The Purchase of Less Than 10 Percent of the Shares

question 204

Multiple Choice

The purchase of less than 10 percent of the shares of ownership in a foreign company is referred to as a

• A) portfolio investment.
• B) foreign direct investment.
• C) foreign indirect investment.
• D) negligible investment.

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Definitions:

EBIT

The financial performance metric, Earnings Before Interest and Taxes, deducts all expenses from a firm's income except for interest and tax expenses.

Return On Equity

A measure of a corporation's profitability, calculated as net income divided by shareholder's equity, indicating how effectively management is using a company’s assets to create profits.

Total Equity

The total of all stockholder's equity (both preferred and common stock) plus retained earnings within a company.

Average Collection Period

A financial metric indicating the average number of days it takes for a firm to receive payments owed by its customers.