Transfer Pricing

question 16

Multiple Choice

Transfer pricing

• A)is a concept readily accepted by managers of divisions,because it relies on concepts used in cost-based pricing methods.
• B)incorporates procedures that allow for ease in determining the amount of profit associated with each division of a decentralized company.
• C)involves determining the cost and profit if the output of one division is transferred to another division of the same company.
• D)is not used by many companies because it is difficult to eliminate intercompany profits.

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Definitions:

Total Assets

The sum of all assets owned by a company, displayed on the balance sheet, including current and non-current assets.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations with its current assets.

Total Current Assets

The sum of all assets that a company expects to convert into cash, sell, or consume within one year or within the normal operating cycle of the business.

Current Liabilities

Obligations a company is expected to pay within a year, including accounts payable, short-term loans, and other short-term debts.