One Argument for Why Subsidiaries Should Be Only Partly-Owned by the Parent

question 42

Multiple Choice

One argument for why subsidiaries should be only partly-owned by the parent is:

• A) that the potential conflict of interests between the MNC's managers and shareholders is avoided.
• B) that the potential conflict of interests between the MNC's majority shareholders and minority shareholders is avoided.
• C) that the potential conflict of interests between the MNC's existing creditors is avoided.
• D) to motivate subsidiary managers by allowing them partial ownership.

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Definitions:

Direct Labor Variances

The difference between the actual and standard labor costs incurred by a business during a specific period.

Direct Labor Costs

The wages and benefits paid for labor that is directly involved in the production of goods.

Property, Plant, and Equipment

Long-term tangible assets that a company uses in its operations and that are expected to provide benefits for more than one year.

Standard Cost

A predetermined cost of manufacturing a product or providing a service, under normal conditions, which serves as a benchmark for measuring performance.