The Ways That a Foreign Government Can Adversely Affect the Risk

question 23

Multiple Choice

The ways that a foreign government can adversely affect the risk of a foreign project include all of the following EXCEPT

• A) change tax laws in a way that adversely impacts the firm.
• B) impose laws related to labor, wages, and prices that are more restrictive than those applicable for domestic firms.
• C) remove tariffs and quotas on any imports.
• D) disallow any remittance of funds from the subsidiary to the parent firm for either a limited period of time or the duration of the project.

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Definitions:

Overhead Cost

Expenses related to the day-to-day running of a business that cannot be directly tied to a specific product or service, such as rent, utilities, and administrative salaries.

Machine Hours

This is a measure of the amount of time a machine is operated and is often used in the allocation of manufacturing overhead to products based on usage.

High-low Method

A method employed in managerial accounting that estimates variable and fixed costs by analyzing the most and least active periods.

Contribution Margin

The amount by which sales revenue exceeds variable costs, indicating the portion of sales available to cover fixed costs and generate profit.