efficiently a company is using its fixed assets to generate sales.